President Mary Sue Coleman’s Remarks to the Regents about the State’s Budget Crisis

December 18, 2003

I want to take a minute to address the state's continuing budget crisis and the second round of cuts to public higher education in the current fiscal year. It is an ever more serious problem, and threatens the very foundation of the academic quality on which this institution is built. Students, alumni and Michigan citizens should be concerned about the implications, especially the loss of educational experiences and threats to the longstanding covenant that all of our state's public universities have shared with our state's residents.

The public needs to hear from us, again and again, about the value higher education contributes to Michigan. Our value proposition is clear, and we need to talk about it forcefully: the educational enterprise we undertake at our public universities is of enormous benefit to our state, and the quality of those services must not be compromised.

We are an extremely complex organization. We manage everything from undergraduate Introduction to Physics classes all the way to our health system and its network of hospitals and medical personnel. And somewhere in the middle of all that—really the lifeblood of our academic quality—our faculty fosters one of the largest research and scientific discovery enterprises in the nation. Our cutting-edge research is hard-wired into every part of the institution from undergraduate education to clinical care.

Unfortunately all this activity and information cannot be boiled down into easily digested sound bites.

Recent headlines suggested that with a mid year cut of another 5 percent to the current year appropriations, somehow universities were “spared” from even more pain.

Let's get something straight:   these cuts to higher education in the state of Michigan are unprecedented. It is fifteen percent in one calendar year. On our three campuses it means $60 million less with which to teach and support our students this year.

Here's another way to look at the 15% cut: It is $1,400 less per student when you divide the total state appropriation by the total number of students on our Ann Arbor campus.

It is a quarter of a billion dollars taken from the state's 15 public institutions just in this fiscal year.

These are not the kind of cuts you can trim away in the margins as you squeeze out more efficiency from your operations. These budget cuts threaten to squeeze the air out of our public universities' lungs.

The current reduction in state funding is more dramatic than it has ever been, and it follows a steady decrease since the 1970s. It represents what I believe has been unarticulated legislative policy that students and families will bear more of the burden for their education.

The state has been on a clear path, affixing responsibility for educational opportunity squarely on families.

In 1970 state appropriations made up 70 percent of the University's general fund with tuition making up most of the difference. By about the year 2000 the state's support had dropped to 35 percent. After the deep reductions of the last two years it now stands at less than 27 percent.

And then there's an analogy you hear a lot when you are a university president: Comparing universities to businesses. But it is a myth to apply a straight-up comparison of higher education to a business in the commercial sector. When businesses cut they do so because technological advances increase productivity, or because they are experiencing a lower level of demand for their product or service.

We don't manufacture anything. We build mind capacity and the world's knowledge base. It is an intrinsically labor intensive endeavor.   Face-to-face communication between experts and students is still the core of the teaching experience. And every year it becomes even more labor intensive as we deal with increasingly complicated and specialized knowledge.

It's an extraordinary amount of human bandwidth.

And demand is growing. These reductions in state funding come at a time when our activity level is the highest its ever been—by that I mean we are teaching more students, those students demand more services, and the indispensable technology and modern facilities infrastructure is more costly.

IT is a good example. Technology is not an add-on. Students cannot prepare to enter a high-tech workforce without access to those tools in their studies. Researchers cannot increase cancer survival rates or find cures for diabetes without the IT firepower or the sophisticated facilities in which to conduct their work.

And again, I do not believe you can separate the discussion of costs from that of value.

Part of our value proposition is the return on the state's investment in public higher education. Some reports say it is as much as 26 dollars realized by the state for every dollar invested in higher education. Even if you are not a student at one of our universities, every citizen of the state benefits from the highly-qualified workforce we educate and the economic engine driven by our research discoveries. Our laboratories, our alumni and our research create the progress upon which the prosperity of this state increasingly depends as it works to move from a manufacturing to a knowledge-based economy.

Can we continue to find ways to save money, especially during tough economic times?   Certainly every institution can continue to reengineer operations and reassess its business practices, and we're no different. We will reduce and eliminate as much as possible. Also we will continue to monitor and reduce necessary cost increases. Today we released annual salary information for the Ann Arbor campus and the modest overall faculty and staff increases reflected part of that hard work. Later in this meeting we will be talking about changes to our health insurance premium structure in order to mitigate future cost increases on that front as well.

We are saving millions and millions of dollars with cost-cutting measures, but the magnitude of the state reductions are so great that I believe we must guard against an erosion of quality that would be impossible to recover once lost.