SLIDE 1: Introduction
SLIDE 2: I might have entitled this State of the University Address, "Adapting to an Ever-Changing World." Why is it important that we embrace change to envision the University of today, tomorrow, and beyond? As almost everything about higher education becomes challenged, the mission we value—residential liberal arts education in the context of professional and graduate education—becomes ever more critical and desirable.
What do we want to become as an institution? The future will have needs we cannot even conceive of today. The liberal arts education of the past enabled people to think more broadly-providing a culture of elevated learning. But we live in a noisy world. Students have different needs, values, and intentions. It will be the job of all of us to find ways to bridge the gaps.
As we begin a new academic year, I will highlight some successes from this past year.
SLIDE 3: Over 150 University of Redlands' faculty, staff, administrators, and trustees attended our first annual "Our House" celebration of research, scholarly, and creative accomplishments on May 16 in the Armacost Library. This event featured presentations and exhibitions by over 14 scholars on their research and creative work.
SLIDE 4: In May this year, the Corporation for National and Community Service honored us as a leader among colleges and universities for support of volunteering, service learning, and civic engagement. Of the 600-plus universities recognized on this year's President's Higher Education Community Service Honor Roll, Redlands is one of the select institutions given the highest "distinction" and one of only a handful of the thousands of colleges in the country that has received the President's Honor Roll recognition every year since the award's inception seven years ago.
SLIDE 5: A trio of University of Redlands faculty members joined forces this summer with the Los Angeles alternative rock station 98.7 FM for the "R.E.D. Series," a discussion of three specific topics–"R" for research, "E" for education, and "D" for discovery. Each professor was interviewed by the 98.7 DJ, "Kennedy," at an invitational event on the rooftop of the Hollywood Towers. The conversations were webcast.
SLIDE 6: The first event featured Professor Johannes Moenius, the Johnson Endowed Chair of Spatial Economic Analysis and Regional Planning. Kennedy found Moenius remarkably able to foresee trends before they hit and called him "a psychic with data."
SLIDE 9: In the professional schools, the School of Education saw its first graduates from: the new Master of Arts in Education (Curriculum and Instruction) with a specialization in spatial literacy; its first cohorts of those receiving the Preliminary Education Specialist Teaching Credential; and its first group of students receiving either an MA in Clinical Mental Health Counseling or a Certificate leading toward state licensure in mental health.
Additionally, the School of Education is one of only four California programs excelling at educating and training high school teachers, according to the National Council on Teacher Quality 2013 Teacher Prep Review of more than 1,100 colleges and universities that prepare elementary and secondary teachers nationwide.
SLIDE 10: The School of Business celebrated the endowment of an academic chair for its Institute for Spatial Economic Analysis (ISEA), which is a research think tank that publishes real-time reports covering retail, employment, housing data, and other special topics. Professor Johannes Moenius leads this entrepreneurial charge as the William R. and S. Sue Johnson Endowed Chair of Spatial Economic Analysis and Regional Planning.
SLIDE 11: Two additional academic Chairs were announced this year: Professor Scott Stevens was appointed as the John and Linda Seiter Endowed Director of Writing, and Professor Walter Hutchens was named to the Endowed Chair in Global Business, thanks to a generous gift from Rich and Ginnie Hunsaker, 1952 graduates of the University.
SLIDE 12: The College of Arts and Sciences continued its longstanding record of producing student scholars, including three Fulbright designees this year. Adrian Poloni '13 will conduct research in Mexico, while Jessie Chansler '13 will teach in Guatemala. Hailey Lopez '13, who received the Fulbright to teach in Norway, had to decline the award to attend graduate school. This brings the total number of awards for graduating seniors to 15 over six years, one of the highest percentage ratios in the country. I want to thank Professor Jack Osborn for his leadership, as well as all the faculty who work so diligently with Jack in advising and selecting these scholars.
SLIDE 13: In the 2012 inaugural course, called "Global and Domestic Consultancy Capstone," undergraduate and graduate School of Business students received the highest grades ever awarded by the faculty of Birmingham City University. Birmingham has run hundreds of these consultancies in Britain over the years, so this was an extraordinary accomplishment by our students.
