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AAC&U Presidents’ Forum Plenary Session
“How Leaders Are Tackling the Cost/Value/Debt Consternation”
USM Chancellor William E. Kirwan
Thursday, January 22, 2015
Thank you Ken. I am very pleased to be here for this important and timely discussion. I would like to commend the AAC&U for organizing today’s session on key issues impacting higher education AND offer my congratulations on the occasion of the associations Centennial Anniversary. I had the honor of serving on the AAC&U Board and as its chair. Without a doubt, my most important contribution to the organization was serving as chair of the search committee that ultimately led to the selection of Carol as president. Carol, I wish all my search efforts had worked out as well as this one obviously has.
Despite the fact that I was involved in Carol’s selection, she has given me a very tricky assignment. Once again, we see that no good deed goes unpunished.
I have been asked to not only address WHAT the USM did to make cost containment a broad, system-wide goal, but also HOW we implemented this effort so that its success became a true statewide priority, with all stakeholders believing in its importance and invested in its success. And, to do all of this in 13 minutes. I’ll do my best with this assignment but, by this point in time, the things we did are arrows in most institutions’ quivers. Still the way we went about engaging the state may have some residual value and interest. I want to add that our past efforts, which we called Effectiveness and Efficiency or E&E, need to be expanded and taken to a new level, so we have launched what we affectionately called E&E 2.0. I hope to spend just a little time talking about what we’re doing now and why we’re doing it.
To tell the story of what we did, I have to take you back to 2002, the year I returned from Ohio State to become Chancellor of USM. You may have forgotten already but our economy had just entered a recession that year. Now those of us who were dealing with university budgets then look back on that recession with a sense of nostalgia, given what we’ve been through the past six years. Nonetheless, it seemed quite severe at the time.
Maryland had just elected a Republican governor who was determined to cut the budget, and cut he did. We responded, as many have when budget cuts occur, with dramatic increases in tuition. Everyone was unhappy with us . . . students, their parents, legislators, the general public. There was lots of finger pointing. We felt the state was unappreciative and unsupportive of our role in building Maryland’s economy and quality of life, and the public felt we were wasteful and bloated. It was not a good situation.
So, we decided to do something about it. With the Board of Regents’ active involvement, we made a very public commitment to review all administrative and academic processes, to find savings where we could, and to eliminate inefficiencies where they existed. This was Effectiveness and Efficiency, or E&E, born. We brought in a consultant, Accenture, to get us started.
E&E was a top-to-bottom, systematic reengineering of both our administrative and academic functions to reduce costs and build capacity while supporting excellence.
Administratively, we consolidated back office operations of our campuses, we streamlined enrollment management services to eliminate duplication, and we began buying major commodities as a system and not individual institutions. In fact, one of the biggest savings—tens of millions of dollars, which continue to grow to this day—came from our purchase of energy through a single contract for all 12 institutions. As another example, we formed MEEC, the Maryland Educational Enterprise Consortium, to leverage our scale in the purchase and licensing of educational hardware and software. We invited the community colleges and the K-12 sector into the consortium. Last year alone, MEEC has enabled a savings of $10 million in hardware purchases and $8 million in software purchases. The total savings since MEEC’s inception is in nine figures.
Academically, we attacked “credit creep” by limiting degree programs to 120 credits, we required students to earn 12 credits outside the traditional classroom, we required an on average 10 percent increase in faculty’s student contact hours, and we maximized the utilization of our “comprehensive” institutions, which offer lower cost to the state and student, to accommodate enrollment growth. In addition, we aggressively took advantage of the capabilities of technology and innovative educational techniques to redesign entire courses—not just individual classes or sections. Large, lecture-heavy, general education courses were changed to incorporate active learning, technology-enhanced tutorials, with fewer formal lectures, and online modules. As the 2014-2015 academic year opened, we had redesigned some 85 USM courses, enrolling more than 24,000 students.
The multi-year effort, which continues to this day, produced results beyond our fondest hopes.
Administratively, E&E has generated close to half-a-billion dollars in direct cost savings, significant savings through cost avoidance.
Over the past six years, our per FTE expenditures have been reduced 12 percent, our four-year and six-year graduation rates have risen significantly, achievement gaps have been narrowed, average time-to-degree across the USM is at an all-time low of 4.2 years, and community college transfers are at an all-time-high. In fact, they are the largest single component of entering students each year, driving down the cost of four-year degrees.
Another critical step was a concerted effort to align our budget requests with the state’s needs in workforce development and economic growth.
Our E&E efforts—which are reported to the Governor and the General Assembly every year—have changed the dynamic with our state government, giving the USM far greater credibility with state leaders. In the last two years of his term, Governor Ehrlich—who had cut our budget in his first two years—was providing significant increases in our funding. In fact, after our initial E&E report, he called a press conference and said, “I now believe $1 invested in the USM produces a dollar’s worth of value for the citizens of Maryland.”
