Good afternoon and welcome to our open hearing on budget matters. >> My name is Sheldon *******. >> I'm a faculty member and the Lerner College of Business and also the president elect of the Senate. Under our bylaws, the president elect of the senate is also the chair of the coordinating committee on education, which organizes open hearings from time to time on issues important to the Faculty Senate. I do want to remind you that we have two other This has been a very busy year. We've already had to open hearings are three. We have one next Monday and the following Monday next week in this room. Smith 130, it's an open hearing. Uncertain revisions to our proposed faculty Handbook dealing with promotion and tenure. >> And in two weeks in gore 10, four will be discussing a new administrative policy dealing with involuntary leaves for faculty. >> Today, President Harker has generously agreed to talk to us about budget issues. I'm going to turn the program over to him as moderator. I'm only going to suggest the ground rules we follow for these hearings. >> President Harker will talk for about 30 minutes about budget matters. >> There'll be time for question and answers. >> We have the room til five, but I hope we're all out of here by five. >> I'll ask people to limit their questions or it could be instead of a question, a comment to no more than two minutes. >> The general rule is you can speak a second time if everybody who was would like to speak has had a chance to speak. >> So no second follow-up if there's still people with hands up. And with that, I'll return the program over to President Harker. >> Well, good afternoon and good afternoon. Everybody. Weigh up there. I went to I really appreciate the faculty senate, their invitation to talk about the university's budget. And I'm thrilled that so many people came that you're interested and invested in the financial strength of UD. And what that strength means for all of us, our students, our faculty, our staff, and our community. So I want to start off before we get to the Q and a, just sort of laying out the broad picture here. I want to start talking about where the university is financially and more importantly, why it's in this position. The y goes directly to the strategic investments we've made over the past several years. Investments I firmly believe will secure Judy's placed among the country's very best public universities. Without a doubt, the areas which we saw opportunity for growth and excellence, where we saw them, we seize them, and our path to prominence is guided those investments. That path was embraced by the university community in 2008, and it really still is our mandate. So we've been faithful to the plants milestones and we've invested into critical areas to helping us meet those milestones. I'll start with what I consider the most important investment we've made. And that's the investment in faculty. You are the core of who we are and what we do. You drive the quality of our programming, the breadth and rigor of our research, the academic desirability of our, for our students. You influence the ability to attract strategic partners and external dollar or reputation rests largely on you. And that's why we invest in faculty and we invested when few other universities were doing it. Since 2007, we've added, we've had a 118 faculty retire in that time. We've hired a 150 faculty. That's 32 net new hires. At the same time that universities in relatively good financial health, we're announcing hiring freezes and those are weaker positions. We're initiating large-scale layoffs, furloughs, plus as you can see, we've replenished, we're replenishing and promoting faculty at higher levels. The number of full professors has grown by 21 since 2007, and associate professors has grown by 18. Over the past few years. >> We've made a lot of high-profile faculty hires. >> Phil Sharp Chaired Professor ships and initiated senior cluster hires and key focal areas like energy and environment. We're committed to supporting you in not only in number, but also in compensation. And we know we have to be competitive to recruit and retain the best faculty. And we are competitive at every rank. Judy's faculty salaries are higher than the average salary is a category one research universities nationwide. And these differences have persisted over time, if you can, if you look only at salaries for peer institutions, regionally, category one doctoral universities and the mid-Atlantic, we're still above the median at every faculty rank. And those gaps have really opened up in the last few years. Really in particular, in the last year, if you consider full compensation versus salary alone, that is, add in the benefits, the gap grows even bigger. For instance, in total compensation, full professors learn their Mid-Atlantic colleagues by nearly $11 thousand. We're serious about keeping the focus on faculty. I'm being aggressive and getting the best of campus and giving them a compelling reason to stay. Or support, though isn't all about dollars. But there's no question that that is a very important part of the support. Equally important isn't investment we're making in students as well as faculty. Last year's freshman class was the most accomplished group of students we've ever enrolled. And over the last several years we've been able to make that claim again and again. Ud is becoming very attractive School to the states, the countries most competitive candidates. As of last week, we've received more than 26 thousand freshman applications. That's nearly, that's up nearly about 9% over last year completed applications signifying a seriousness of intent, or up over 12% over last year. Equally significant is that this increase in completed application is almost wholly among students at higher SAT levels, students with a combined verbal and math score of at least 1200, we've generally maintained a freshmen yield of above 28%. And next semester we expected Ra, freshman class. Similarly, similar in size to last fall's in-state applicants are very strong this year. And I do take it as a sign that our commitment to Delaware and is working that in-state students are taking course loads a better prepare them for college level work, and that they're excelling in those courses. We've promised these students that they'll never compete with out-of-state students for admission. And that they'll never limit, will never limit the number of Delaware Aryans we enroll. But as you know, college access is as much a factor of affordability as academic preparation. The financial part of our commitment to Delaware is a pledge to meet the full demonstrated need of every resident student and the cap, the students total debt at one quarter of the cost of a UT education. This financial pledge is absolutely critical to Delaware students and families, especially now we have to put real money behind it. And we are this year, 1559, Delaware. Delaware students receive assistance through the commitment. That's about 40% of the in-state freshmen, sophomores, and juniors on campus. And we've obligated $7.9 million to the program this year. Next year, when we achieve our first full four-year cohort under the commitment, we project will provide assistance to another 500 students with a total institutional obligation of about $10.5 million. We then leverage other sources of support like private gifts and federal assistance. So at the average per year aid package to elbow eligible students now tops $14,900. We just made a video that features UD students sharing what this commitment has made possible for them, what kinds of opportunities it's opened and how it's helped them to give back to their communities. It's a really good piece, and I encourage you to watch it at our commitment to Delaware, Ian's website, which is right off our main website. We showed this video to the Joint Finance Committee in Dover last week, and it was a big hit. This program, this commitment has one AS a lot, and I want to emphasize a lot of goodwill in Dover, a lot of capital, and we're thrilled to have the state support. The commitment to Delaware ends, though, is just part of our financial aid story. In fact, a to all students, residents and non-residents has climbed sharply. We have to make UT an option and attractive, affordable option for talented students. You want those talented students in class, and financial aid is a key part of attracting them here in