The university also responds to the state’s request for suggestions for “formula funding” – a mechanism to standardize appropriations for higher education. The letter argues that this formula approach to funding for higher education, which has resulted in one-time allocations, should instead be used as base-level funding, to provide greater consistency for budget planning. The letter also argues that formula funding, which is based on year-to-year improvements, doesn’t recognize the high level of achievement that institutions like UM have already reached.

Regarding cost containment, the letter highlights UM’s efforts to eliminate $235 million in general fund expenses since 2004. A third phase that’s currently underway is targeting $120 million through 2017 in a combination of cuts and increased recurring revenues. More than $30 million in cuts have been identified in fiscal year 2013, which runs from July 1, 2012 through June 30, 2013.

The letter also includes sections on affordability and economic impact. For economic impact, the letter references the UM Entrepreneurship & Innovation website for more details.

UM’s FY 2013 general fund budget of $1.649 billion for the Ann Arbor campus, which regents approved in June, reflects a $4.3 million increase in UM’s state appropriation to $273.1 million – an increase of 1.6% compared to FY 2012. The previous year, in FY 2011, state funding to UM had been cut by 15%.

This report was filed from the Michigan Union’s Anderson room on UM’s central campus, where the regents held their December meeting.

A surplus of $5.8 million is projected for FY 2013, after allowing for $4.5 million for deferred maintenance. Revenue growth is positive, budgeted for an increase to $130.32 million in FY 2013, he said, compared to anticipated revenues of $128.69 million in the current fiscal year. The largest individual line item comes from ticket sales, which are budgeted at $44.05 million, down from a projected $48.988 million in FY 2012. Brandon noted that the lower ticket sales reflect fewer football games this coming season – six, compared to eight games last season.

Other revenue sources for FY 2013 include conference distributions ($23.28 million), preferred seating and gifts ($27.42 million), corporate sponsorships ($15.05 million), facility revenues ($6.85 million) and licensing royalties ($8.02 million).

The $124.5 million in expenses for FY 2013 includes $44.2 million in compensation, $18.35 million in student financial aid, $19.05 million in team and game expenses, $10.62 million in facilities expenses, and $14.69 million in debt service. Debt service payments will increase by $1.468 million, related to Crisler Center renovations. Brandon also noted that the athletic department is taking on responsibility for UM’s Radrick Farms Golf Course, which will add to both revenues and expenses.

Regarding the balance sheet, Brandon noted that the department is a $130 million business that generates about a $6 million surplus – but it carries an estimated $318 million in liabilities, including $240 million in long-term debt. Managing that debt will be key.

Brandon also pointed out that operating revenues in the budget do not reflect endowment gifts, saying “thank God we have generous donors” who are appreciate and are passionate about the university.

Brandon ended his presentation by highlighting a long-term list of upcoming capital projects and estimated expenses, through fiscal 2017. Projects include Schembechler Hall renovation ($9 million); field hockey renovation ($9.5 million); Michigan Stadium painting ($6 million); softball facility addition ($3 million); scoreboards at various venues ($4 million); lacrosse office and locker room facility ($12 million); strength & conditioning/rowing/soccer facility ($25 million); indoor/outdoor track competition facility ($90 million); Yost Arena ice plant replacement ($3.2 million); Canham Natatorium expansion ($20 million); and a multi-purpose competition arena ($30 million). [.pdf of full athletic department budget presentation]

In a separate action, regents approved appointments to UM’s Advisory Board on Intercollegiate Athletics. Appointed members to three-year terms through June 30, 2015 are: Bruce A. Courtade (alumni representative, reappointment); Jessica L. Hanes (faculty representative, replacing Phillip E. Savage); and Michael J. lmperiale (faculty representative replacing David S. Potter). Brandon T. Zeerip (student representative) was appointed to a two-year term from July 1,2012 through June 30, 2014.

This brief was filed soon after adjournment from the June 21 meeting, which was held at the Michigan Union Ballroom on the Ann Arbor campus.

A year ago, tuition increased 6.7% for in-state undergraduates at the Ann Arbor campus, and 4.9% for out-of-state undergraduates. At the June 2011 regents meeting, Ilitch and Deitch had cast dissenting votes for those increases, too.