SLIDE 14: Our students also excelled outside of the classroom. It was another great year for our student-athletes, with many more noteworthy accomplishments than I can list.
Three teams won SCIAC Conference championships - women's softball and lacrosse and men's basketball.
Redlands' student-athletes earned more than 120 All-SCIAC awards and nine Bulldogs earned SCIAC Athlete or Freshman of the Year recognition.
We took 32nd out of 450 NCAA Division III intercollegiate athletic programs nationwide in the Learfield Sports Directors' Cup (that's ahead of 93% of the rest of the USA).
SLIDE 15: Our University Choirs, under the batons of Professors Nicholle Andrews and Joe Modica, performed the Mozart Requiem at Carnegie Hall in May 2013. Invited to participate by Mid-America Productions, the choirs joined several other singers from California, New Jersey, and Michigan in the performance, for a total of over 125 singers.
SLIDE 16: In FY 2012-2013, the University received a total of over $1.3 million in sponsored research grant funding. The top three grants originated in the Redlands Institute and a fourth from the Department of Biology. Projects received funding to support research on topics as diverse as the clinical outcomes of student stress and their relation to academic success, the impact of humans on gray whales, and the National Endowment for the Humanities project on Muslim Journeys, just to name a few.
SLIDE 17: In June, the University hosted the 2013 International Double Reed Society Conference and drew an amazing 1,126 world-class musicians and other attendees. Hosted by the School of Music faculty with support from graduate students, the conference brought together some of the most accomplished oboe and bassoon professionals from around the world (representing 20 countries and 34 states) for several days of masterclasses, lectures, and concerts.
SLIDE 18: This year, David Boies '64 and Brian Silva '00, two nationally prominent alumni, fought for marriage equality. Boies, the plaintiff's lead co-counsel in the Hollingsworth v. Perry case, argued for same-sex marriages in front of the Supreme Court. Brian Silva, executive director at Marriage Equality USA, led efforts at that volunteer-driven organization to secure legally recognized civil marriage equality, and he spoke about key issues from the Supreme Court steps.
SLIDE 19: On June 3, 2013, I announced an organizational study to determine how best to restructure following Phil Doolittle's departure the extensive portfolio within the Executive Vice President and Chief Operating Officer purview. In fact, you probably can't read this chart of responsibilities because the scope was so exceedingly broad. Six weeks later I reported back to you the process and outcome of the organizational study. Our goal was to remain as budget neutral as possible, while retaining current staffing levels and the greatest benefit for the University community, which we achieved.
SLIDE 20: We eliminated the Executive VP/COO position and re-established a Vice President for Finance and Administration, to which I promoted Cory Nomura. He will now expand his Chief Financial Officer role to lead human resources, facilities, legal affairs, and other administrative services. As part of this transition, Roger Cellini has assumed direct responsibility for facilities planning and management.
SLIDE 21: The other big change, which is of foremost interest to faculty, is the switch from a vice president of academic affairs model to a provostial one. This is a different structure than the provostial model briefly present here in the 1990s, because it adds responsibilities for academic budgeting, information technology, and other University initiatives. Because it affects the Chief Academic Officer of the faculty, and because it's an experiment, I am considering the position an interim solution. David Fite has been appointed as the Interim Provost and Chief Academic Officer, reflecting both his substantial experience but also the newness of the position.
Professor Ed Wingenbach was named Associate Provost and is continuing to manage program reviews, assessment, and WASC accreditation, and has taken on the additional responsibilities for management of Institutional Research and the Registrar.
Hamid Etesamnia has assumed the role of Chief Information Officer and Associate Provost, reporting to David Fite, emphasizing the rising importance of academic computing and digital technology for enhanced learning and teaching.
SLIDE 22: Kathy Ogren, who this year became the regular Dean of the College of Arts and Sciences, now becomes also the senior administrator for the Salzburg program, which was formerly under the purview of the Executive VP/COO.