three years, overall, scholarship and grant a undergraduates has grown 40% and you and the university is taking on a larger share of it. You, these institutional obligation to undergraduate scholarships and grants. Now $42 million has grown 51% since 2009. And relative to our peer universities, we remained an extremely attractive pricing, extremely track of pricing position to draw academically competitive students right here into your classrooms. Another key area of investment has been in the development office. Who's fundraising activities enable all this things we say we value support to faculty and students, to academic programs, enrichment opportunities, and capital priorities. In six years, staffing, Office of Development, Alumni Relations has doubled as hasn't budget. This was a critical move for us to say that we're deficient and resources we allocate it to. University Development is an understatement. This growth and tracking us is tracking us to be on par with the country's comparably sized universities. Growing the development and alumni relations budget doesn't mean that we don't expect efficiencies and fundraising. Good programs, good fundraising programs at universities spend between 14, $0.18 on every dollar raised based on a calculation recommended by Case and Jacobo. These are they kinda industry groups. Ud is operating a $0.15 on a dollar, a very efficient margin. And look at the dollars. We broke a fundraising record last year, 51.3 million in cash and pledges in this recession, half of that amount goes directly to current operations or cash total last year that's cash and pledged payments climb to $32 million. Without a doubt, success and fundraising has helped our endowment. And despite the economic downturn, we continue to see good growth and endowment value through our diversified portfolio over five years ending last fiscal year or annualized rate of return was 4.6%, comparable to the median return for colleges and universities nationwide. For fiscal year 11. That is last year, our return was 20.4%, comparable with the median, the coup by reported return of 19.8%. And I know at least some of you saw a Chronicle of Higher Education report showing you d with a one year 12% dependent down and value. >> My heart stopped at that point when I saw it. >> But the fact is it's an, it's an error. >> We attribute that to an error on our part in which we fail to include some critical assets and are reporting it's not negative. In fact, it was 20.4% increase. So rest assured, the endowment value at Judy's fiscal year 11 end was $1.2 billion in one year. Return was indeed positive. And we'll make sure we do a better job of vetting their surveys in the future. So my heart doesn't stop every time that's reported. Of course, endowment can't solve our budget gap. We have to maintain the endowments principle and using investment income according to the donors wishes. Remember, much of the endowment is given to us for a specific purpose. We can't use it just for anything. There are considerable restrictions on examined towers. And again, it's not a rainy day fund. >> Many want it to be just can't function that way. >> Research is another area that's grown. And if you want to be a competitive research university, it has to. The research enterprise is central to our mission. And research activity is a key metric by which we measure success. We've tracked growth in the research office versus growth and sponsored research and programs. And we found that by providing a small amount of facilities and administrative support to the research office, we've been able to keep our staff proportional to our volume of activity. Our volume has increased, so therefore the support has to increase to that volume. Since 2006, UD support to the Research Office has been about 2.2 to 2.3% of total sponsored program expenditures. Those sponsored expenditures have climb thirty-two percent since 2006, and sponsored research has climb 41%, reaching a $134.4 million last year. We've expanded services and training, research development and compliance and area that seems to grow, frankly, more burdensome every day. >> The compliance area. >> We've also we're also overseeing an increasing number of CDE programs to help launch new research and new researchers. The bottom line is this, we're doing more than we've ever done before to promote research growth and competitiveness. For external dollars or a $134 million in sponsored research expenditures, the $65 million we were awarded, and stimulus funds there signs that we, you, the faculty are doing a lot of things, right? And our research enterprise, and I won't go so far as to ascribe this to our research support. But NSF's 2012 Science and Engineering Indicators just placed Delaware researchers at the very top in terms of productivity. You are the countries most productive researchers per million dollars of R and D funding. That's worth a drink tonight. I think public safety, we've invest in public safety because there are a few issues that will cause more serious or more immediate harm to university's reputation than crime or the perception of it. We do heavy volume correspondence with constituents in the media around this issue and it's not likely to change. A lot of crime occurs on an around US college campuses, UT included. And if we're going to have armed police officers on campus to control it. We also have to ensure that each officer receives adequate training and retraining and the opportunity to participate in exercises that promote proper response. In 2008, some of you may recall we held a forum and Mitchell Hall to discuss campus safety concerns. Students, faculty, staff, and neighbors demanded an investment in public safety officers. Of course, that begs the question, how many officers do you need? Which is a hard question to answer exactly. And for years we've grown the forced by ten officers, but in that same time, we've cut in half the number of officers serving in an administrative capacity from six officers to three, meaning we have more frontline officers working on patrol during critical days and times. We factored several variables into our investment. Population density, the economy, geographic location, crime rates, the number of area resonance in the criminal justice system. We have challenges, we shouldn't kid ourselves. We have challenges. Close proximity to an inter-state, which allows criminals easy access nearby gang activity, concentrated crime, and a number of resonance on supervised probation or parole. It's true that our police forces about the same size as Penn State's, but were located in a much more challenging environment with a transient population. The University of Maryland, College Park, and the University of Pennsylvania schools with 30% more students in UD and located in challenging geographic areas, have twice as many police officers as we do. And looking at outcomes are investment is paying off from 2010 to fall 2011. From fall 2010, the fall 2011, overall crime on campus and in adjacent New York streets was down. 27% were also invested in the Office of General Counsel. I should note here that our in-house budget for legal services represents about 25% of what we pay for legal services. The remaining 75% is the cost especially retained. Outside counsel, we have three lawyers, general counsel's office, actually two ones on maternity leave. That's low. Even looking at institutions without medical schools and affiliated teaching hospitals compared to peer universities. In this graph, we have 278% more students per lawyer and six times the operating budget per lawyer. Looking at it all together, in-house cost, intellectual property costs, outside counsel, and settlement fees. We spend just under 1.5 of 1% of the university's operating budget on legal fees. This is typical of universities that don't have hospitals and insignificant liabilities that come with it. A university of the hospital spending a lot more than 1.5 of 1% At the beginning of this presentation, I said there are areas, we saw opportunities for excellence and growth and we seized them. Nowhere was this more apparent than in the College of Engineering. We placed a premium on recruiting expert faculty, researchers and staff. And maybe we, maybe we overinvested in faculty. But I absolutely believe that this recruitment at a time when other universities weren't aggressively recruiting and then losing the top faculty