State of the University Address 2009

February 3, 2009

Lou Anna K. Simon
President, Michigan State University

The State of the University Address has traditionally been on our birthday, and birthdays are a time to reflect on the past and on the future. And, as we begin a new calendar year, this is a time to do the same kind of reflection.

I know that all of you feel like I do that each year should be a little bit better than the last. Unfortunately, I think that like Charles Dickens wrote in A Tale of Two Cities, “It was the best of times, it was the worst of times . . . it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us.” We feel as though we’re sort of standing in two spaces or having two minds at the same time. This event really reflects that: we gather to celebrate our distinguished colleagues and look back on our collective achievements over the past year, while we also take stock of the current challenges we must address.

We have so much to be proud of and so many accomplishments: great faculty, great staff, great students, and great partners in the community and the Greater Lansing area, in the state, nationally, and internationally. At the same time, although we know that education, technology, and science are the keys to the future, it seems as though no one wants to support them in a sustained way so that we can really accomplish the goals we need to accomplish.

Cooperation characterized Michigan State's response to the unprecedented challenges forced upon the state during the Great Depression of the 1930s. Students, faculty, and administrators joined hands on campus, while MSU Extension agents and specialists worked tirelessly to assist Michigan's farmers increase crop yields and help urban dwellers make the best use of their scarce resources. Extension personnel also helped to implement federal programs designed to improve the lives of Michigan citizens. The university pulled together but at the same time reached outward in order to be assured that our resources and our strengths became the state’s strengths. And, that’s another paradox, because when you’re under difficult financial circumstances, it’s easy to pull inward. It’s easy to blame someone else for our circumstances, but that doesn’t get us anywhere. What we did then and what we have to do now is make the most of our resources.

Franklin Delano Roosevelt at this time commented, “We have always known that heedless self-interest was bad morals; we now know it is bad economics.” I would add that it’s also bad for the university. So, we have the opportunity at this time in history, if we pull together and stay connected to our fundamental values, to make a difference and write a different chapter for the next stage of history. That is really something very special about our university because we are in it for the long run.

In my inaugural speech, which seems like a long time ago, I talked about the issue of not using short-term solutions for long-term problems, noting that “short-term strategies may ultimately deny the American dream to future generations and diminish our impact around the world.” I said it then and I still believe today that we must have a bold vision and strategy for the future. Boldness by Design as a strategy, I think, has stood the test of time. Within it are all the things we need to do to be competitive. It’s about how to add value to undergraduate education and how to add value to graduate education but also recognize that graduate education for the 21st century will be what undergraduate education was for the 20th century. And, we have an important role to play, not in the way retraining is defined but in making sure that people have cutting-edge knowledge in order to solve tomorrow’s problems, which will require some education and retraining of the existing workforce as well as producing the faculty and researchers for the future. We can do this.

A review of initiatives defined in Boldness by Design will show that our global experiences are a part of that plan, as is the stewardship of the environment and the stewardship of the university—it’s all there. What you will not see is a shift in priorities or focus. We are not changing strategy because there is more difficulty in the economic circumstances. We have to be clear and resolved to implement that strategy and implement it well. The other thing we have to do in this strategy is recognize that we’re not alone in this.

Tuition has gotten a lot of publicity recently as the governor has called for colleges and universities to freeze tuition, but we all know it’s not that simple, that there are other sides to the story. To give our students and families some perspective, we looked at the rate of state appropriations for higher education compared to other parts of the budget and to other states. For example, if the State of Michigan had increased our appropriation at the same rate as the corrections budget, we would be able to save each family $2,500 a year. If the State of Michigan had increased higher education spending at the same rate as the other “M” states, including Mississippi, we would also save our families about $2,300 a year. And, the list goes on. Some of the increases in tuition are there to sustain the quality and vitality of the institution and offset the shortfall when our partner, the state, hasn’t quite come through.

