University of Michigan organizes task forces to explore savings, revenue
Tighter staffing, ramped up marketing to out-of-state undergraduates, and continuing education and non-degree certificates could be on the horizon for the University of Michigan.
The university has organized five task forces charged with recommending new ways to save and make money from its academic and research units, including one to explore all administrative staffing areas for savings, said Phil Hanlon, vice provost for Academic and Budgetary Affairs,
"Right now, what we're focusing on is trying to find the most productive staff configuration possible. The greater the productivity, the more you can do with the same sized staff," Hanlon said.
The task forces were organized less than two weeks ago and haven't yet met. Their recommendations for savings and revenue are expected to be released between March and June of 2010 for future academic years, Hanlon said. Individual task forces may bring in outside consulting firms.
Employee salaries and benefits are U-M's largest cost, accounting for almost 70 percent of its total expenditures and rising faster than the rate of inflation every year. Administrative service areas being examined for "creative approaches through shared service opportunities," include finance, human resources, student services, development, facilities, marketing and communications and clerical support, according to an e-mail sent to U-M leaders.
Hanlon noted progress has already been made in this area. For the upcoming school year, 64 funded positions are not being filled.
Faculty positions were not identified as an area of cost containment for the task forces to explore. A $30 million, five-year initiative began last year to hire 100 additional tenure-track faculty to keep classes sizes low and to compete with elite private schools, officials say.
Other task forces will examine: Marketing to non-resident undergraduates, the addition of non-degree certificate programs, best practices for centers and institutes and the expansion of spring and summer enrollment.
The cuts and revenue areas being explored are connected to the general fund budget for U-M's Ann Arbor campus, which stands at $1.45 billion for the 2009-2010 school year. The general fund pays for teaching, administrative support and services, and is funded via tuition, state appropriation, grant awards and interest accrued on general fund balances.
Before any task force recommendations are enacted, U-M will try to squeeze savings from a few key areas beginning in the 2009-2010 school year.
Information technology, travel and hosting expenditures are being eyed for "intense and ambitious" budget cuts, Hanlon said. Centralized scheduling and more inter-college sharing of classroom space should also contribute to future savings, Hanlon said.
The university hasn't disclosed an amount it wishes to shave off the general fund budget through IT, travel, hosting and other central "cost containment" efforts. But additional scaling back is urgent as the university plans for future budgets and expects less funding from the state, he said.
U-M expects a $317 million contribution from the state for the upcoming academic year, $12 million less than it received in 2008-2009. The outlook for 2010-2011 isn't good, Hanlon said.
As the state appropriation falls each year, tuition rises. In-state freshman at U-M's largest undergraduate school - the College of Literature, Science and the Arts - will pay $11,659 in tuition and fees, $622 more than last year. Out-of-state freshmen will pay $34,937 in tuition and fees, an increase of $1,868 over last year.
The university began taking a hard look at its costs in 2002. Since 2004, $135 million in expenses has been removed from the general fund budget. Some of it has been achieved by reallocating money to U-M's three other budgets.
A host of other efforts, such as shared staffing, energy efficiency initiatives and changing employee benefits, have resulted in the rest of the reductions.
The general fund increases every year despite cost-cutting as new academic programs are added and staff and faculty salaries increase.
Provost Teresa Sullivan said the goal of the belt-tightening is to keep tuition down.
"We are going to do some serious cost-cutting in the coming year," Sullivan said. "I want to keep tuition increases as low as we possibly can. What I've said to the deans is, 'If we can cut costs here in the central administration, you won't have to cut as much in your units, but if we can't make the cuts centrally, then we'll have to pass the cuts on to your units.'"
The task forces will consist of eight to 12 individuals each. They include:
- Expansion of spring and summer instruction, chaired by Jim Penner-Hahn, associate dean for the budget, College of Literature, Science and the Arts. The group will propose two or three options for increasing spring and summer enrollment, including plans to implement each option.
- Non-traditional education programs at U-M, chaired by Derek Collins, associate dean, LSA. This group will explore non-credit education programs to generate revenue for U-M.
- Marketing U-M to non-resident undergraduate applicants, chaired by Robert Dolan, dean of the M. Ross School of Business. "Our main competitors are the elite privates, the Ivy Leagues, Duke, and some of the high-flying publics like Berkeley," Hanlon said. "Competition has gotten really fierce, with elite privates rolling out highly publicized financial aid packages. We ought to look at how we market ourselves to that set of applicants to continue to compete for high quality students."
- Best practices for centers and institutes, chaired by Hanlon. Operating efficiencies at centers and institutes will be explored.
- Shared and creative staffing, chaired by Martha Pollack, dean of the School of Information. All administrative service areas will be explored to see where services can be shared in academic units.
The general fund is one of four separate budgets totaling $5.2 billion that fund U-M's Ann Arbor campus and the U-M Health System. The largest is the auxiliary fund, consisting of self-supporting entities such as the U-M Health System and U-M Athletics, totaling $2.6 billion; the designated fund includes fees charged for and spent on conferences and continuing and executive education, and totals $135 million; and the expendable restricted fund of $970 million is funded by endowment payouts and research grants, with dollars spent restricted to specific areas, such as scholarships or some faculty salaries and benefits.