we were picking up. I believe these, cuz we'll have long-term benefits for our students, for the UD community, for the state, the region, and for the nation. Of course, you have to be patient and seeing return on this investment. And we've been working closely with the administration and engineering and the college leadership to develop a financial plan that will allow the cows to repay a central loan over multiple years. This central loan, along with the colleges focus on limiting discretionary spending, means that engineering's financial situation will have minimal impact on other colleges and on non college units. And surely if you walk around campus, the most visible area of investment, UD, in terms of visible and has been our construction program, the ice lab, the Life Sciences Research Facility, Allison Hall East Campus Housing, the bookstore, the Bob, the little bob, and the Science and Technology Campus. From June 2010 through the end of last month, we awarded a 191 construction contracts worth $230 million. Our intent is to build a campus that attracts the best, the best students and the best faculty. The tout we're trying to draw in the town, were trying to retain sizes up, facilities, equipment, amenities. Everyone does. I mean, we're human, everyone does. You need it there? Tools or facilities for your work? And ask the question, do we have the infrastructure that will support their scholarship that will keep them happy and that will make them want to stay right here. We need a campus that's responsive to this community's needs now and for years from now. And a campus, it's well-planned, well-constructed, and well used. But it's important to understand and want to take a moment so that we can understand how we finance capital projects. There are very few projects in which we absorb the full cost of construction. Look at our biggest academic projects, Allison Hall. The Hall renovation is a great example. This has been a long standing priority of ours. From one we've pitched over and over again in Dover, and it's attracted sizable support from the state of Allison's total $17.3 million cost. 16.5 million is coming from the state, only $800 thousand from us. And for the faculty here who have lived and worked and Allison hall, you understand how solely those renovations are needed? The life sciences research facility going up on Delaware Avenue and can see the steel right now will more than double our preclinical research capacity of it's $12.5 million cost. $8 million is coming from the federal government and $4 million from the state. The university's obligation to the project is $0.5 million I slap only the ice lab at a $132 million is being financed primarily with UD funds through our capital program and our strategic initiative fund, and through private giving, through gifts or last major ground up academic project, The Center for the Arts was financed using a very, very similar model, the ice lab, as a critical priority for us. It gives us a badly needed classroom space and will obviate the need for unpopular Scheduling Options. >> Where's the progress? >> Like Saturday classes and Saturday and Sunday labs. And it's not just for science and engineering majors. The building will house many of our basic science courses, and so it will serve a good number of UD students irrespective of major. It's being designed to transform the teaching learning experience into grower innovation opportunities. And it's right and keep it with the state's focus on stem education as a key to a more robust economic development. The other construction projects that I mentioned, East Campus Housing, Bob carpenter center, the carpenter sports building. They don't compete with academic funding. Let me be very clear on this. They do not compete with academic funded they're funded with pass-through fees like licenses, lease agreement, student fees, much of what you see on the recreational side, really, all of it is being funded by student fees and some gifts. Most of the bookstore cause, for example, is financed by our Barns and Noble rental agreement. Our last bond sale supported portions of all these projects, as well as a majority of the construction of these campus utility plan. While these investments are unrelated to academics, they are undeniably related to attracting competitive students to Udi and giving them the college experience we think they deserve. If you follow the blue hand pull every spring that they Wilson doesn't his class for three years in a row. The recreational facilities are number one or number two on the students thing. They hate most about UD, lest we had to do something and they were willing to pay for. There are many more investments. We've made many more commitments, but these are the big ones that I mentioned. And they were undertaken at the same time that resources were being constricted. Now it's tempting to think that this is somehow attributable to rb, that if RDB went away tomorrow, we'd be okay. >> But it's just simply not the case. >> I know are BB wasn't introduced at the best time. I think I've said it it was an exquisitely bad time as we went into the recession to implement this. And I know our initial processes are training our data were inadequate. We didn't know what we didn't know, we didn't know what we did in terms of the infrastructure to support it. But RB B will remain because it's absolutely consistent with the goals of a research university. And I really believe this. It strengthens faculty governance. It drives budgetary decisions into the colleges where the curriculum decisions are being made. And to make it worthwhile. And it makes it worthwhile for colleges to think about. As colleges think about what they need to do, maybe they don't need to do anymore. The new things they can do to generate new revenue and new opportunities for their students and faculty and the things that maybe they shouldn't be doing anymore. Because let's face it now, there are things we startup that over time, things change. And maybe that program that was essential 20 years ago. It's not essential today. But those decisions are being made in the colleges. And that's why I think most of the countries, research universities have a distribution model similar to RGB or are frankly close to adopting one. They said before that RB be decentralized decision-making and it really aligns budget authority and accountability. But what this means in practical terms is the college deans control approximately 75% of your total budget through direct or indirect costs. So I want to talk to you quickly about some of the budget pressures we've been feeling. But again, I do want to emphasize that, that RBD is often viewed, as I hear this phrase a lot, it's corporate, it's actually the opposite that the old model was everything was being decided in Hawaii and haul these decisions are now being made close to the faculty with your department chairs, with your deeds. Now that's been a transition for this university. It's new. It like all universities have gone through this transition, but we have to seize that opportunity. You have to seize that opportunity. Let's talk a little bit about where some of the issues we're facing. The state's resources have shrunk during the worst of this economic downturn, Judea seen its operating appropriation fall considerably. State support to UD now comprises less than 12% of our operating budget compared to previous session funding depths applied more than 17%. And I really feel bad about this. I could just starts to go down as soon as I get here. But but there's also that recession, that pesky recession. But given the fiscal challenges the state still faces, we I am very grateful for the governor's recommendation last month to make no further cuts to our operating appropriation. You've heard it, you've seen it. Other states and other universities are grappling with far tougher challenges. Last week, just look to the north of us. Pennsylvania Governor Corbett proposed a 30% slash the Penn State Temple and pit. This is a year after corporate proposed to cut in half the state spending on higher education. Cash-strapped states are meeting awesome, brutal budget measures. And again, we're grateful, and I think we should be grateful for what we're getting. >> Flat funding is good. >> We're also moderate modelling scenarios for more modest tuition increase in fiscal year 13 than we've had over the last several