Another part of our tuition increases has been very specifically targeted to reducing the student-faculty ratio. Today, students spend approximately a thousand dollars more per family, but we have targeted those resources, with the leadership of Provost Wilcox, to reduce the student-faculty ratio from 19 or 20:1 to about 16:1, which puts us in the middle of the Big Ten. This is not simply a number. It is all the other experiences that students are permitted to have as a result of that number. It’s a matter of research experiences and smaller class sizes, more opportunities for study abroad, and all the things that are of value to our students. It is the capacity of graduate students to have more opportunities for research and engagement. It is the work we do in the community because these efforts, at 24 percent of our general fund, have not decreased during this time when the communities need us most, even though it would have been easy to pull inward.

We have been experiencing our own financial difficulties. Our investments are down. Our portfolio in the common investment fund, which includes our own long-term operating cash, is down about 20 percent. We’re going to be able, through that process, to sustain the contribution of investments to the general fund so that burden is not placed on students and families. Unfortunately, we’ve been using the remainder of that investment income in our principle of not putting recurring dollars behind recurring commitments to reduce the deferred maintenance load on this campus and not charge it to students and their families because that’s also a responsibility of the state for all those state buildings. We have been able to reduce our deferred maintenance from over $300 million to about $6 million, but that’s going to go up. The kinds of projects that we normally do with that investment income simply are not going to happen.

We also know that other parts of our budget need to be constrained. The rising cost of health care is part of an important dialogue nationally. We’ve been pretty good stewards of our resources in this regard. Historically, MSU’s health care costs have been growing at about 9 percent, which is at or below the national average. Had we been able to grow at 7 percent, however, we could have reduced tuition by 5 percent, or put money into faculty salaries, or anything else you’d like to do. We need to have that conversation because health care is an important component, and it cannot continue to grow at the current rate. We’re spending a little less than $300,000 a day on health care costs, and that cannot continue. This is equal to about seven cents of every dollar we spend. If we can’t control the growth, it will double, and we would not be able to do the things we need to do for the state and for our international partners. So, we have to get that under control.

There will be a letter going out this week, which will not be a surprise to the leadership, faculty affairs, or our partners in the collective bargaining groups, saying that we have formed a health care strategy advisory committee. This committee, which will also include retirees, has been created to help us look at this issue and find strategies that can be implemented by the end of the year because we have to get ready for the next enrollment cycle next spring. The people on the committee are prepared to take on that challenge, and I thank them very much for that.

We also are planning, in a number of ways, to look at the necessity of reducing budgets, which is not a pleasant task. We have already, over the course of these years, closed colleges, closed programs, and consolidated support units, and the list goes on and on. We’ve not done that by declaring a crisis; we’ve done that because Michigan State University has to reallocate resources for higher purposes. We’ve done that with things that are really good and it’s been painful, but the circumstances require that we continue to take these necessary steps because we need to be sure that we use our resources in the best way possible for the people of Michigan and to meet our academic objectives. Those planning processes are also under way at the college and department levels.

To give you a calibration, a 1 percent reduction is equal to about 70 people. So, you can do your own arithmetic. Those reductions, however, can be offset by growing revenue. I’m very pleased to report that our total research expenditures this year were about $340 million. Our target was to grow about 10 percent, and we’ve been growing at about 6 percent per year for the last few years. This year it appears that, year to year, we’re going to hit that 10 percent target. It is important for us to not only meet that target but exceed it, because if we can offset some of these job losses through greater growth and revenue, the institution and the community are better off. It is one of the things we can do.

We can also look at other entrepreneurial activities very carefully and make sure that they are genuinely entrepreneurial and that they are producing revenue. We have asked the colleges and departments to do those kinds of things. We also know that there are faculty members across the humanities who are looking at ways in which they can get foundation grants to improve instruction and provide other kinds of opportunities for our students. Everyone can do this—not everyone in the same way, but everybody can do this.