SLIDE 23: Three other changes were made as a result of the dissolution of the Executive Vice President position: (1) Kevin Dyerly, the Vice President for Enrollment, now reports to the President and has Student Financial Services and Student Employment within the enrollment purview; (2) Nathan Gonzales, part-time visiting archivist, now reports through University Advancement, which as you know is now led by Anita West; and (3) Michelle Rogers, Chief of Staff and Liaison to the Board, now also serves as the University liaison for the Redlands Symphony Board.
It is important to acknowledge that the University lost a vast amount of institutional knowledge with the departure of one person, and we had to act quickly and skillfully to address that. It became clear during the process that the distribution of authority within the University had become concentrated and unbalanced, so we sought ways to spread the knowledge, the responsibilities, and the career growth opportunities. Not responding to this realization would have left us vulnerable to risks in the future.
SLIDE 24: The 2013-2014 academic year is off to a great start. The first-year fall class in the College of Arts and Sciences came in this year at 767, making it the third largest incoming class in the University's history. The College received 5,105 applications for this year's entering class . . . an increase from last year but an impressive 27% increase from 2010. More importantly, this increase was achieved in a highly competitive market. The class consists of 668 first-year and 99 transfer students and has a higher average GPA of 3.65, up significantly from 3.58 last year. This class is a double plus for us, because along with student quality, diversity expanded as well, with 40% under-represented minority undergraduates, up from 38% last year. And 18 students have an international background, a doubling from 9 last year.
SLIDE 25: The School of Business welcomed 839 new students in 2012/13 (down from 889 last year) including 515 graduate students and 324 undergraduates. This includes our first cohort of international students (India and China) in an accelerated, residential MBA.
SLIDE 26: The School of Education welcomed 358 total new students in 2012/13 (essentially flat from last year), including 203 for teaching credentials; 98 master's students; 12 doctoral students; and 45 students seeking professional credentialing or a graduate certificate.
It will be important for us all to decide how we will make educational opportunities increasingly affordable for all these students in our care, and how we can become increasingly prudent in our own financial management and revenue generation.
1 - Affordability
SLIDE 27: Higher education, particularly residential and broadly liberal education, is increasingly and critically debated as to whether its value is as a unique opportunity or a mere commodity with a vocational outcome. A survey of employers and the general public, released September 18 from Northeastern University, affirmed yet again what we've always known – that a broad education, especially with writing and communication skills, is far more important to employers than specific job skills. Northeastern's survey results support the conclusions of a poll of employers released earlier this year by the Association of American Colleges and Universities that found broad support for the idea that students should learn to think critically, communicate clearly, and solve complex problems, or what the association described as "a 21st-century liberal education."
SLIDE 28: On August 22, public debate on the value of a higher education gained renewed momentum with the release of President Barack Obama's ambitious new agenda to make college more affordable. The new plan, A Better Bargain for the Middle Class: Making College More Affordable, proposes a system to measure and rate college performance to help students compare the value offered by colleges.
SLIDE 29: The ratings, which will be developed by the Department of Education by 2015, will be based upon such measures as:
Access, as measured by the percentage of students receiving Pell grants; Redlands will rate high.
Affordability, such as average tuition, scholarships, and loan debt; here we will rate above many peers because our average true (net) cost in real dollars has remained flat.
And finally, outcomes, such as post-graduation salaries, graduation and transfer rates, and advanced degrees of college graduates; here our rating will be hard to predict.
The Obama Administration is also seeking legislation by 2018 to link this new rating system to the way federal aid is awarded to colleges. Students attending high-performing colleges could receive larger Pell Grants and more affordable student loans.
SLIDE 30: The plan has some admirable aspects. Affordability does have a direct impact on accessibility, and a college education can provide economic mobility for future generations while helping to restore middle class security. The proposed Pay as You Earn component will help students manage debt by allowing them to fully repay their loans on a sliding scale that adjusts monthly payments based on changing income and other factors.