years. Tuition for in-state and out-of-state undergrads climb 7% this academic year. For the last five years, in-state tuition fees has risen nearly $3,500, and out-of-state tuition and fees of jump more than 9 thousand. We have to give students and families of brick. And we have to be cognizant that the increasing tuition is creating a closely correlated increase in student need. Alright, so as our tuition goes up, the need for families who are struggling, who are losing jobs goes up at the same time, and therefore our financial aid obligations are going up. President Obama made college affordability a key piece of the State of Union address. Calling on public universities to rein in tuition costs and previewing a plan to shift federal dollars away from those who don't. So I want to talk about tuition and state appropriations together, because for resident students, the interplay between the two is critically important. >> There's abouts >> Absolute bounds to be struck between cost borne by students and costs borne by the state. And I think if you see this chart, we've achieved the better bounced and many of our comparator institutions providing a quality education that does not rely disproportionately on either lever, student tuition or state support. The challenge going forward, of course, is maintaining this balance. And as you see here with places like Penn State, that's going to be a difficult thing to do for them as they're getting cut back further and further. Obviously, the nation as a whole has suffered through this downturn longer than anyone of us probably anticipated. And the country faces continuing economic uncertainty after several years of significant growth, the colleges are forecasting 3.2% dip in indirect cost recovery this coming fiscal year AND flatline next year. The slowdown and grant activity is hardly surprising, giving the sunset of stimulus funds and the federal government's tough budget situation, agency simply don't have the resources. They didn't flesh times, and I know many of you in this room are feeling it with your proposals. Another factor exerting pressure on the budget is rising operating cost over the last four years or annual average annual increase in health care costs for employees and retirees is 6.3%. That's a 25% jumps since 2008, annual growth in utility cost is 4.6%. Retirement costs of climb 3.8%. Bouncing our budget not just in the short-term but over long-term. Two will depend on us containing these expenditures. And this is true at the federal level, is true at the state level, and it's true for companies and it's true for universities. Health care costs are eating up a bigger and bigger share of our budget along with these other things. And we as a society, we as a community have to figure out what to do about it. These pressures though, aren't new, and over the last few years, we've had to make some difficult decisions because of them. In 2010, we cut the basic budget by 2.9%, a cut that was spread proportionally among colleges and non college units. Together, the seven colleges reduction total $7.9 million and the administrative units lost $7.7 million. We're now on our third straight year of cuts in the administrative units. This year's cuts free up another $3.8 million. The cumulative three-year reduction has shape about 10% off of non college, non college budgets. But like every state in the nation every year, we have to balance our books. We can't run a deficit, we can't print money to be a great idea. We can't do it. And so you have to see, and so you can see the parity in our biggest revenue across centers. Half of our revenue comes from student tuition and fees. And nearly that much goes to instruction and academic support. It's also worth noting, at 12.6%, student aid is accounting for a significantly larger share of the expense pi. Again, as our tuition has risen, we've had to match that with an increase in student aid. On the revenue side, I want to point out that 17% coming into contracts and grants. And I want to thank you for your productivity that happens because of you and your hard work. We've been vigilant in ensuring how are resources go to our highest priorities are students in our college program. So I think this is an important slide. While we've allocated more resources, the colleges and the students, eight, we've really held administrative resources flat over this period. The next fiscal year that I was going to bring its own challenges. We continue to look at our core revenue drivers, tuition, state appropriations, gifts and contracts, grants, endowment investment income, and we're trying to forecast what we can expect from them this coming year. That revenue was competing with some big expenses, employment costs including salary, health care and pension, financial aid, utility's capital maintenance. And given all this, the investments we've made, the budgetary pressures, we felt our expenditure obligations were forecasting a fiscal year 13 budget shortfall between 15, $25 million. Now we have large reserves, but we can't fund operations out of our reserves because we need this. We'll build year after year. If we don't solve the problem, we can solve it in any one year. >> That's not going to solve the overall problem over multiple years. >> So we need to fund this out of revenue. And we will, we'll do what families and everybody you are all doing right now. You're making some tough decisions and you have to be innovative and creative cost-saving opportunities. So I convened a budget working group last fall to really help to review the financial plan for next fiscal year and to recommend measures to eliminate the projected budget gap. The working group has made some recommendations and I'll be as candid as I can about them. There are some that I need the board's approval, my boss's approval on first. So I hope you understand that I've I can't speak fully to some of those recommendations because the trustees have not had a time, time to talk about them yet. And of course, additional decisions are being made within colleges and oncology units. The can't be entirely anticipated right now either. I mean, these things need to work out and play out over this semester. The Working Group has a set of principles guiding its deliberations. Neither important to encourage efficiency by eliminating duplicative services and programs and low demand to preserve the core of our services and retain our ability to attract and keep great faculty, staff and students to measure reductions against the impact on students, faculty, staff, and on the university as a whole to avoid reductions that impede the cost of another unit and provide flexibility for the implementation of cost saving ideas. >> In other words, the work across those boundaries. >> And to focus on the long-term by investing in areas of strategic importance. Implementing revenue generating ideas, and reducing costs are expected to continue to grow. Now the recommendations that they've made are organized under some broad categories. Manage salary, Unemployment costs, higher education is a people driven industry. Alright? We are people driven business. And that's where the value is, u r the value. This is what you are. Why students come here, and that we're not going to compromise the investment in our most precious asset, your time, your talent. We're committed to implementing the multi-year contracts we've negotiated with all the units. But given that employment costs comprise the largest expenditure in her budget, we're going to have to look at those costs over the long run, including salary, both in the short and long run. But we have we are committed to keeping our work in the contracts. We're going to work with the state to control growth in health care and pension costs. Because again, those cost, it's not just salary, it's also the healthcare costs continue to be an issue not just for the university, but for the state and frankly, again for the nation, will renegotiate our vendor contracts, reduce expenses on ancillary benefits, dental, vision, life, and long-term disability with an eye toward also maintaining or enhancing the quality of those benefits. We want to reduce operational administrative budgets. Another 3% administrative reduction across the board, the same as this fiscal year would net about $4.3 million. Now, that's the fourth round of cuts in as many years to Judy's non college units. That's a lot that