In 2007, when a new governor—democrat Martin O’Malley—was elected, the partnership continued. Over the past eight years, we have been treated as a priority for state funding and we weathered the Great Recession better than most if not all other state systems of higher education. As a result, from the fall 2005 to fall 2014, instate tuition has risen a cumulative 15 percentage points, the lowest in the nation, and Maryland has gone from having the 7th to 27th highest tuition in the US. Of course, we’ve gotten a lot of help from other states in making that dramatic move.
The E&E effort has been profiled in national and regional publications. One was the Washington Monthly, which referred to it as the “Mid-Atlantic Miracle.”
Now, in case you need proof that what goes around comes around, Maryland just elected another Republican Governor, Larry Hogan, the state has discovered it has a huge structural deficit, and the new governor is determined to eliminate it, as he should. The outgoing governor wanted to avoid the stigma of leaving his successor with such a deficit, so he just announced a very significant mid-year cut to the state’s budget, including ours. Talk about “déjà vu all over again.” I feel like I’m living in a dream, a nightmare really.
Several of our institutions have just announced a very modest $60 to $70 spring tuition adjustment, so for them that 15 percentage point increase over 9 years will rise to 17 percentage points, still less than 2 percent a year on average over that period.
But, our E&E efforts are well know to the incoming governor. He has reached out to us and expressed his strong desire to continue the partnership that has been established between the state and USM. There will be some challenging times ahead in Maryland and across the country. But at the end of the day, our nation needs what higher education delivers as never before in history. For those of us in the public sector, as well as in the private sector, it is imperative that we build a sense of partnership with our state governments.
So I will close my comments with a few of the defining characteristics that I think helped set E&E apart from more traditional “cost cutting” efforts and built a mutually supportive relationship with our state leaders that continues to this day.
· First, it was important that the USM took the first steps. We accepted—even embraced—transparent, accountable cost containment as our mode of operation. We saw getting our own house in order as job one.
· Second, in addition, from the outset, we made it clear this was not a “quick fix”, but rather a long-term, transformative change in our culture and our operations. Our willingness to not just accept but actually drive this change helped underscore how serious we were.
· Third, internally, and from the start, we secured presidential and shared governance leadership support for this approach across the system. I don’t think anything could have short-circuited our efforts faster than a lack of institutional support and advocacy from our campus leaders.
· Fourth, we were very public about our efforts, meeting with elected officials, business leaders, the media, civic groups, etc. And by doing this we got wide “buy in” and made E&E a “Maryland” effort, not just a USM effort.
· And, finally, my last observation is captured in a quote from President Harry Truman: “It is amazing what you can accomplish if you do not care who gets the credit.” In fact, with an effort like E&E, the more people that want to attach themselves the better; it helps make the support and partnership around it permanent. As John Kennedy said, “Victory has a thousand fathers…” and E&E surely does.
So that’s an overview of E&E. I see that I have exhausted my time and probably you. So, I’ll have to leave further comments on E&E 2.0 for the panel discussion but I do want to close with one final observation. Our topic today shouldn’t be just about managing through tough economic times. There is something much larger at stake.
In one generation, the US has gone from being the model, well-educated country that others wanted to emulate to being a nation where economic advancement and social mobility have become stymied by the absence of more equitable higher education participation and attainment rates. Our nation’s historical claim to being the land of opportunity and the upwardly mobile society now rings hollow. Sadly, we have in fact succeeded in re-creating the economic caste system our ancestors came to America to escape. As Nicholas Kristof put it in a New York Times op-ed a few weeks ago, “In effect, the United States has become 19th-century Britain: We provide superb education for elites, but we falter at education for the masses.”
And so, as a nation, we find ourselves at a very troubling crossroad: a long-term, systematic disinvestment in public higher education essentially “butting heads” with the desperate need to graduate more students—especially from low economic and underrepresented populations.
What are we to do about these circumstances?
Some see the solution as straightforward. They say we just need to do a better job of persuading our states to reinvest in higher education, as in the halcyon days of yore, which will enable our institutions to continue business as usual. While I am all for pressing the federal government and our states to increase public investment in higher education and, in fact, have spent most of my adult life doing so, to put all our eggs in that basket and wait for significantly better funding to occur is, for me, like waiting for Godot.
We in higher education must seriously rethink our business and academic models. While aggressively seeking better funding, we must simultaneously actively pursue lower-cost means of delivering high-quality higher education to more students. Failure to do so will, I am convinced, lead to a seriously diminished America both in terms of economic strength and social equity.
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