SLIDE 31: But what of the unintended consequences of such a noble idea? The plan, while admirable in its intent, does not account anywhere for student learning, and it bases its ratings on flawed inputs. Tuition data are very complex, and the plan's subjective definition of "value" is tied simplistically to cost and supposed return on investment (meaning salary), not on the quality and content of the education provided. One naturally worries about unintended consequences: A rating system that is tied to the amount of aid an institution receives could cause colleges and universities to game the system by warping admissions to control the outcomes in their favor, seeking for example to enroll more full-pay students or business majors to improve ratings. The fallaciousness of the Obama ratings-based financial aid system is that it uses post-graduation income as one of the outcome measures indicating value. Do we really want to create more Wall Street brokers and fewer school teachers? Carol Schneider, president of the Association of American Colleges and Universities, articulated the potential pitfalls succinctly:
"I certainly believe that encouraging innovation designed to provide more students with quality learning outcomes at lower cost is worth doing from the federal level. However, taken as a whole, the proposals seem at cross purposes at best and potentially damaging to the pursuit of quality at worst. How can you call for learning-centered innovation, on the one hand, and then propose a federal rating system that leaves quality learning indicators off the table? The invocation of quality seems like pious rhetoric, while the measures that will have teeth are all about narrow indicators such as earnings and completion rates."
Even if the Feds could enact such policy, experts say it could not be implemented for a decade, because the data systems in the Department of Education are woefully inadequate.
SLIDE 32: What have we done on our part at Redlands to increase affordability? We mounted a significant response to the economic realities our families face, because in the past five years, the net tuition cost, that is the actual price our freshmen paid on average after financial aid, rose only a total of 6% in the College compared to an 18 % national increase in average net cost for freshmen at four-year public universities during that same period. Notably, after adjusting for inflation, the net cost increase at Redlands over those years was zero. In the professional schools, we've passed along minimal fee increases to students over the past three years, with no tuition increase last year in the undergraduate programs within the School of Business or the master's and certificate programs in School of Education. Today, it remains that the biggest financial mistake one can make about affordability is not going to college, because the lifetime income differential of a college bachelor's degree averages near $1 million and the chances of being unemployed are reduced by more than half (Department of Labor Statistics, August 2013). And that, of course, ignores the even more important "Jeffersonian" value of an educated citizenry.
Compare us to public higher education, which in some states has increased costs of attendance in the 20-40% range, because state legislatures have decided to shift their cost support from the tax base to students, by charging much higher tuitions. Meanwhile, the flagship publics have survived by simply moving their missions out of state and recruiting out-of-state students (if you live in Reno, Nevada, the cost to go to Berkeley is now very nearly the ~$60,000 price tag at Stanford). And compare that to other private institutions that have not done nearly as much as we have to control costs and increase aid.
SLIDE 33: A disturbing demographic trend is that parents across all income sectors are saving less and less for college. This may drive another trend – society's expectation that loans are increasingly acceptable but families are expecting non-family sources (discount aid, so-called "merit aid," and Pell and Cal grants) to cover an increasing proportion of price.
SLIDE 34: I have emphasized during the past year that - after the downsizing and operational cuts of the recession - our ability to create better affordability at Redlands resides more on the revenue side than on cost-cutting. However, of course, there always ought to be a discipline of examining staffing and eliminating positions and functions that are becoming obsolete. If the federal government and regional accreditation systems paid more attention to eliminating unnecessary regulatory burden, it would help us all a great deal to become more affordable. The federal government seems more intent on layering on more and more burden, which results in ever expanding staff requirements. Examples of important and necessary programs that never the less come with excessive administration requirements include: the intricately detailed IRS form 990 reporting; SEVIS database for foreign nationals; Title IV on financial aid; and Title IX on sexual harassment procedures.
The University began to attack its cost structure during the "opportunity" of the Great Recession five years ago. The multiyear budget reduction plan the University adopted back then did shave off about two-thirds of the structural deficit (commonly defined as the size of an enterprise in excess of its resources), which was then running around $15M annually.
SLIDE 35: As a result, we are now running at a significantly higher student-to-faculty ratio of 14:1 rather than 11:1 (as reported to US News) and a higher staff-to-student ratio (since most positions we lost were staff). Both were part of the structural deficit. At the same time, we have only modestly increased average class size in the College.
