Update on the University's Financial Situation
Faculty and Staff Colleagues,
Now that the semester is well under way, I wanted to give you an update on the University's financial situation.
The University of Michigan - Ann Arbor remains on a stable financial path largely because of our disciplined approach to financial management that emphasizes multi-year budget planning, on-going cost containment and continual reallocation of resources toward our highest priorities. During the recent period when many of our competitors were experiencing dire fiscal constraints, we were able to make strategic investments in faculty expansion, robust growth in need-based financial aid and expansion of academic programs.
These investments highlight the key principles that have guided our strategic financial choices, including:
* Keeping a U-M education affordable by investing in student financial aid
* Recruiting and retaining top faculty
* Enhancing the student learning experience with efforts including innovative new
academic programming and experiential learning
* Identifying opportunities to grow or develop new streams of revenue
* Reducing operational costs through deliberate, thoughtful and steady effort over time
Our cost-containment efforts have continued unabated since FY 2003, and we have reduced recurring general fund expenditures by about $135 million from the start of that effort through FY 2009, enabling the reallocation of savings to our highest priorities.
Last year at this time, we announced a goal of achieving an additional $100 million in general fund reductions and reallocations by the end of FY 2012. I am pleased to say that we are well on our way toward meeting that challenge. With a primary focus on lowering operational costs, changes have included health care cost containment, energy purchasing strategies and reduced energy usage across campus, consolidation of our central IT units and updating procurement processes. In addition, a benchmarking study was completed in late 2009 to begin identifying areas in our human resources, procurement, information technology and finance operations that have the potential for increased efficiency and cost savings. Again, our cost containment efforts are enabling us to continue to invest in our highest priorities.
Between FY 2013 and the end of FY 2017 we will achieve additional general fund reductions and reallocations of $120 million. We are in the process of planning longer-term efforts that will contribute to this goal by enhancing revenue and achieving additional operational efficiencies. Suggestions from the Prudence Panel, convened in March 2009 by the Provost's Office, resulted in five task forces on Best Practices for Centers and Institutes, Creative Staffing and Shared Services, Expansion of Spring/Summer Instruction, Marketing U-M to Non-Resident Undergraduate Applicants and Non-Traditional Educational Programs at U-M. The recommendations of these task forces will help shape specific cost reduction and revenue enhancement plans for the long term. Additionally, efforts at IT rationalization across the Ann Arbor campus that began early in 2010 will contribute to future-year efficiencies and strategic technology investments. You may have heard about some of these efforts already and others will be rolling out over the next year.
Although we are buoyed by our progress, we recognize that the fiscal environment remains volatile. In particular, the State of Michigan continues to have significant financial challenges and may be forced to make difficult choices over the next few years that could significantly impact our State appropriation. As we carefully position the University to meet future challenges, we will need to continue to work together to address our budget challenges and maintain our unwavering commitment to the quality of the institution both inside and outside of the classroom.
We owe our success to date, as well as in the future, to the active involvement and support of our community of faculty, staff and students. I would like to thank you all for helping U-M maintain and strengthen its position of leadership among the world's universities.
Learn more about cost control and the university budget
Provost and Executive Vice President for Academic Affairs
Updated October 2010