Public Universities and the Challenge of Budgeting in a Recession

Teresa A. SullivanProvost

and Executive Vice President for Academic Affairs

University of MichiganNovember 30, 2009

Questions to Consider

- What does it mean to be a public college or university?

- How can we address budgetary challenges?

Attributes of a Public University

- Mission

- Governance

- Funding

UM Budgeting Strategies

- Cost reduction and containment

- Revenue enhancement

- Reallocation of resources

U-M has cut $135M from its recurring budget over the past five years

This presentation highlights the basic principles that are documented at:

http://www.provost.umich.edu/budgeting/CostContain-2009.pdf

Develop a Cost Containment Strategy

- Consult stakeholders

- Communication plan

Giving the budget greater transparency

Deans: permanent committee + task forcesFaculty: advisory panelsStaff: budget administrator committee and

Budget and Resources AcademyStudents: advisory committeeCross-functional: cost-containment ideas

Communication is as important as consultation

Budget briefing for Regents every monthFrequent briefings of faculty groups, staff

council, and other similar groupsMeetings with donors and alumni leadersCommunications with parentsPeriodic letters from president and provost

Keys to Making Progress

- Consider incentives to encourage savings

- Set targets and establish metrics

- Follow a disciplined process

Incentives

- Provide a way for innovative units to keep at least part of their savings

- Emphasize cooperative solutions as preferable to competitive ones

- Give credit for good ideas- Engage faculty expertise where relevant

Key Taskforces- Best Practices for Centers and Institutes- Creative Staffing and Shared Services- Expansion of Spring and Summer Term Instruction- Marketing to Non-resident Undergraduate Applicants- Nontraditional Educational Programs at UM

- http://www.provost.umich.edu/CRRE/introduction.html

Targets and Metrics

- Assess best practices and use benchmarking

- Move to longer-run time horizons: budget now on a three-year cycle.

Budgeting process involves a set of principles

- Protect and invest in our core educational and research missions

- Seek stability and reduce volatility wherever possible

- Remain competitive for faculty/staff/students- Leverage our size and scale

Principles

- Maintain high quality essential services

- Eliminate duplicate and lower priority activities

- Shift costs from the general fund to other funding sources, where appropriate

- Avoid short-term reductions with long-term cost and/or quality implications

Principles

- Introduce centralization and greater sharing of resources in cases where this will result in higher quality services and/or more effective use of high quality facilities

- Consider in-sourcing and outsourcing, when that leads to improvements in service at the same or lower costs

- Take advantage of advanced technologies to achieve efficiency of operations

Focus on Key Areas

Biggest gains are likely to be made at points of “big spend.” Two factors are important: number of dollars spent on a recurring basis, and the rate of growth in the item.

Energy UsePlanet Blue - 5 building pilot in FY08

6% reduction in energy use$800,000 annual savings when all measures implemented

- 30 buildings in FY09 -30 buildings planned in FY10

http://www.sustainable.umich.edu/

“But whatever may be the method of endowment of our great schools, may the day never come when they shall be inaccessible to the humblest youth in whom God has lodged the spark of genius, or that more common but sometimes not less serviceable gift of useful talent.” James B. Angell

June 1879