SLIDE 36: Because of the remaining structural deficit, the budget process each year gives heightened scrutiny to all remaining positions. Staffing is key to costs, but resisting the momentum towards "more" is tough. Nevertheless, even without the impending doom of a recession, which is a great stimulus to change, we are operating with greater prudence. We examine every staff and faculty position request to determine if it is likely to be one that either generates revenue or is sustainable. We must be diligent about hiring experienced, competent people, conducting meaningful performance reviews, and evaluating positions over time.
We are also committed to reviewing all of our operating practices to identify possible areas of improvement and at the same time save costs. Some of the work ahead of us is to do what we already do better. We can re-envision certain potentially overlapping functions. For example, certain support services in alumni relations might have parallel or overlapping/complementary ones in student life through which we could view the "Bulldog for Life" concept as a continuum of relatedness. Then there are potentially overlapping functions in both the schools of business and education that might be able to be combined on regional campuses if the campuses were to become more efficiently staffed.
SLIDE 37: The University continues to pay particular and close attention to the management and effectiveness of its financial aid programs, has responded to dramatic changes in the real economy (unemployment) as well as Cal and Pell Grant programs, and will closely monitor proposed changes. Financial aid as a percentage of our operating budget has soared from 21% to 32% over the past decade. This is admirable from an accessibility standpoint, but regrettably unsustainable.
SLIDE 38: In this difficult period, we have made some progress to positively impact (increase) net tuition revenue, while remaining sensitive to the implications of the balance between our "sticker" and net prices. Given the continued trend of internal and external pressures on the availability of financial aid, we are developing and implementing additional strategic directions. In spite of the State's decreasing support in the Cal Grant program, we continue to provide strong financial support to these students so that Redlands remains accessible to many of our State's best and brightest who add so much to our campus community and retain and graduate at rates higher than our overall student body.
SLIDE 39: Furthermore, I am focusing on potential new sources of revenue.
I have asked Dean Kathy Ogren and the Communicative Disorders master's program to consider the potential for increasing the size of that graduate program, as it is nationally excellent, has high demand and extreme selectivity, and because it turns away about 90% of its applicants. It is easily able to generate new revenue of about $200-$400,000 per year with only an increase of eight graduate students per year and a modest addition of clinical supervisory staff.
Similarly, we should consider expanding the highly successful and international MS-GIS program.
Whether the MBA can be expanded we don't know, as that market is fickle. But like our peers, we are currently exploring enhancement of our programs by offering various specialized options.
The School of Music's master's programs may be expandable with more faculty.
We can also envision other new master's programs that can generate revenue (geospatial analysis and design comes to mind). And one day we might eventually be able to create a new Doctorate of Musical Arts program with very few more faculty. But the revenue potential there is less, by nature of the high discount rates in the field of music generally.
Enrolling more international undergraduate students is an obvious leverage not only for diversity but for revenue. In addition to the benefit of revenue, which is up to 50% more tuition per international student than domestic, more than anything else internationalization will help us prepare our students for a global world. We need to be in it for all the right reasons.
We will also continue to take on the matter of undergraduate retention and graduation rates. We have made good progress here, but like most colleges, we incur not only the social cost of non-continuation and non-graduation but lose also millions of dollars in the costs of recruitment and foregone tuition revenue.
Continued focus on retention rates allowed us to obtain a one-year retention rate high of >90% for the first time, for full-time entering College of Arts and Sciences freshman in 2011, up from 87% in 2010 (and we don't know if we can sustain that). It costs approximately $2,000 to acquire one student. This means in 2012, even at the high rate of >90%, we lost about $150,000 in recruitment costs and theoretically $4.5 million in forgone total net tuition revenue over the course of the next three years. Can we do better? What would it take to get to, say, a 95% freshman retention to be in line with our aspirational peer group?
US News and World Report predicted in its latest release that the University of Redlands would have a 72% six-year graduation rate for first-time full-time entering freshmen. Our three-year average in reality matched this prediction. Interestingly, against the odds, we do significantly better with high-risk populations including first-generation students and Cal Grant recipients. Retention and graduation rates are important to us according to our social compact, but they are important to us in generating revenue as well.
