Office of the Vice President for Global Communications

Thursday, October 28, 2010

Provost provides update on the university’s financial outlook

University leaders credit a disciplined approach to financial management for the stable financial path of the Ann Arbor campus, helping to avoid the grim fiscal constraints experienced by many other U.S. universities. In fact, U-M strategy has included making investments in faculty expansion, need-based financial aid and academic programs.

“The investments that we’ve made are a result of principles that guide our long-term financial choices,” says Phil Hanlon, provost and executive vice president for academic affairs. “We are committed to keeping a U-M education affordable and providing students with innovative learning experiences, recruiting and retaining top faculty, developing both new and existing revenue streams and reducing our operational costs over time.”

U-M has not retreated from steady cost-containment efforts since fiscal year 2003, achieving reductions in recurring general fund expenditures of about $135 million from fiscal years 2003 through 2009. Hanlon says cost containment has enabled the reallocation of some of the savings to efforts that represent the university’s highest priorities. He describes the investments that have been made in financial aid, faculty expansion and academic programs as a reflection of these priorities.

Last fall university officials announced a goal of $100 million in additional general fund reductions and reallocations by the end of fiscal year 2012, and U-M is well on its way to reaching it, Hanlon says.

“With a primary focus on lowering operational costs, changes have included health care cost containment, energy purchasing strategies and reduced energy usage across campus, consolidation of our central IT units and updating procurement processes,” Hanlon says.

In addition, the university completed a benchmarking study in late 2009 to begin to identify areas in its human resources, information technology, finance and procurement operations that might have the potential for increased efficiency and cost savings. Between fiscal years 2013 and 2017 the university plans to achieve additional general fund reductions and reallocations amounting to $120 million. Long-term planning is under way for efforts that will contribute to this goal by enhancing revenue and gaining additional operational efficiencies.

Five task forces convened by the Office of the Provost in 2009 were asked to study Best Practices for Centers and Institutes, Creative Staffing and Shared Services, Expansion of Spring/Summer Instruction, Marketing U-M to Non-Resident Undergraduate Applicants and Non-Traditional Educational Programs at U-M. Their recommendations are expected to help shape additional long-term cost reduction and revenue growth plans for future years. Ann Arbor campus efforts at IT rationalization that began early in 2010 also are expected to contribute to future-year efficiencies and strategic technology investments.

Hanlon says the fiscal environment in Michigan remains volatile, and difficult choices faced by the state government could affect future university appropriations. Continued cost control efforts will help keep the university well positioned for future challenges.

“We will need to continue to work together to address our budget challenges and maintain our unwavering commitment to the quality of the institution, both inside and outside of the classroom,” he says.

To learn more about cost control and the university budget go to www.vpcomm.umich.edu/pa/key/budget.