On Thursday, Ilitch spoke against the FY 2013 tuition increases, describing the burden on students as “brutal.” Higher education is increasingly becoming out of range for Michigan residents, and that’s unacceptable, she said. Regent Julia Darlow responded by saying that all the regents are concerned about affordability and accessibility of higher education for low- and middle-income students. But she noted that the net price for a UM education – including all costs, not just tuition – is actually lower now for students from middle-income families than it was in 2004.

The general fund budget for the Ann Arbor campus also includes $144.8 million in student financial aid, an increase of $10.5 million compared to last year. In a media briefing prior to the June 21 meeting, provost Phil Hanlon said this marks the fourth year in a row that a typical student with financial need won’t see an increase in the cost of attending UM, due to increases in financial aid. This year, the financial aid increase reflects additional grants, not loans.

The FY 2013 budget reflects a $4.3 million increase in UM’s state appropriation to $273.1 million – an increase of 1.6% compared to FY 2012. Last year, state funding to UM had been cut 15%. Hanlon noted that while the university is appreciative of this year’s increase, in the past 11 years there has been a drop of $178 million in state aid to UM, adjusted for inflation. He encouraged state legislators to continue their investment in higher education.

Hanlon also highlighted the university’s cost-cutting efforts, pointing to reductions of $235 million in general fund expenses since fiscal 2004. Looking ahead, UM has a five-year goal of cutting another $120 million, he said, which includes more than $30 million of cuts in fiscal 2013. The savings will come in part from consolidating IT operations, cutting about 70 staff positions through a combination of attrition and layoffs, and using the university’s buying clout to get more favorable pricing from vendors.

On the expense side, the budget includes what Hanlon characterized as modest salary increases of 2% for staff and 3% for faculty. He noted that these are not across-the-board increases, but will be made based on merit.

Tuition and fees make up a large portion of the general fund operating budget. For the Ann Arbor campus, a budget of $1.649 billion in FY 2013, which begins July 1, marks a 3.9% increase from FY 2012. Of that $1.649 billion, tuition and fees account for $1.156 billion in revenues. The budget reflects a 6.1% increase in tuition revenue – an increase higher than the tuition hike itself because of changes in enrollment.

Also during the June 21 meeting, regents approved student fees that are unchanged from fiscal 2012: $7.19 per student per term to fund the Michigan Student Assembly; $1.50 per student per term to fund school/college governments; and $8.50 per student per term for Student Legal Services. A $174.40 fee per student per term was approved for the University Health Service, up 1.4% from FY 2012.

Multiple votes were taken on budget-related items, including the overall budget, tuition, fees, housing rates, as well as budgets and tuition rates for the Dearborn and Flint campuses. UM president Mary Sue Coleman chaired the meeting, and there was considerable confusion at the board table about the order of the votes. At points it also was unclear – at least to the media and general public observing the meeting – who cast the dissenting votes. The outcome of the votes was later clarified by Nancy Asin, assistant secretary of the university.

This brief was filed from the Michigan Union Ballroom on the Ann Arbor campus, where regents held their June meeting.

Room and board costs for a double residence hall room would increase from $9,468 to $9,752. A staff memo accompanying the proposal indicates that the 3% increase for residence halls is divided into two components: 1% for increased operating costs; and 2% for residence hall renovations.

In April, Eastern Michigan University’s board of regents approved an aggregate 4.95% room and board increase.

Housing rates are typically set by regents at their May meeting. This year, it was handled as part of the overall budget approvals for the coming fiscal year.

This brief was filed from the Michigan Union Ballroom on the Ann Arbor campus, where regents held their June meeting.

For the current fiscal year 2012, revenues are expected to reach $2.24 billion, with an 0.5% negative operating margin of $11.3 million. However, that’s better than the anticipated loss of $23.5 million that had been budgeted for the year, Strong said. The loss is due in large part to costs related to the new C.S. Mott Children’s and Von Voigtlander Women’s Hospitals, which opened in December of 2011, as well as to the expansion of an adult emergency department and a new system for patient records and billing.

Strong noted that the system’s operating margins fluctuate historically, and downturns are tied to the opening of new facilities – like the Cancer Center in the mid-1990s, and the Cardiovascular Center in 2007 – or to changes in payment rates, such as Medicare and Medicaid reimbursements.

Revenues are projected to increase to $2.39 billion in FY 2013 – a 6.7% increase. An operating gain of $10.8 million is anticipated.

This brief was filed from the Michigan Union Ballroom on the Ann Arbor campus, where regents held their June meeting.