I've spoken about the vision for an innovative "University Village" before, but I list it here because developing the South Campus real estate assets holds possibilities for generating new sources of revenue that do not correlate with student fees.
And of course the comprehensive campaign is about new revenue.
I won't settle for my own ideas about new revenue–I will be inviting the University community to attend forums to generate ideas for new revenue. And as I present this address to the Board of Trustees, I will be seeking their wisdom as well. So far, our community gets the challenge. They seem intrigued. We have to figure out how to incentivize all of us to think about new revenue continually.
2 - Digital Media/Online Education (how best to adapt multimedia technology and online access to human learning)
SLIDE 40: Higher education is being transformed by the uses of instructional technologies to enhance student learning and to provide online access to education for all students. It appears that the fastest growing position now in higher education is "Vice Provost for Advances in Learning," as just announced at Harvard and similarly at MIT and Stanford.
SLIDE 41: We have made some progress in the last few years by developing our first online courses in the School of Education and School of Continuing Studies, under the leadership of an Online Working Group and Advisory Committee and with the review and support of the respective School Curriculum Committees. We also are expanding the uses of educational technologies such as Moodle to help manage student learning and personal response clickers to enhance in-classroom engagement. But we need to move more rapidly in the years ahead to adopt new educational technologies to enhance learning. That's consistent with both the University's historical commitment to progressive pedagogy and with broadened access to online education.
SLIDE 42: In pursuit of this strategic goal, I asked our Provost and Chief Academic Officer David Fite to form a new Task Force on Online Learning last fall, in consultation with the Steering Committee of the Academic Assembly. The charge to the Task Force was based on two philosophies. First, the goal of it all is learning. It's not about being trendy or searching for revenue where it is not likely to come. And it's certainly not all about massive open online courses (MOOCs), even though they occupied front stage this past year. We know that early reports from the National Science Foundation on the learning and success outcomes at San Jose State, for example, have cast doubt on those MOOC outcomes and on which categories of learners may or may not benefit from them. Further, the value the marketplace assigns to MOOCs is not yet established, as students are not yet willing to pay for transferable credits, and completion rates are extraordinarily low. The second philosophy is that faculty should have a central role with regard to content, pedagogical quality, and presentation style, using the various kinds of online, blended, and flipped methodologies.
SLIDE 43: The Task Force presented its preliminary report and recommendations in February 2013, including budget enhancement requests to support expanded uses of instructional technologies in the current fiscal year, and has recommended the University take the following five steps:
The Task Force on Online Learning issued its full and final report and recommendations on September 16, which I accepted and disseminated on September 18. The Task Force is sophisticated in its approach, and its report is wise. I am grateful for the selfless work of Task Force chair, Ed Callahan, all of its members, and Provost David Fite.
3 - Comprehensive Internationalization
SLIDE 44: Early in my term as President, I identified internationalization as a major priority for the University of Redlands. That topic, more than any other, has resonated with many. Given the ever more globalized contemporary world, we must collectively realize our own rhetoric: if we are to produce truly globally engaged citizens, we must have an international student body and faculty. We have an opportunity now to envision our identities and become increasingly international. Given a mobile professoriate, we can recruit faculty effectively from around the globe, not just Southern California and the nation. Further, we can envision an expanding international curriculum.
SLIDE 45: And given the rising number of international students attending universities in the United States, the University of Redlands must seize the opportunity to expand substantially its enrollment of international students. Redlands is currently at the bottom of our peer group, with just 36 undergraduate and graduate nonresident aliens enrolled in the fall of 2011, up from 26 in 2010. The proportion is less than 1% of total enrollment. Increasing international enrollment will provide triple benefits by enhancing campus diversity, creating peer-to-peer global knowledge, and positively affecting the University's financial position.