the non college units have absorbed. And we know these cuts have an impact on program services and staffing. And we need to ensure that the reduction doesn't violate the principle of protecting our core programs. So in looking for where we need to make those cuts on the administrative side, we need to make sure that we're not affecting the core business of what we do in education and research. The recommendation also has a drop-down. Mandated costs will be met by maintaining the capital maintenance reserve at its current level, delaying our contribution to the annual reserve fund, and maintaining capital and strategic initiative funds, a current levels. But we're also looking at putting in some delays to growth and key investments. For example, extending the planning phase of our comprehensive capital campaign that will net some short-term savings, hopefully without jeopardizing long-term commitment to raise more funds for this university. I mean, there's no mystery here. As state support dwindles, we need to replace that with philanthropy. We need to be raising more money. And that is a long-term need for the university. >> It is not in crisis, not by a longshot. There are short-term issues, but they're not really fundamental problems. And we have a finite resource pool and there's no doubt will have to be diligent and cutting costs. But I agree with Professor 5k and bombs overall analysis at UT isn't good financial health. The AAUP commissioned a report, but it illustrates the strength of our position, especially relative to other universities. Of course, the report is intended to assess IUDs, long-term financial outlook, not the short-term budget challenges we face. I don't agree with every point in the report. For instance, I'd argue that the 1% decrease in instruction he cites is almost entirely offset by the increase in sponsored research, which is faculty driven and faculty valid. Regardless, the challenges before us today are one of budget, of controlling costs and continuing to make UD affordable and competitive over the short and long terms. And we'll do this by maintaining our focus on sound financial management principles that have one AS a double a plus bond rating. I do recognize so the cost challenges facing all viewed these colleges and departments. And I encourage faculty to communicate with their deans and vice versa. Of course, as resources or stretch and budgetary pressures arise, the budget recommendations were considering will position us well, not only for the coming fiscal year, but to set us up for the next fiscal year and beyond, we've set a direction, we're investing in that direction, we will see a payoff. This too, is our path of prominence as fiscal path throughout the this economic downturn. There's no doubt. I think there's no doubt if you talk to your colleagues around the country, that we fared much better financially than many other universities. That said, we're not immune from the economic realities that we all face. And we have to continue to find ways to be innovative and to create efficiencies. But what we won't do is to abandon our ambitions. I think that would just be devastating. To abandon our ambitions to detour from the path or undervalue our students, our faculty, and our staff, the very people who every day make this University is great as it is. So I want to thank you. I mean, we've got these challenged, but I want to thank you for your dedication, UD, and to your colleagues and to your students. And I want to thank you for your contributions day in, day out, week in, week out urine. You're out to the academic and financial strength of this institution. So I'm happy to answer any and all questions. This will be up on the website tomorrow and in case anybody wants to read it. I know some people are taking notes, but I talk fast, so let me stop there and see what's on your minds. Any questions, comments, complaints, and these microphones. There's not a microphone to pass around for questions. We are trying to podcasts as right child, so it can get least close to one of these microphones or just or you have a big booming voice, you know, so that the system can pick you up, please. Floors yours. >> I'll give you one. I can say that the faculty on the ground are feeling discouraged because of the current budget situations. And you set that setting us up to not have this happen in the future. But you didn't actually explaining your talk why the various budget constraints that I've been on the faculty Carnap and hearing it out for the past decade or more. Wow, change, which structural changes are being said? We're not going to be having a discussion in the same hash. >> Yeah, you know, that's a great question. And it's one that I've been around through a lot of colleges. A meeting with I was just in college of earth, ocean, environment. We spend about half the time talking about this issue with the faculty. Let me put it bluntly. When you make the President's State of the Union address as a, as a problem in the country you've made the big time. It's not just UD, This is, this is a issue of higher education across the country. It really is. So I actually think we're fairing better than many of our peers. But there's still a fundamental issue. And the fundamental issue is that we are a people driven industry, that our costs keep going up because wages and benefits keep going up, but we're being squeezed. And this is what you're hearing from the president and this is what you're hearing from society at large on tuition. So if tuition is being squeezed down and costs keep going up, What's going to happen? But one lever is fundraising. So the private universities have been in this for a long time. Just to put this in perspective, Princeton's not having this conversation. And the reason Princeton's not having this conversation there, endowment per student is over $2 million. Alright? So if you take an average pay out of 4%, every princeton student can get a free ride and a new car every year, right? So private universities that had been in the business of fundraising for a long period of time with large endowments relative to their size. Because the key metric isn't the size of your endowment, is the size of your dominant relative to your student, but right how much you have to support. They're not having the same conversation. We, the publics or quasi publics are happening. We're seeing states support decline. We're seeing pressure to not increase tuition, and we're seeing continued rising cost. We look to the south of us at Maryland. Maryland's on year four of no races, plus I had ten days a furlough. The governor of zeroed out tuition increases for at least one of those years. But health care costs kept going up, energy cost kept going up. It's not like somehow we're immune from those costs, right? So I think there's a, the long-term solution. We really need to think about a dao. Put my academic hat on. I used to run a very large, actually the only one at a time, research center on the study of service industries, the service sector, which is the dominant part of all developed economies. And there's a classic example of a classic concept in the economics of services called Baumol cost disease. Bill Bowen, who's at the time an economist at Princeton, then became president Princeton. Then he ran the Mellon Foundation. Baumol and Bowen wrote a famous article and ask one question, how do you improve the productivity of a string quartet doctrine. Interesting question, right? I mean, how do you improve the productivity of a string quartet? Well, you could play a little faster, drop a few notes, and see if anybody notices pay the cellist piecework. What do you do? Well, one solution has been you build a giant concert hall. So you don't just have a small concert hall yet, a giant concert hall. >> Has that apply to us? >> It does. What have we done in higher ed to improve productivity? And I mean productivity as measured by an economist. I get into trouble with faculty when they say productivity. Nevertheless, and it's a productivity as measured by an economist. We built these rooms, right? Cuz we don't, the most precious resource we have is your time. The most expensive resource we have is the fact that as a university is you, you are that but we don't necessarily leverage faculty time most effectively, most efficiently. You're starting to see people experiment on the fringes with new ways of doing this. I