This year, the state asked universities to provide suggestions for “formula funding” – a mechanism that’s being considered as a way to standardize appropriations for higher education. Regent Martin Taylor advocated for revisions to the letter that would explicitly state UM’s opposition to this kind of approach to funding, along with the suggestions for how to implement it. Other regents agreed. After discussion with university administrators – including provost Phil Hanlon and Cynthia Wilbanks, vice president for government relations – the board unanimously approved the letter, with the understanding that it will be revised to include a statement opposing formula funding.

Attached to the letter is a copy of the university’s $1.587 billion FY 2012 general fund budget, which the regents approved in June 2011. The budget is based on the assumption that UM will receive $268.8 million in state appropriations for the fiscal year, which runs from July 1, 2011 through June 30, 2012. That amount represents a $47.5 million cut in UM’s state appropriation – a decline of 15% compared to FY 2011, and the lowest amount of state aid received since FY 1964, when adjusted for inflation. The budget included a 6.7% increase in tuition and fees for most in-state first- and second-year undergraduates at the Ann Arbor campus, for a total of $12,634 per year ($6,317 per term).

This brief was filed from the boardroom of the Fleming administration building on the UM campus in Ann Arbor. A more detailed report will follow: [link]

University of Michigan regent Denise Ilitch, who was elected chair at the June 16, 2011 meeting, listens to local resident Tom Partridge, a frequent public commenter at meetings of various governing boards in and around Ann Arbor. He did not sign up to speak during public commentary at the regents meeting, but approached regents individually before the start of the session. (Photos by the writer.)

Tuition and fees will increase 6.7% for most in-state first- and second-year undergraduates at the Ann Arbor campus, for a total of $12,634 per year ($6,317 per term). Most out-of-state undergraduates will pay a total of $37,382 per year ($18,891 per term).

Voting against the tuition increases were regents Denise Ilitch and Larry Deitch. Ilitch has voted against increases for three straight years, but this is the first no vote for a tuition proposal that Deitch has cast in his 19-year tenure on the board. He objected to the higher percentage increase that in-state students were bearing compared to out-of-state students, as well as to the state-level budget process, which threatens additional state funding cuts for public universities if they raise tuition by more than 7%. He contends that the “cut-and-cap” approach results in tuition increases that are higher than they might otherwise be.

This is the second wave of increases for students this fall. At their May 19 meeting, regents had voted to raise residence hall rates at the Ann Arbor campus by 3%. The rate increase for Northwood Community Apartments – housing primarily for graduate students and families on UM’s north campus in Ann Arbor – is 1% for the 2011-12 academic year.

In presenting the budget at the June 16 meeting, university officials emphasized the context for these increases: The FY 2012 budget reflects a $47.5 million cut in UM’s state appropriation down to $268.8 million – a decline of 15% compared to FY 2011, and the lowest amount of state aid received since FY 1964, when adjusted for inflation. The budget attempts to soften the tuition hike by adding $9.2 million in student need-based financial aid.

Tuition makes up a large portion of the general fund operating budget. For the Ann Arbor campus, the budget of $1.58 billion in FY 2012, which begins July 1, reflects a 2.2% increase from FY 2011.

Regents also approved the FY 2012 budget for the UM Hospitals and Health Centers – revenues are projected at $2.169 billion, with a $23.5 million operating loss. The loss is due in large part to $89.4 million in costs related to the new C.S. Mott Children’s and Von Voigtlander Women’s Hospitals, which open in November.

UM athletic director Dave Brandon gave a briefing on the athletic department budget, though it doesn’t require separate regental approval. The budget calls for a $11.4 million surplus and projected revenues of $121 million, including $45.5 million from ticket sales.

In addition to budget items, the board conducted other business during Thursday’s meeting, approving several construction projects – including a major renovation of Yost Ice Arena – and electing new officers: Ilitch as chair, and Deitch as vice chair. In her first action as board chair, Ilitch asked to enter a statement into the record. Though she didn’t read the statement or refer to its topic at the meeting, it was a response to a May 27, 2011 editorial in the Detroit Free Press about a resolution approved at the regents’ May 19 meeting. The resolution supported the right of graduate student research assistants to unionize.

