Address to the Academic Assembly
May 16, 2013
Keith Osajima asked me to brief you at this last University Assembly about my past academic year, its surprises and accomplishments. I would like to begin by spending a few moments talking about our FY14 budget process, since it's current, then end with what inspires me about our future. In the fall I will plan to deliver a focused State of the University Address to you.
Budget and Process:
We now have a balanced budget. This has been the consequence of our University Cabinet leadership, the deans, and the University Council, with its assembly chairs and faculty, continuing to do the arduous work of developing realistic budgets during challenging times.
The budget process was different this year. My intention was that it become more of a collaboration with faculty and among all members of the Cabinet. In the absence of a University-wide faculty budget committee, I appointed additional faculty members to the University Council (on the advice of the Assembly chairs), and I used the Council as the advisory body. We involved faculty on the University Council earlier in the budget cycle this time, including offering up to them budget assumptions at the same time they were being tested, also a sensitivity analysis so they could test what effect specific budget changes might have, plus a consideration of budget trade-offs in several iterative budget models (an example would be trading salary pool for 403b contribution), and finally a consideration of the best options for healthcare benefits coverage.
To be certain, it is an austere budget, without much growth. We are running yet another year without creating a positive margin. I consider the decisions about the budget to have been collective and not authoritarian, to be in the right direction, and to have been highly impacted by faculty opinion and input. This has required a number of sometimes difficult decisions as we tried to address our ongoing needs. University budgets everywhere continue to be austere, despite the upward trajectory of the Dow and the S&P 500, the turnaround of housing, and other positive indicators. That's because endowment payout formulas tend to average the last five years (with their severe downside and volatility), and financial aid spending depends on the real economy, which has been characterized by relatively stagnant unemployment and consumer confidence.
The Good News:
The full-time faculty salary pool increase will be 4%.
- The part-time faculty salary pool increase will be 3% (it had been zero for more than a decade). I intend for these both to recover equilibrium. We especially need to provide adjunct faculty a living wage and better status. We have made progress on reaching our faculty salary goal. According to the most recent AAUP averages for FY12/13 – just released last month – our mean Assistant Professor salary rose to exactly the 80th percentile of AAUP peers, and further, we closed the gap for Associate Professors, with now a variance of only $1,180 from goal. The variance for mean full Professor salary is still unacceptably high, at $5,057, which is up slightly from last year but lower than FY 10/11.
- The 403b contribution inched up to 7.25% from 7%.
- Healthcare costs will rise only about 2.5%, and this is a dramatic, beneficial change from recent history. However, under healthcare reform, we cannot expect it to continue.
- The University will achieve the $1M/year target for setting aside cash reserves to increase liquidity, which is an important criterion for credit rating agencies.
- The enrollment target in the College of Arts and Sciences is lowered from what was the actual, surprisingly high enrollment last year.
The Bad News:
The contingency reserve is razor thin at 1% of budget.
- Our "major projects" budget for facilities (mainly large-scale repairs and renovation) is only $800,000, when best practices suggest it ought to be $2.5 to $5M annually to avoid unwieldy growth in the backlog of deferred maintenance.
- We will likely be able to support very few faculty position requests for searches next year for appointments in fall 2014.
- There is no real positive operating margin (a strong requirement of credit agencies), because we do not fund depreciation in the operating budget. The budget is merely balanced as to revenue and expenses.
- There is no expectation for an increase in new net assets.
- We continue to forecast a high tuition discount rate in the College of Arts and Sciences.
Impressions, Surprises, Accomplishments:
Keith asked for my impressions, surprises, and accomplishments.