worry about the competition coming from those startups. I know one right now that is actually very well financed and they're, they're trying to create a $10 thousand degree that can compete with an ivy league level education. With that prestige, I'm African pulled off. But there are people out there thinking that way. So I don't know how we do it, but I think one of the challenges we face is how to make the most effective use of your time. Because that's what drives everything. That's what drives the quality of the institution. That's what drives the quality of the student experience and that's what drives ultimately our cost, right? I mean, in some ways, but it's making your time most efficient and effective. That's what we need to start focusing on for the long run. Because I don't think that we're not going to change the cost curves in the short run. I mean, will bend them a little bit. But health care costs are going to keep going up, energy costs are going to keep going up, especially its economy. Global economy comes out of recession. We're in a law right now with energy costs a little bit because we've been in a global recession, they're going to come roaring back at us. The, Oh, I think we need to start being creative and start thinking about experiments. And we do this well. This is one thing this university does extremely well with problem-based learning, discovery learning, with other approaches to learning. We have a creative faculty. You are willing to experiment with different ways of learning. Different modes of learning. And I think we need to continue that or else we're never going to get these cost curve. I mean, at some point, if you're, and you see this with our students, right? I mean, I teach every year a class of freshman class. My first year here, I taught an MBA class history with our students, right? If you're just lecturing, they're not showing up or they're just not. I mean, then we need to think differently about how we educate. And if it's not, if we're not creating those real interactive moments for a student, they're going to walk away. And so it's not just a cost issue for me. I also think it's a quality of education issue. That's what we need to really, really focus on as a faculty. And I don't have the answer for that. I don't know what the problem is, but this is where we just need to have a lot of experimentation of you trying some things and seeing what works. And it's happening right now. We have those experiments happening on this campus. We just need to figure out how to leverage them. You know, simple things like, I know in, in some of the science departments, instead of doing experiment live every time we're doing it once, videotaping it and showing it to suit sounds trivial, right? But saves all the chemicals that we were using. It saves time. So there are things we can do that actually can improve the quality of education and reduce costs at the same time. Otherwise, these curves are going to keep moving the way they'll move, I don't see in any time in the short run. And that's the other thing that bothers me. We've lost the sense that an educated population is critical to the nation's future. We think about that, just read some of the debate happening up in Pennsylvania right now. Pitt Temple and Penn State are moving toward being private institutions. And then some point when you're budget is 5% from the state, you have to ask yourself what you know. But what it means is what's happening is the state, the, the society. I don't blame the legislators, right? It's the state saying we don't value higher education. Higher education is a private good, not a public good. Alright? That's a dangerous place to be. I mean, if you look at the history of this country and read some of the things that are coming out in this debate. One of the big ways we accelerated our society after World War Two was the GI Bill. When society say We're going to invest in these people coming back, we're going to excel. Because before World War two, very few people went to college. We expanded access. And today, what can you possibly do with just a high school degree? I don't know what you do with even without a high school degree, right? I mean, it's a real problem in american society, but we, we need to get that back. And that's a broader issue. That's a broader societal issue where we, the academics need to do it even though we're getting hammered. And let's face it, we're getting hammered because we are now being viewed as the big, greedy fat cats that are feeding off. This is the way people are portraying us. We need to push back on that because we are, I mean, you think about this economy, this society, we are critical to the health of this nation. We've always been critical to the healthiest nation. I would argue even more so today. Even more so today because of the kind of economy we have, right? I mean, just walk into a factory. My old There's there are no more factories like your Chrysler plant where thousands of people working, putting on it just doesn't. Modern manufacturing runs with a couple of 100 people that run numerically controlled machines, not thousands of people putting on bolt. It just doesn't, it doesn't work that way anymore. We need an educated population if we're going to be successful as a nation and we've gotta get that back. And we've gotta get our politicians to believe it again and it's going the other way. That's my big of of all the things I lose sleep over those charts for state support is plummeting. It's not just a budget issue for us, it's a deep societal issue for us. So what else? >> I was glad you mentioned prints because I had the good fortune of teaching at Princeton about 30 years ago. >> And I think what makes prints, the mistake from many other good universities is that it has very small plasters and hardly any classes that would be held in a lecture room, this art. And so I certainly think that we are building more dry and concert halls as not religion way forward, I'd have to say that I have been, or a bar B, B, at least in concept since it was introduced a few years ago. >> And I think that on research, the algorithms are pretty well aligned with quality. >> What concerns me is that on teaching, teaching one course in a room like this with 250 kids, half of whom may not even show up for class most days, generates the same income for the college as teaching ten courses with 25 students each. >> Where there actually is that close engagement of faculty with the students. >> And that's where I think that if the algorithm X bar b, b will align so that teaching 25 students each attending courses was given a higher financial value to reflect the higher educational vouch, teaching one huge Course, 250 students, it would be a big step forward. >> Well, here's, let me give you my view on this. And it's my view that is coloured by lots of conversations with Bob them ski at Penn, who was kind of a guru or one of the gurus architects of the RCR model are cm, which is what we call RB, BBA destroy. Our CME is not a decision-making tool. It's a tool. Decisions need to be made because of academic quality. There are informed by the budget, but the budget shouldn't drive everything. That said, you know, you can say, well, the old days were better. We didn't do that. Of course we did. We built this. I mean, it's not like the old model. Somehow we didn't reward large classes. Of course, we rewarded large classes. We've never would've built this lecture hall. But what has to lie on top of our Beebe or in our SCM system, is a quality program led by the faculty and the deans in the colleges and to go in to it with open eyes and open ears Know that yeah, we're gonna teach. We are a premier institution, of course. We're going to teach a bunch of small classes. And of course we're going to lose money on those. And that's OK. Now we as a university can't lose money on literally everything we do. Or we're never gonna close the budget gap right away. That just doesn't make sense. We have to have some things that make, but the decisions have to be made for academic quality purposes first and foremost. But they're being informed now by an understanding of the budgetary implications of those decisions, which there was no understanding of that before. Maybe the one thing, if there is a beauty of this system and it's not perfect, I'm not arguments PRF. But the one thing it does do is it brings into light what