That issue also arose at the meeting during public commentary. Dan Benefiel – a member of the Willow Run Tea Party Caucus and the Washtenaw County Republican Party executive committee – told regents he’s concerned that their decision will eventually lead to the unionization of college athletes. He called the vote a “leftist intrusion on American educational institutions.”

Budget Overview

Tim Slottow, UM’s chief financial officer, began the budget presentations with an overview of the university’s financial status, to provide a broader context for the changes. The university has $14.8 billion in assets – in non-capital and capital assets combined – and $4.7 billion in liabilities, resulting in net assets of $10.1 billion. It’s a healthy ratio of overall assets to liabilities, he said, and of financial assets to debt. (Total debt is $1.67 billion.) On the down side, many of the university’s assets have long-term, restricted uses – primarily for things like endowed professorships, scholarships, and capital projects, among others. That limits the university’s flexibility, he said.

Slottow noted that what’s not on the balance sheet is about $600 million in deferred maintenance on the institution’s 33 million square feet of facilities. In the past, UM has relied on state support for this purpose, Slottow said. In the 1980s, the university got about $250 million for capital outlay. That dropped to about $200 million in the 1990s, he said, and from 2000 to 2010 UM got about $30 million. “We are not depending, going forward, on the state,” he said.

Slottow moved on to a list of “things that keep me up at night.” Those include categories that can be reasonably quantified, he said – deferred maintenance of buildings, retirement health benefits and increasing future debt liabilities – as well as a raft of things that can’t be controlled. In that latter category, he cited the volatility of capital markets, the state and national economy, rising health care and energy costs, and competitive pressures like faculty retention and recruitment, and research funding.

Tim Slottow, UM's chief financial officer.

Turning to long-term strategies, Slottow reminded regents that to help absorb reductions in state appropriations, the university began an effort six years ago to increase endowment support for the general fund. The general fund endowment now provides about $12 million in annual revenue to support general fund activities, such as scholarships, professorships and academic programs.

He outlined several other strategies to increase revenues for the general fund. They included: (1) increasing the indirect cost rate paid to the university by federal research grants, bringing in $11 million; (2) directing a portion of Big 10 TV revenue – $2 million – to support financial aid; and (3) restructuring or redirecting non-general fund revenues to support general fund activities – bringing in $5 million from late fees, vending machines, parking and other sources. They’re continuing to beat the bushes for new revenue, he said.

Slottow reviewed the physical plant of the Ann Arbor campus, as a reminder of the infrastructure that the university supports. That includes:

• 25 miles of roads and 4.7 million square feet of sidewalks, steps, and plazas
• 7 miles of utility tunnels and 150 miles of fiber optic cable
• 280 acres of parking lots/decks
• 33 million gross square feet of buildings and core infrastructure
• 602 buildings, 1,894 classrooms and instructional labs, 1,160 study rooms, and 6,166 research labs/rooms
• 580 elevators and escalators
• 14,200 trees and 13 million square feet of turf
• 106,000 network desktop computers

Related to facilities, Slottow highlighted the university’s commitment to sustainability, saying “it’s become part of the fabric of what we do.” Planet Blue – a campuswide energy-saving initiative – has resulted in significant declines in energy demands, he said: BTUs per person/per square foot have dropped 22% since 2004; energy usage for UM’s campus vehicle fleet has decreased 7.7% from FY 2009; and water use has decreased 3% from FY 2009 – the lowest water usage in the last seven years.

And though emissions increased 12% compared to 2009, Slottow noted that when normalized for the amount of building square footage, emissions have dropped 0.6% since 2004.

People are the university’s most important asset, Slottow said. For all three campuses, the university employs 29,355 regular staff – up from 28,809 a year ago – and 7,133 instructional, clinical and research faculty, compared to 6,967 last year.

As of March 31, 2011, the university’s debt totaled $1.67 billion – up 5% from $1.58 billion a year ago. Slottow said a prudent debt management policy has helped the university earn the highest possible credit rating, which was affirmed in April: Standard & Poor’s AAA, and Moody’s Aaa.

He concluded by noting that despite enduring the state’s worst economy in 50 years and other pressures, the university’s financial position remains strong.

Budget, Tuition, Financial Aid: Ann Arbor Campus

Phil Hanlon gave his first budget presentation as provost – he was promoted last year following the departure of Teresa Sullivan, who’s now president of the University of Virginia. Hanlon had briefed the media for about 30 minutes prior to the start of Thursday’s regents meeting.