I knew I faced significant structural financial challenges here before I came. But the challenges we face financially have been surprising to me in how long they've lasted and how recalcitrant they will be to solve without new sustainable revenue sources, especially those that aren't correlated with our current revenue sources. Revenue – not more cuts – is our future! It's why I have focused remarks often on the internationalization of our student recruitment and the need to move forward with creating the public/private development partnership that will result in University Village. Both initiatives have higher purposes – the contemporary imperative to educate students as global citizens, and the political and philanthropic tying of town and gown to our University's advantage. But both these initiatives have the unique ability to produce new revenue that goes to the bottom line – the line that will be how we can support faculty salaries and retirement contributions, which are where we are dangerously close to being not competitive.
- No doubt the biggest surprise was the great beauty . . . and pure heart . . . shown at the Inauguration on February 20th. It was a thrill. Student and faculty artists and speakers performed at the very top and beyond anyone's best aspirations. It will be personally long-remembered, of course, but also permanently archived in this University's history as what is meant by its "very best." And of course the biggest surprise of all? – Art Svenson's "Our House."
- How huge is the Washington, DC, alumni chapter and how successfully we've made us of it for the May term in DC and the summer Tinker Scholar internships.
- The willingness of Redlands friends to engage with both me and the University and their willingness to be philanthropic.
- On the other side of the ledger lie other surprises. How long it takes to get initiatives to a really productive stage, like international recruitment, or governance models that will promote true shared governance.
- How precariously low is our endowment for the size of our enterprise.
- How non-diversified are our revenue streams – 92% comes from net student revenue. And, 68% of our undergraduate enrollment draw is from 5 counties in southern California: San Bernardino, Riverside, Los Angeles, San Diego, and Orange.
For all students, almost half [45%] come from only two counties in America – Riverside and San Bernardino.
What might be some accomplishments?
- A relationship with faculty and students is important to me. I've met each trustee personally, many major donors, most staff by now, about half of the faculty in their departments and individually, and thousands of students and alumnae/i.
- I mentioned the increased use of the University Council for budgetary advice in real-time by faculty (I consider this a holding pattern until a faculty governance structure is decided).
- A reorganization of the President's Office was based on an experienced consultation (delivered pro bono!) with the hiring of a top-notch Chief of Staff, Michelle Rogers, as the University's first-ever Chief of Staff and Liaison to the Board of Trustees.
- I've worked to create a culture on my Cabinet of senior leaders that enhances true give and take, engagement of all, and collaboration, so that we all become essentially a staff of advisors for one another, not just engaging in dialogs with me.
- We've moved ahead on improving our collaboration, as evidenced by effective faculty leadership from across the University in our three WASC theme groups, which helped ensure our excellent reports. In the College, the General Education Working Group also brought to successful fruition a multiyear process of discussion, debate, and modeling for the new Gen Ed.
- Fundraising to date: We will take an initial goal of more than $200 million – more than double the goal set for our Centennial Campaign – to the Trustees for their approval on Saturday. $30M in formal commitments and cash have already been received, and $5.5M more in verbal commitments are in progress. In the year ahead, I have challenged the development staff to work with faculty, trustees, and senior administrators to continue to enlarge our pool of potential major donors so that we may significantly increase this goal by the time we publically announce the campaign in FY 2017.
Starting July 1, pending Trustee approval, all gifts and commitments from July 1, 2013 through June 30, 2020 will be part of the campaign total. We did begin to "pre-count" selected and strategic gifts and commitments to move the campaign planning forward. Gifts in our total to begin the campaign counting period range from a very large bequest commitment to cash gifts from loyal friends.
A few to mention are the following:
- A $1-M bequest commitment from Jan Berckefeldt '67, a loyal and generous alumna living in the Bay Area, for Scholarship Endowment.
- $340,000 in cash, and likely more to come, from the estate of local alumnus Edwin Hales '63, to support the Bulldog Bench.
- Two new charitable gift annuities totaling $200,000 from alumni from the 50's to provide guaranteed life income for themselves and leave a legacy for students through new endowed scholarship funds.
- A new six-figure pledge from Trustee Larry King and his wife Rita to establish the King Summer Science Research Endowment and a $75,000 pledge for the Salzburg Endowment.