the real costs are. So you can trade, trade off the costs and benefits or whatever you wanna do me, I lived in such a system as a dean. I started programs that I knew were going to lose a lot of money, but they were going to be high quality. The craziness is to, to subsidize mediocrity, right? And this is where faculty need to stand up and faculty need to take control. This faculty need to oversee the academic quality of the programs and institutions. What I know is a death knell for these systems is tweaking algorithms. Because once you to quit once, then someone's going to take it to next time. And third time, fourth time, you never got my points. You're never going to get the algorithms perfect. They're never perfect. He sorta get close enough and that's good enough. This is the engineer on the right. They just kinda close enough that you're never going to get perfect. But on top of that has to lie the academic quality of institutions. By the way, the way the system's built here with invention, we have that wiggle room suspension is the wiggle room, right? To say, well, we're not going to get completely perfect in some colleges are going to lose some money. And there's a way of that subsidize ignorance. But you can't, I mean, it, it can't be the decider. R b, b should not decide because the worst thing to do, and I've said this to other groups, to worst thing and you see it when it fails is when engineering, I'm going to pick on engineering, right? Starts teaching Spanish engineering, Spanish versus Spanish Spanish. Why? Because they think they can make a quick buck. Or nursing started teaching, starts teaching something, you know, you see this, that this is where the faculties have to have the academic control over top of the system. Because what'll happen is yet in the short run, you can make a quick buck. And a long run run. The quality, the whole institution comes down. And engineering thrives because Arts and Sciences strives, hey, engineering is strong because they're around a strong health sciences program and so on. That's there has to be an attitude and a governance structure, faculty on top of the system. That's my point. It cannot drive decisions, but again, it just creates clarity on when you make a decision. This is what it's going to cost and it's okay if we think it's high-quality, we're going to lose money on it. And that's, that's an okay thing. But we just have to be clear on it. So I'm not a big fan of tweaking algorithms because I've seen institutions do this every year. And then it's just sheer chaos. And it devolves into the survival of the fittest or the loudest, right? Who gets the algorithm tweak this way or that way? I just think it's a bad way to go. So, but that said, it wasn't like the other system that reward large classes either. I mean, we have a lot of them now. In fact, we have too many Him in some ways, and too many of them without the requisite support, teaching assistants, and so forth. Alright. So we got a we have an issue. We've had an issue for a long time. We just need to fix that issue. >> I heard someone hypothesis it with a larger rooms or quality of education is we're trying to tweak things and strip it of things. >> I'd suggest that we consider doing data collection and doing some actual experimentation rather than just experimentation in the subjective sense. >> So there's no reason we couldn't do something like, yeah, I compare learning outcomes from class one versus a class of 50, for example, 35 versus somebody. >> If we're going to be evidence-based research we do is part of our jobs. >> Yet even haven't species decision-making within the context. That's a good point because also I'm not arguing that large classes are always bad. There are, there are circumstances where there are faculty who are so mesmerizing in a lecture that you want them in a large class. And I'll speak sort of personally, when I was a senior in college, my friends convinced me to take Russian history. No real interested. They said, you've got to be in the room with this guy. He's, and he was a fantastic scholar of Russian history who's in the room larger than this root. And he held the whole room captive. He was mesmerizing, he was inspiring. So I don't think there's a one-size-fits-all an education either, right? That everything should be in a small problem-based learning classroom. I think we do need to experiment. In some cases, we have faculty stars who are phenomenal lecturers. We should play to their strengths, right? Not try to put around peg in the square hole. If they are great lecturers and can hold a classroom this size mesmerized, then let him out, let them do it. So again, I just think we need to there's no one size fits all here, depending on the outcome and also depending on the skills that the individual faculty member. Alright? And so it's really when I say maximizing the value of the faculty members time, that's one of the things, I mean, let's really helped the faculty find their real strengths and then built the system so that we can we can all benefit from that as a community. Absolutely. Yeah, I think these aren't going to go away because we still have great lectures, but we also need a lot more problem-based learning classrooms and everything else as well. But I agree. I think we can run these experiments. What else? Yes. Your first slide number faculty tragedies. Do you happen to know if Joe's increase over that period, if it's only to track faculty solid palms isn't time wondering. I don't know if I go. I don't know offhand. >> Had a sort of theme that suggested that there was less transparency in the way the budget to numbers were reported, making it more difficult to analyze. And if I read it correctly, one of the charts suggested declining dollar from developmental with the last few years that your slideshow is decreasing. So I wonder also the suggestion that there's been a decrease in the administrative Trojan that sort of runs counter to the perception on campus and the administration have to increasing its bold. >> So I wonder what's chance has common categories compare and analyze? Absolutely. I mean, at first I don't understand the development piece because we're not I can show you the data. I mean, pretty clearly in terms of transparency generally, yeah, sure. Work will be willing to share what you need to know. Why why would we hide it? I mean, this is now the issue of the AAUP report. I don't quite understand. On the administrative side, yes, we have grown those categories. I mentioned Public Safety development, the general counsel's office, and so on, those we did make strategic investments in, but then we've held flat everything and that's what that chart was. All the increase in the budget has gone to Financial Aid and to the colleges. And that would mean that we can get you the details on that. I mean, that's easy, but sometimes reading the financials and I'll know what they were looking at our financial statements, but they're audited financial statements using common categories that every other university uses. So I'm not sure how much more. I mean, it's pretty it's out there. It's pretty clear what it is. So, but there are questions. Let us know and we'll get you the answers. What else? I think you're exactly right. >> So help us understand some of the specific genes exist. >> Yeah, so ONC, on development, there are really two categories of development. One of activity one is basic awareness building and loyalty building of the alumni base broadly. This year, I'm going to point to bet this is our fourth reunion weekend for number four. Now think about that. Every college you went to, I bet you've gone back to reunions. We had one reunion a year at the University of Delaware, the 50th. You did not hear from the university? Between 050 and then we had a really nice 50th reunion. And at that point, people had already made their state plans and everything else and you're late to the game. So a big chunk of what has had to have happened here, it's just basic building of loyalty of the alumni to the institution. Would you go out and meet with alumni? Just look at the return we've gotten on these four years. By the way, the Development Office Every event they do they do a return on that investment. We don't do events just to do events where we actually look at how much has we have we increased donations from the people who attended that event over time. So we track that and the