Chancellor Black Remarks
Town Hall Meeting
February 18, 2015
3:30-4:30 p.m.
Marshall Performing Arts Center
Slide 1: 2015 Budget Presentation
Good afternoon and thank you for joining me today at the first Town Hall Meeting for 2015. I believe that it is important to meet with the campus community to provide an update on where we are in the budget process, as well as celebrating the incredible accomplishments we continue to achieve at UMD.
I want to start today by emphasizing that our budget deficit continues to be a very real challenge for us. However, we have made great progress over the past year and a half, and the end of this budget challenge is in sight. The progress we have made is the result of much hard work from many of you, and I appreciate that we have kept our focus on the quality and value of a UMD education, and we continue to do great things in the best interest of our students.
For example:
• Last year, we received confirmation that a UMD degree has one of the best lifetime returns on investment. Affordable Colleges Online found that UMD grads are among the most likely to have the largest earnings potential when compared to those who do not have a college degree, and that UMD graduates earn more on average than graduates from many other peer universities.
• UMD students continue to be highly successful in finding jobs after graduation. According to the most recent survey, about 95 percent of our graduates are employed or are continuing their education, a year after graduation. Of course there are many values to a UMD education, but this study verifies you can get a job and a very good job with a UMD diploma.
• We were informed recently that UMD will be the only Minnesota site to display Shakespeare's First Folio, which will be on loan for us from the Folger Shakespeare Library in Washington, DC in the fall of 2016. We had to submit a competitive proposal to get the First Folio on our campus, and I appreciate the great work of UMD faculty and staff that developed the proposal to bring this unique opportunity to our campus community.
• The new UMD Cultural Entrepreneurship Program in the College of Liberal Arts has 41 declared majors in its first three semesters, with Duluth-area business leaders serving on its advisory board, providing field opportunities, and participating each semester in the celebration of student entrepreneurial projects.
• The UMD Communications Sciences and Disorders Clinic continues to be a valuable community resource serving over 200 clients per year.
• The College of Education and Human Services Professions is building a partnership with the Swenson College of Science and Engineering to increase the development of our STEM and education programs, especially as we seek to recruit more women and members of traditionally underrepresented communities.
• The Labovitz School of Business and Economics received reaccreditation from the Association to Advance Collegiate Schools of Business in December. By receiving this accreditation, we are among the top 5 percent of business schools in the world, and the review team told us that UMD's was one of the best reaccreditation reports and processes they had seen.
• We have added new and innovative majors in Entrepreneurship and Financial Planning, and our students in the new Financial Markets program manage an investment portfolio called the Bulldog Fund that now exceeds $1 million.
• We have a new and exciting Motion and Media Across Disciplines Lab, which is a 3D motion capture and high definition video production studio. This interdisciplinary lab has faculty members teaching digital arts, bio mechanics, theatre, virtual reality, computer science and ergonomics.
• LSBE and SFA are collaborating on a new Graphic Art and Marketing Major.
• We have record enrollment in the Swenson College of Science and Engineering programs and nearly 100 % placement in all science and engineering majors. SCSE's goal is to continue to build these programs to meet regional needs and recruiting the top students in the region. Our plan to build the proposed Chemical Sciences and Advanced Materials building will help facilitate our expected growth in this college.
• We continue to see outstanding programing and facilities improvements in student life that focus on developing the whole student and provide co-curricular experiences that enhance and deepen student learning at UMD.
• We continue to enjoy outstanding achievements in athletics, and we continue to win awards in various areas of sustainability as we are mindful of our carbon footprint, how we use our facilities, and how we take care of the valuable natural resources in the Northland.
I could go on and on about our accomplishments, but we have much more to discuss this afternoon as we focus on our budget challenges. I mention these few accomplishments to emphasize that in spite of the challenges we face, there are so many great things happening at UMD. We need to keep our focus on how we are moving forward as we solve the issues of the day.
Slide 2: Today's Discussion
This slide provides an overview of what we will cover this afternoon. There will be time for questions and comments from you, after I provide an overview of our deficit reduction progress and describe our plan for moving forward.
I know our budget challenges have created more work for us and anxiety about the future. I share that anxiety with you, although I am more optimistic than some, and I have a firm commitment to work with you and solve these challenges as soon as possible.
Here is a brief recap of where we have been over the last eighteen months. At the end of Fiscal Year 2013, we had a $12 million structural, recurring deficit, which was created by a combination of factors: over $5.4 million in reduced tuition revenues due to enrollment decreases; $4.2 million in state funding reductions in Fiscal Year 2012 that were never reduced from the UMD budget; and a $2.3 million fringe benefit shortfall. Through a lot of hard work at UMD and a solid partnership with the University of Minnesota system leadership, we cut this $12 million deficit in half, and eliminated an $8 million non-recurring deficit. Our current target is eliminating the remaining $6 million deficit over the next two years.
