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Updated 10:00 AM November 24, 2008
 

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Provost Sullivan and CFO Slottow Issue Financial Update

To the UM Community:

Since we last wrote on October 16, the national economic situation has evolved considerably. Although the economy may remain stressed for some time, we want to assure you that thanks to prudent investment and financial management policies, careful planning, and on-going cost containment measures, the University of Michigan’s Ann Arbor campus remains financially sound.

To be sure, our campus does face extraordinary financial challenges. Based on the recent forecasts by U-M economists, the State of Michigan will see contracting revenues in this fiscal year and the next, and the Governor and the Legislature will have to make difficult choices that are likely to include reductions in the state appropriations to Michigan public universities. Affordability—always a high priority—will be a particular concern in the upcoming years as U-M students and families find themselves in more difficult circumstances and we must balance increases in tuition and investments in financial aid.

We are keeping a close watch on further developments in the economy and their impact on our revenue streams as we begin to work on advance budget planning with the Regents, executive officers, and deans. But moving forward, we expect to be able to meet the challenges of the next few years primarily through careful prioritization of our plans and activities coupled with continued cost containment efforts.

Over the past seven years the University has taken a number of steps that have helped prepare us for these turbulent times. Several years ago, the Regents approved a more conservative endowment spending rule which will help cushion our operating budget from the recent large losses in the financial markets. The University has also implemented careful budgeting and investment practices that have protected funding for its highest priority initiatives, guaranteed sufficient liquidity, and minimized losses in endowment value. At the same time, we have made investments in key activities and resources that will help us attract external support from grants, gifts, and contracts. And through an aggressive and systematic program to contain costs and improve the efficiency of our operations, we have reduced the operating costs of the University by over $135M during the last six years. By continuing this effort, we will net additional savings that will help us deal with the period ahead.

The coming months will not be easy, but we are committed to managing the challenges before us by working together as a community to set priorities and to find new and creative ways to do our work more efficiently. In doing so, we believe we will be able to maintain student access and build the excellence of education and scholarship that is the hallmark of the University of Michigan. Thank you for your involvement and support.

Sincerely,

Teresa Sullivan, Provost and Executive Vice President for Academic Affairs                    
Timothy Slottow, Executive Vice President & Chief Financial Officer        

 

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