SLIDE 46: I recently announced the creation of a "University-wide Council on Comprehensive Internationalization" to organize the work necessary to achieve this important priority. The Council will coordinate the efforts of three working groups and produce a report defining short-term (1-2 years) and long-term (3-5 years) goals for comprehensive internationalization. Since truly comprehensive internationalization initiatives will require thoughtful investment, the Council will submit a preliminary report justifying specific budget enhancements by January 2014.
The Council's work will begin by identifying existing strengths of the University, so that we can extend and deepen them where both appropriate and financially supportable. We have successfully increased the diversity of our student population; you'll recall under-represented minorities account for 40% of the well-qualified incoming class in the College. The lessons learned as we built and now sustain that success will inform preparations to meet similar challenges posed by increased international students. Successful efforts to better integrate internationalization into the University of Redlands mission will involve connecting to and supporting the existing cultural diversity within our institution, because attracting and retaining international students and scholars requires a campus environment in which they feel supported.
SLIDE 47: The University's finances remain stable. We completed the fiscal year 2013 with positive operating results. This past May, our Board of Trustees approved a break-even fiscal year 2014 operating budget of $174.5 million. The approved budget included salary increases greater than the cost of living for employees, and that included contingent faculty for the first time in 10 years for the College and School of Education and five years for the School of Business. We made a modest increase to the University's contribution to employees' 403(b) retirement accounts. But that budget, though balanced, shows disturbing trends, namely the slowing of net revenue growth, which does not allow us to create positive margin, grow assets, or contribute sufficiently to facilities maintenance.
Over the past 10 years, gross revenues (primarily tuition, room, and board) have increased 82%; however, net revenues have only increased 59%. The difference is attributable to our increasing University funded scholarships and financial aid, which is budgeted to be $57.8 million for fiscal year 2014. The University's internally funded financial aid has increased 160% or $35.5 million over the same 10-year period. Personnel expenditures have modestly increased 54% and non-personnel support expenditures have increased 85% over 10 years. For the first time in 10 years, the total amount of scholarships and financial aid will exceed support expenditures by $4.3 million.
These are real risks, and our fiduciaries on the Board and our bond raters Moody's and Fitch have taken note.
By rule of thumb, a university's endowment is expected to be at least two to three times the institution's operating budget. Thus, our operating budget for fiscal year 2014 of $174.5 million would equate to an endowment of approximately $350 to $525 million. Ours is approximately $115 million. By that measure, as well as by the peer ratios that benchmark endowment-per-student, we are woefully under-endowed. Hence, our fundraising campaign will focus on endowment.
The total investment return on the University's investment portfolio for fiscal year 2013 was 10.6% as compared to -1.3% for the prior fiscal year.
Developing new and consistent sources of revenues will be critical to funding new institutional priorities and ensuring future financial stability.
The University has no current plan to issue or accept any additional debt from the issuance of bonds or loans. Fortunately, all of the University's debt is at a fixed rate, and therefore the debt service will not be subject to increasing interest rates and additional interest expense when the Fed's policy of "quantitative easing" ends and prevailing interest rates rise. Our focus in the future will be to reduce our outstanding debt obligations.
SLIDE 51: The state of the University appears hopeful to me. But vulnerabilities remain:
In May of 1996, the President's Cabinet released the first version of the University Planning Document in response to both the Board of Trustees and the President's Advisory Council, who urged the President's Cabinet to bring together into a single document the key operational initiatives identified by various constituencies. Since 1996, the document has been revised by the President's Cabinet following conversations among trustees, faculty, administrators, and staff.
SLIDE 52: This year, we are taking a different approach. Rather than identify priorities "in silos" by schools and units, the President's Cabinet is currently working to develop a two-year (rather than annual) operational planning document organized around core themes, aligned with both the annual budget planning process and comprehensive campaign, and accountable to assessment metrics. This year a University priority will be to begin the process of identifying fundable priorities to assist Advancement with fundraising activities/alignment. The new style "Operational Planning Document of the President's Cabinet for 2013-2015" will be given in draft form to the University Council (which includes assembly chairs), the Board of Trustees, and the new Staff and Administrators Assembly in October.