We have worked hard at UMD to create a more open budgeting process and using our new shared governance structure to help us improve understanding of the UMD budget and to provide meaningful input from faculty, staff and students into budget processes and decisions. We have transitioned from a budget and allocation process that was highly centralized, where units would regularly ask for money from that central funding pool, to a decentralized budget model where colleges, schools, and units across campus are empowered to manage their own budgets. This creates more decision making at the local level and requires us all to be responsible for our allocations and expenses.
There is no question that eliminating the deficit is hard work, as we position and transform UMD for the 21st Century and for the new realities in higher education. We can't keep doing things the same way in changing times and be successful. This work is made harder, because in the past, we have not taken the true cuts we should have as we were too dependent on that central pool of money. For example, in fiscal year 2012, we received a $7 million reduction in state funding, but, as I said earlier, $4.2 million of that reduction was not really taken. We put off some of the tough decisions and shifted expenses from one area to another. We depended too much on the large central reserve instead of taking true budget reductions in our recurring budget.
So, this is a new day in how we manage our financial affairs. We started down this road last year, and again I want to emphasize we have made great progress. We have more hard work to do, but these actions we took last year and the ones we will take this year, will get us through these current challenges and position us well for the future.
Another change we have made is more reliance on data-informed decision making, strategic decision making, and better planning for the future. We are asking department heads, deans, directors, vice chancellors and the chancellor to use a strategic process informed by data in making financial decisions. Obviously, we use different metrics and different ways to assess the relative value of what we do. Since my academic training and home is in the arts and humanities, I want to be sure we use qualitative and well as quantitative data to make our decisions. We also look at the total impact programs have at UMD, in addition to numbers of majors, numbers of graduates, student credit hours produced, etc.
Through these types of data-informed processes, we will not just ask people to keep doing more with less, but find new ways to do things differently as we focus on the best strategies to serve the evolving needs of our students and different populations of students we have not served in the past.
Obviously, we are not the only university dealing with these issues. Budget reductions and addressing the changing nature of higher education are the new realities of universities throughout the country. We are in a much better situation than many of our neighboring higher education institutions, but that does not lesson the difficulties we face at UMD. I know they are real and they will take us all working together to find creative and meaningful solutions to get us through these tough times and to be stronger and well positioned for the future. There are many questions around campus that I'm attempting to address today and I will invite your questions in a few minutes. First, I want to be clear: we will not have across the board cuts. Any reductions in administrators, faculty, staff and programs will have to be determined through a thoughtful, data informed, and strategic approach. That is what I'm asking of the department heads, deans, directors, vice chancellors and of my units.
Slide 3: UMD Structural Imbalance
Here is a graphic representation of our current budget deficit, the structural imbalance we have in this fiscal year.
The good news is that over one fiscal year, we went from a deficit of $12 million to a deficit of $6 million. One positive result of last year's budget difficulties is that we have a much better financial understanding with the Senior Leadership of the University of Minnesota. This was evident during the recent visit by University of Minnesota Vice President/Chief Financial Officer Richard "Fitz" Pfutzenreuter and members of the Office of Budget and Finance. While discussing the budget process, Fitz acknowledged the effort it took to successfully reduce our deficit from $12 million to $6 million over the last 12 months. For FY15, UMD received an increase of $4.5 million in support from the system and $2.9 million of these resources were to address our structural imbalance. As I mentioned earlier, the system agreed to help us eliminate the $8 million non-recurring deficit by providing an additional one-time allocation of $4 million. We look forward to additional assistance from the system this year. They will partner with us, but they will not bail us out. We have to do our part in solving this recurring budget deficit.
We have involved many people with the budget planning process, particularly the UMD Financial Team, the Strategic Planning and Budget Committee, and the Strategic Enrollment Management Committee. The Financial Team has been working since fall 2014 on a multi-year budget model. I have been meeting regularly with the Strategic planning and Budget Committee, and committee members have conducted focus groups and a campus survey. The Strategic Enrollment Management Committee has been examining what our future populations of students might look like, where are there opportunities to expand programs based upon student needs, and what would it take to expand those programs.
Since last fall, members of the financial team have been working on a multi-year budget model that will help solve the $6 million recurring deficit problem while anticipating future fluctuations. [Team members include: Andrea Schokker, Executive Vice Chancellor for Academic Administration; Sue Kerry, Associate Vice Chancellor for Finance and Operations; Mary Allen, Administrative Director for EVCAA; Lisa Erwin, Vice Chancellor for Student Life and Dean of Students; and Paula Rossi, Administrative Director for Student Life and Mary Keenan, who chairs the Strategic Enrollment Management Committee.] The multi-year budget model is proving to be extremely helpful. The modeling work helps us demonstrate a 3-5 year payback for funds we might invest in program expansion. We appreciate all of the work that has gone into this project, and anticipate that it will assist us in making sure our structural deficit is resolved.
