Greetings,

Our work on the budget is continuing both internally and externally, and I want to provide you with information about our progress in the past two weeks. We have also set up a new website with background material and where new information will be posted as it becomes available, at
http://www.umich.edu/~urel/budget/.

As I related in my most recent budget message, Governor Granholm has proposed a budget that would reduce the appropriation to higher education by a total of 10%. The state appropriation provides more than 30% of the resources in the University's General Fund, and the cut she proposes will amount to a $36 million reduction for the Ann Arbor campus. In addition, we have another $50 million of increased costs for 2003-04 that we need to address.

On March 19, I testified before the House Appropriations Subcommittee on Higher Education. I was part of a panel of university presidents who testified; this was the second of four scheduled panels at which presidents of the fifteen public colleges and universities will testify as the Legislature reviews budgetary items. The dialogue with the legislators was thoughtful, and we all were impressed with the complementary strengths and distinctive missions of the public institutions of higher education in this state.

In my testimony, I provided information about the role of the University of Michigan as a national leader in research and education. I related the ways that our University provides value to the state as one of the largest research universities in the nation. And I impressed upon the subcommittee the importance of our educational environment for undergraduate and graduate students, along with the valuable contributions the University makes to the state economy by attracting such significant external funding and research activity. The University of Michigan has a direct and positive impact on the state's economy.

Also, I told the subcommittee of our guiding principle throughout this budgeting process: the need to preserve the core academic quality of our teaching and research missions, even in the midst of budget reductions that will have real consequences at our University. And finally, I asked the Legislature to consider the importance of strategic investment in public higher education. Although we understand that every public agency will have to share the short-term economic burden, I believe strong public universities provide the state with the means of a quicker economic recovery as well as future competitiveness.

A transcript of my complete testimony can be found at
http://www.umich.edu/pres/speeches/030319state.html.

Provost Courant has been working with deans, directors, and executive officers to plan for a reduced budget for 2003-04. This process has helped units to identify potential cuts that will target less essential services, with the goal of protecting, as much as possible, their core academic programs. Specific cuts will vary from unit to unit, but each unit supported by the state General Fund will feel the impact of the anticipated reduced appropriation.

We estimate at this time that approximately 200 staff positions will be eliminated as a result of the budget reduction. Many of these reductions in personnel are already occurring through the elimination of vacant positions and through natural attrition; but in some areas, layoffs will be necessary as a last resort. In addition, about 25 vacant faculty positions are not being filled at this time.

We are instituting these measures in addition to the cost savings we continue to achieve in our business operations. We have made significant progress in the past few years in areas such as utilities, benefits management, and purchasing, but we have more work to do. For instance, we hope to save $3.2 million over the next two years in purchasing with the continued implementation of an electronic procurement system, and we will save $9.7 million per year when our energy conservation programs are fully implemented. In addition, we know we must evaluate the rapidly rising costs associated with our health care benefits even as we continue to provide competitive benefits packages for our faculty and staff. We will assess these and other issues carefully over the next several months with input from across the campus community.

We will continue to provide information about the state budget situation as it becomes available.

Sincerely,

Mary Sue Coleman
President