- The Development team is also currently working with me to help several generous current donors consider new transformational gifts for entrepreneurship, communicative disorders, athletics, Johnston, and many other of our flagship programs. Additionally, many new endowed scholarships are being proposed to prospective donors to help us grow our endowment and keep the University of Redlands as affordable as possible.
What Inspires Me and Is Exciting Ahead of Us:
- My engagement with each school, department, and group I've visited has been deeply inspiring. Since September 2012, I have met with several departments or groups including Theatre, Art, Visual and Media Studies, Chemistry, Religious Studies, Math and Computer Science, Chemistry, History, Business Administration, Sociology and Anthropology. I have met also with the faculty in our School of Business and the School of Education, our head coaches, the Humanities Advisory Group, the Untenured Faculty Caucus, and the Humanities Advisory Group.
I am convinced of a thriving faculty of masterful teachers who are unequaled in their attention to student needs, the student experience, experiential learning, community service, and the future success of their students as alums.
I am hopeful that we can recover the forward momentum on getting ALL faculty salaries to goal, including not only full-time faculty but part-time continuing faculty and adjunct faculty who have too long worked with lesser status and perilously low compensation.
Ditto for recovering the full 9% contribution to 403B.
I hope for greater endowment behind our most successful faculty scholar/teachers, for greater infrastructure and support of their research, and for greater undergraduate research funding.
I am energized by the potential development of University Village on the 28-plus acres of our south campus in conjunction with the Redlands Rail project. I have been asked by Third District Supervisor James C. Ramos to participate in his newly established "Rail to Redlands" ad hoc committee created to engage stakeholders and ensure timely completion of the project. This project could have many ramifications for the University and the Center for the Arts.
My greatest thrill on those days that are the roughest – and we all have them – is found in meeting with individual students and small groups of students. It's what inspires us all as faculty, and it never fails to center me. I shook 1,300 hands on April 18th, 19th and 20th. But more importantly, I knew many hundreds of them, scores personally. They impacted me, and I them. It's why I'm here - to make a meaningful difference.
- A comprehensive campaign is to be launched in its silent phase this summer. Nancy and I will visit strategic areas around the nation next year, meeting more of our key donors and stakeholders. The campaign planning has taken 3 years because of the presidential transition – an inventory phase, a multi-year budget planning process, the annual planning document process, canvassing of all faculty by Ray Watts and Neil Macready, open forums (the one about optimal size, the upcoming party about revenue generating ideas, and others on future topics). I convened small groups of us in workshop formats, first of faculty (the nominated so-called "creatives" among us), a similar all-day workshop for Trustees, the recent all-day retreat of the Cabinet and colleagues in Development. But we are now starting in earnest. Our stretch goals have not been decided yet. Themes are emerging, and we will test these with the Board of Trustees this week. It is likely that we will try to stretch ourselves boldly as a university and seek upwards of 20 new endowed professorships and other positions; up to $100M in endowed financial aid; and an infrastructure for both faculty and student research. Areas of campaign focus will be ensuring affordability, increasing quality, increasing innovation, and internationalization. But more than anything else, we will strengthen the financial position of the University to protect our "core" and put us in a position to be entrepreneurial to grow and leverage our flagship programs.
- You should expect me to try to bring these same principles of efficiency and new collaborativeness into the organization of the president's senior Cabinet over the coming year, as we all become more used to working with one another and are able to recognize new ways of managing and stewarding the resources of the University to make the faculty's work ever more enabled.
Thank you for inviting me to speak today. I hope you will join me this afternoon to attend "Our House," the inaugural edition of an annual celebration of the scholarly and creative accomplishments of our faculty and staff that sets the stage for volumes and stories to come.
The event begins at 5:30 PM in the Redlands Room of the Armacost library with our chief academic officer David Fite serving as the master of ceremonies. This is the kind of intellectual and convivial event only a university can create.
Thanks for listening.