Here is an overview of our timeline over the next few months and our plan to solve the budget deficit over the next two fiscal years. Timeline:
Slide 4: UMD FY16 Budget Cycle
1. All units on campus have been asked to examine carefully what they do and to prepare suggestions of how they might contribute to UMD reaching a $6 million reduction target over the next two fiscal years, FY 2016 and 2017. We provided dollar amounts equal to 3% per fiscal year, because we needed a place to begin the discussions. 3% of our O&M budget is about $3.6 million.
2. Those suggestions are currently being discussed among the chairs, deans, directors, vice chancellors and chancellor.
3. When we submit our budget request (compact) to the system office at the end of February, we will provide an overview of actions that are "under review" for reducing costs and increasing revenues.
4. We will have our budget compact meeting on March 11 with system leadership to discuss our budget plans.
5. Soon after that meeting we will communicate to the campus likely reductions that are still under consideration, as well as our latest information on revenue generation.
6. We will have about two to three weeks of campus discussion and will determine the best methods for gaining feedback from the areas impacted. We will follow on our normal communication protocol with programs communicating with their deans and directors, who will communicate with the vice chancellors and then the chancellor. As much as possible, we will invite general comments from the campus related to the areas that are affected.
7. When we receive our preliminary system budget decisions in May, we will have a clear idea of what actions need to be taken. The answer to which programs, administrators, faculty, staff will be cut and which will be enhanced will be clear when we received the budget decisions in May. Up until that time, any changes will be "under review."
Slide 5: Three-Pronged Approach
As we have said repeatedly over the past year and a half, we will not solve this deficit only with cost reductions, and we continue to follow our three-pronged plan of trimming expenses, generating new revenue, and partnering with the system on financial solutions.
The multi-year budget model looks at how shifts in available resources and costs and investments go toward balancing the budget over time. Meanwhile, the Strategic Enrollment Management Council has been analyzing academic programs by looking at demand and capacity issues and we are optimistic about some of these opportunities to grow our academic programs. Based on the data review, collegiate units have developed proposals showing how financial investments from system leadership could help increase enrollment in areas of high demand. The Strategic Enrollment Management Council has analyzed six initiatives that came from the collegiate units and focus on opportunities for investment. These areas for consideration are: Cultural Entrepreneurship in CLA; Graphic Design Marketing/Marketing Graphic Design in SFA and LSBE; Chemical, Civil and Mechanical Engineering in SCSE; Computer Science in SCSE; Internal Enrollment Marketing for retention. They are also analyzing programs with capacity and determining how we can enhance recruitment in other geographic areas regionally and nationally. These ideas will require some up-front investment of funds, but could provide significant new revenue streams over the next few years.
Other potential revenue ideas and suggestions that are being discussed include enhancing summer offerings, increasing marketing efforts, bolstering student retention programs, cross-unit collaborations, making sure that we are maximizing how we use our campus space, and potential new programming. Facilities Management has discovered that outsourcing doesn't always save money and is investing in a position that will provide better service at a reduced cost.
We are continuing to look for new cost-saving and revenue-generating ideas. From sustainability efforts to renegotiating vendor contracts, to a better use of equipment and materials, all employees are encouraged to help us change how we work to increase efficiency. We are also reviewing positions to see what can be combined and how we can work differently instead of focusing only on cutting positions. No suggestion or action is too small. Also some ideas may look insignificant by themselves, collectively they will make a big impact.
Slide 6: Funding Chart
This slide graphically shows the paradigm shift that began in 2012, when tuition dependence began to drop and state support began to increase.
The trend of declining state support for UMD and the entire University of Minnesota System has been reversed, and UMD saw additional new revenue through general O&M assistance, the MnDrive research initiative and through new capital projects.
Slide 7: Balancing UMD's Budget
Here is a graphic representation of our progress and our end point. Several people have said to me: "This is tough and we will get through it, but when will it end?" As you can see from this chart, we are targeted to break even by the end of FY 2017, June 30, 2017. At the end of FY 13 the deficit was $12 M. During FY 14 the deficit was reduced with support from the UM System, planning for the voluntary workforce reduction program, strategic program reductions, and debt restructuring, which reduced the deficit to $6 M going into FY15.
All of the budget discussions are held under the umbrella of our core values and the mission and vision from our Strategic Plan. The more we stay focused on our goals, our strengths, and our opportunities, the greater our chances for success will be. We should continue to challenge each other in productive and collegial ways to be the best we can be. Our students deserve that. With our combined efforts, our potential is tremendous.
Thank you for attending today's Town Hall meeting.
Slide 8. UMD Photo
Time for questions and comments.
2015 TOWNHALL Budget Presentation 2015-02-18 FINAL.pptx
Audio recording: http://youtu.be/8UKseTTkbxg