SLIDE 53: At the May Board meeting, the Trustees unanimously approved "A Campaign Framework for Advancing the University of Redlands." The silent phase of the campaign began on July 1, 2013, with an initial campaign goal of $200 million (and growing!). The goal is to at least double the size of the endowment in this campaign while building a more deeply engaged community of donors, so that we may then launch another campaign, immediately following this one, that will triple the endowment from its current size.
Our current campaign will be a seven-year effort ending in 2020. It will seek to increase the level of cash gifts secured annually to $15-$20 million from the current $8-10 million, to increase deferred/planned giving, to more than double the number of endowed professorships, and to increase greatly the number of endowed scholarships. Most importantly, it will be focused on ensuring the gift of a Redlands education for all time by strengthening our financial position and our ability to seize new opportunities for innovation.
During the quiet phase of the campaign, which will run from fiscal year 2014 to fiscal year 2016, we will refine the goal and seek the Board's approval. We will take the campaign public in 2017 or before, and the campaign will run through the end of fiscal year 2020. At that time, we will immediately enter the planning phase of a second campaign that will end in 2030.
We are moving in earnest and very rapidly. Last year at this time we had roughly $8 million in commitments towards a future campaign. I am pleased to report today that we have secured just over $30 million in leadership commitments with a number of major visits lined up to add to this total in the coming months.
I have shared with many of you my experience as an undergraduate having received the gift of a liberal arts education through the generosity of donors I never could have had the chance to personally meet and thank. Coming here, serving as your President, I wake up every day looking for ways to pay back what I was given. This campaign will be historic. It will be a grand undertaking, but most importantly it will be a collaborative effort that I hope will engage all of you as ambassadors, relationship managers, and spokespersons for the noble work we do here. It is rewarding work to get to know our alumni and donors and to find ways to match their philanthropic passions with our dreams for the future.
Many of you have your own stories about how philanthropy has made a difference in your life. Maybe you were a scholarship student, maybe your work is funded in part by donors and philanthropists. I ask you to think about your own story and your willingness to share that story with others for the good of the University and our students.
SLIDE 54: This September, in the Pacific Northwest, Nancy and I began a year of touring the country to meet with potential donors and to hear from them directly about their dreams for the University's future. Whenever possible, we hope to engage members of the faculty to travel with us to participate in this dialogue, building upon the successful Our House showcase initiated this past spring.
There will be a place for every donor in this campaign, but we will make a special effort to educate all alumni, parents, and friends on ways they can move from donor to philanthropist by thinking about gifts through their estate. For many, the opportunity to make a major gift during their lifetime is impossible with the everyday financial reality we face. However, by thinking about an ultimate gift through the prism of one's entire asset base, philanthropic dreams can begin to become reality. I hear many stories of the "millionaire next door" throughout our generous and loyal annual donor population – people who have lived fiscally responsible lives and are capable of planning their legacy. These true Bulldogs for Life make a decision to invest in the students and faculty of the University of Redlands. It is my hope that this campaign, and our efforts to showcase the value of a Redlands experience, will weave together even more tightly our alumni, students, faculty, and friends, to strengthen our learning community for all time.
Now that I have provided a snapshot of Redlands today, one should be asking what does our future hold? We could survive for many years to come by merely maintaining the status quo, but I was drawn to Redlands because I see great potential for our University to be at the forefront of innovation in providing a distinctive liberal arts education in a rapidly changing world.
SLIDE 55: For example, one might envision the day we offer the following four progressive, interrelated options to adapt to changing demands:
These are interrelated, because research suggests that students today need a longer transition to a meaningful profession, which impacts their ability to be financially independent upon graduation.
SLIDE 56: Like all institutions of higher education today, we face challenges, including several outside of our control. Yet, we continue to attract and retain bright and creative students and talented faculty and staff. We have a dedicated community, loyal alumni, engaged trustees, and many friends who share our vision that we are all here for the sake of learning.
As I begin my second year, I am pleased with the progress we have made but am also reminded daily that we must continue to balance what is special about the University of Redlands with the challenges of the future. The best is yet ahead. We are a University destined for greatness.