Energy conservation is also a very important point. We have announced our environmental stewardship program and our targets for reduction as part of Boldness by Design. We need everyone’s help in achieving those targets, which will also help reduce the budget. And, it’s a win-win situation for the university and for the environment.

Last year we also announced that we raised about $200 million coming out of the capital campaign, with a target to raise about $150 million a year. Right now we’re struggling to hit that goal, though we are not alone. Other institutions are reporting declines of 15 to 25 percent. Part of our decline is a function of coming off of a successful capital campaign and maybe being a little bit higher last year than we planned. Part of it’s just the economy, but regardless, we need those dollars. We need that private support, not for operations but for margin of excellence to keep us current. We truly appreciate the support that we’ve been getting from our alumni and friends, but we just simply have to rely on that even more to assure the quality that we need for the future of Michigan State University.

The kinds of things that I’ve talked about you all know because we’ve been through it all together these past few years, and it is all available on the Planning & Budgets web site. There’s a part of me that says, why do we have to do this again? But the circumstances of the state are very, very difficult, and we do understand that. The circumstances of the families of Michigan State University are very difficult, and we do understand that as well. It is one of the reasons we postponed the implementation of the tuition increase, and it is why we created the Adverse Economic Circumstances Fund in order to help families and students. So, as you can see, we really are in this together.

We’re also concerned about access across socioeconomic class because this represents our values. I’m very pleased to report that even though we’ve had high tuition and even though it might be contrary to popular opinion about what tuition does to access, the number of Pell and Pell-eligible students over the last 10 years has grown by about 786 students, and now we have over 7,000 students on this campus who are Pell or Pell-eligible. It may be the highest number in the state or near the highest number. We’ve also been able to maintain students from families that would be considered as middle class. We know it’s more difficult now.

As a first-generation college student, I know how hard it was for my family to put me through college and how hard I had to work along with that to make ends meet. It is not easy, but this education at Michigan State University, just like John Hannah promised, has to be worth the value. Because if our value declines, you can freeze a number, you can freeze a position, you can freeze tuition for a moment, you can do lots of things that are in the category of freezing, but we can’t freeze hope, we can’t freeze creativity, we can’t freeze innovation, and we can’t put a chill on folks so their future isn’t any better.

The language of freezing is interesting. Sometimes when you freeze things, you can take them back out and pop them in the microwave and they work out just fine. But academic programs aren’t like that, and peoples’ lives aren’t like that either. So, we have to be very careful that we’re always sustaining this for the future and that we’re very proud of our accomplishments. Going back to what John Hannah said, this is a time when we can be proud. The challenges before us are really testing us and there’s much unfinished work, but there’s much to give us pride, hope, and confidence. The contributions we make as Team MSU are significant, even during these most difficult times.

We really do have much to be proud of. Back to Dickens and his paradox of two worlds, we have our history and we have our destiny, and part of what we need to do is stay true to the fundamentals and stay true to who we are. Part of that is simply seeing opportunity and we must build on it. We see what will work anywhere and apply it everywhere. We have to see ideals and turn those ideals into ideas, ideas into actions, actions into visions, and visions into practice. We also have to see dreams and we turn those dreams into reality.

That really is the land-grant heritage and the character of Michigan State University. It doesn’t change because times are really very, very difficult. If anything, we have to hold on to that resolve, hold on to those values in a way that makes a difference for the people of Michigan. Now there is a lot that can be said about the dialogue that goes back and forth in difficult economic times, but I stand here before you with a simple commitment: that we will work with people and we will work with our partners to think about how we can share goals and how we can use our assets and align them to help them meet their goals to build bridges to folks, whether it’s downtown or across the state, but build bridges to a future—not bridges to nowhere but bridges to a future. That requires conversations and dialogue, listening, and hard work, internally within the campus community and with our partners. Our commitment to that destiny is to have those dialogues but also to do it fundamentally in a way that assures that we are an engine of cutting-edge technology and innovation. When people look back on this time, they may say it really was tough but it was a time when Michigan State University’s character really shined. Thanks very much.


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