reunions have actually had a great return. And both in terms of just sheer numbers, we've had over 3 thousand people coming back. Cities that scared to death that we don't know the kind of crowd we're gonna get this time because the words out, but that's critical, right? To a university. Every university does it. We weren't doing it. And I would say that was because we have what many institutions a Delaware have, which was we will rely on a few very, very generous donors that built the great institutions in this state. But that those family trees have gotten larger, their wealth has dissipated throughout the family tree. We need to build that loyalty. And it's not just for fundraising, it's also for door opening for our faculty on research or first students on getting hired. So that's one base that you have to build and that, that can't be just college specific generally, right? Because an undergraduate university delaware, who was a Spanish major, was also in the band and also in a sorority. And that, you know, so they don't view their life as my department was the only thing that mattered to me. There are lots of things that matter to a student when they're here. So we need to build kind of comprehensive, university-wide at the same time, colleges are doing cow specific things and that's what we're trying to do. And reunions, right, have both broad, university wide activity and then college and in some cases department or school specific activities. Building up the second part of this, and this is where the deans are actually very involved along with me and the whole senior team hitting Roden, talking to donors. People don't give because you sent them a letter. Not any significant money. I was at a college recently giving taught me just talking to the faculty and somebody asked me the question of rape Romans $225 million gift to the University of Pennsylvania the name to medical school, right. And wake and his late wife, Ruth, didn't wake up one morning and say, gee, I think I'm going to give $225 million. And University of Pennsylvania re, graduate and I think in 1946 from Wharton. And over many, many years, Ray had been generous to the institution. And the institution involved in those kind of large gifts are based on decades and decades of involvement of a faculty member or faculty members with a donor and deans and so forth. That's what we need to build. And to do that, you need to be on the road talking to people. If this is a, this is not, there's no magic to this. There really is no magic to it. It's, it's bringing faculty out. We've been doing some of this, bringing faculty out to talk to, you know, maybe a small talk to a group of donors or alumni about a specific topic of interest. There are lots of things we can do or when people come back on campus. One of the main reasons, and Cindy Camp and Alice here writing our alumni activity, one of the main reasons people come back to our union is not just to see their friends and have that great party on Friday night. They want to see you. I mean, you hear this a lot. I mean, they want to see faculty who changed her life. Faculty that they Continue to stay in touch with and so one thing that you can do generally is B around that weekend if you can, because you can imagine you'll forget, I mean, look, volume, sometimes you forget these people. You don't know what you said to them and how you impacted them, right? And just you thought it was just this offhand comment like clean yourself, clean your act up Joe, or whatever it was. And that actually affects our students. And they remember that years and years later they want to see you. That's why one of the reasons they say they come back and they go actually knocking on the doors and seeing if they can find you, if you can be around that weekend. That will help build this loyalty to the institution because they're loyal to the institution because of what you've done for them when they were here. So that's what I mean, this is going to take some time. We, we are starting from a very basic level where we didn't even have reunions. But there is traction. The fact that in this recession, we hit our best year ever and fundraising, that gives me some hope, right? I'm pretty optimistic. I mean, most people are sitting on their hands right now not willing to write big checks. Because when the stock market goes up and down 3400 points today, and you're watching your net worth go up and down at the same level. You're not willing to write that BIG check. But it's going to happen if we keep building the base and its deans, faculty in the team, just generally just getting out there and talking, talking, talking, getting people enthusiastic about the universe, and getting them re-engaged in university. What else? Yes, yep. So we are still at a quiet phase of the campaign. That is, we're still building the kind of base of support. A typical campaign, you have to have in hand a third to half of the, the target before you go public with it, a sort of a standard target. We're not there yet again because recession has not been our friend. But actually in a way, it's also been a friend because we've been able to build the infrastructure. I'm starting to build some of the activities like the like the reunions and so forth and some of the other alumni activities that are start will pay off as we go public. But the large donors that typically create the foundation for the quiet phase of the campaign there still sitting on their hands waiting for the economy to come back a little bit. I mean, I know one fellow in particular who is a serial entrepreneur who has a company and he's just waiting for the stock to hit a certain price before we get to a large gift, and it comes tantalizing close to that price. And that goes back there one day, it may even cross the line, but then it goes back down until he sees stability's not willing to write that check. That's understandable, right? It's human nature, so we just have to get the economy rolling again. Anything else? >> Experts now? >> Now, so the idea of the Chrysler, really the the whole intent of the Chrysler property is except for the space is being used for purely academic purposes like health sciences, the rest like Bloom Energy, we want to make some money on, right? So in case of Blum, and this is public information, so Bloom Energy, we gave them a no cost ground lease and return. The state has committed to economic development money to the university, so we can start to build out the first phase of the infrastructure around the one building. We left up the administration building, which will be over time, the activities of health sciences will be moving down there. What we need to build the roads, the sewers, we need to build a basic infrastructure for other developers that want to come in and put up lab space and other things. The litmus test for that site is we don't want to lose money. And obviously we don't want to use university money. We want to use somebody else's money to develop that. But we have some I mean, it's not just anybody moving in there. We want whoever's coming in to have opportunities for our faculty and our students. So blooms are good example. We bloom. It's not just going to be a manufacturing site, but they're going to be doing some research and development. Engineering students, other students will have an opportunity to work there. They're interested in are biofuels program here because right now they use natural gas, but they'd be very interested in thinking about, but we're starting to work on that with my client and the Energy Institute. There are lots of opportunities like that, but we, we don't want to have somebody come in just to take up space. And this is the beauty of a university. We've been around a long time, right? That land is ours. We don't have to rush. We don't have to meet a certain target to get a return on investment, we can take our time. That doesn't mean we're going to do nothing, but we want to find the right people to come in and really want to partner with the university to create those opportunities. Because one of the issues that we face here's University compared to say, a university in the middle of a city. If you ask students today, how did they get a job or getting a job or they interned, right? Just wait is me.
2011-2012/facsen-open_hearing-budget-20120213.mp3
From Joseph Dombroski May 06, 2020
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