It was the most challenging year he can recall, Hanlon told regents, and he thanked his staff for their help – several of them attended the meeting, and received a round of applause from the regents and university executives.

UM provost Phil Hanlon led the budget process for the Ann Arbor campus, and presented the FY2012 budget presentation at the regents June 16 meeting.

The FY 2012 operating budget for all three campuses – Ann Arbor, Dearborn and Flint – totals $6.02 billion, including $1.788 billion for the combined general fund. For the Ann Arbor campus alone, the FY 2012 general fund budget is $1.587 billion, a 2.2% increase from FY 2011. Tuition and fees account for the bulk of revenues – $1.09 billion. [.pdf of Ann Arbor campus budget report]

State appropriations of $268,803 mark a 15% drop of $47.5 million from FY 2011. It’s slightly more than the amount that the university received in 1991, he noted. And when adjusted for inflation, it’s the lowest amount of state aid received since FY 1964 – and ”I think we have a few more students than in 1964,” he quipped.

Hanlon pointed out that in 1960, state appropriations accounted for 78% of the university’s general fund revenue, with tuition and fees making up most of the remainder. Now, tuition and fees provide 69% of general fund revenue – state appropriations have dropped to 17%, with other revenue sources accounting for the rest.

Hanlon emphasized the university’s commitment to academic quality, despite the budgetary challenges. He also noted that the budget calls for a 10.9% increase of $9.2 million in undergraduate, need-based financial aid, to a total of $137 million. This is the amount for centrally-awarded aid, he said – additional financial help is offered by individual units of the university.

He cited other investments as well, including an ongoing effort to hire 150 new faculty members in order to reduce the student/faculty ratio, an increased budget for library collections, and upgrades of technology and facilities.

[Responding to a question at the media briefing, Hanlon also said that the budget includes a 3% increase for the faculty merit salary program, or about a $9 million increase. The budget calls for a roughly $8 million increase for staff salaries. The university's executive officers are also budgeted for an average increase of 2%. In that category, the largest percentage increase is for the vice president for communications – that budget is getting a 5.33% increase, to $5.56 million. The office is overseen by Lisa Rudgers, who was hired effective June 1 as the new vice president for global communications and strategic initiatives. Several other executive officers and units have significantly higher budgets, but will receive lower percentage increases. The largest executive office budget – $168.86 million, overseen by chief financial officer Tim Slottow – gets a 2.5% increase in FY 2012.]

Increased financial aid and other planned investments are only possible because of cost containment, Hanlon told the regents. They’ve cut expenses by nearly $200 million over the past eight years, he said, and are shifting nearly $44 million in FY 2012 to fund priority initiatives. The university plans an additional $120 million in cuts from 2013-2017.

To date, most of the expense reduction has been operational, Hanlon said. The university has shifted a larger portion of health care costs to its employees, who will be shouldering 30% of the costs, compared to 5% in 2003. UM also has expanded its energy conservation efforts, and changed its retirement policy to institute a one-year waiting period before it begins contributing to the retirement benefits for new employees.

However, this year the cost containment is affecting academic units as well, he said. Several units will be closed or downsized, including the Center for Ethics in Public Life, the Substance Abuse Research Center, the Center for Advancing Research and Solutions for Society, and the Autism and Communication Disorders Center. [During the media briefing, Hanlon said there would likely be layoffs associated with these and other changes, though he said the university will try to address the downsizing through retirements and attrition.] The university also will be eliminating courses with low enrollments.

Within this context, Hanlon recommended a 6.7% tuition and fee increase for in-state “lower division” undergraduates – the equivalent of freshman and sophomores – and 4.9% for both non-residents undergraduates and for most graduate programs. The 6.7% increase means students will pay $797 more per year, for a total of $12,634 ($6,317 per term). Out-of-state students will pay a total of $37,382 per year ($18,891 per term), a $1,781 annual increase.

In some cases, tuition and fees for specific UM schools and colleges vary widely. For example, lower division in-state students in the school of music, theatre and dance will see an 11% tuition and fee increase, to $13,136 per year. [.pdf of tuition and fee list for all units on the Ann Arbor campus]

UM president Mary Sue Coleman, left, talks with Sally Churchill, vice president and secretary of the university, prior to the start of the June 16 meeting.

Hanlon showed three charts that compared UM tuition and fees to other institutions, noting that not all had set their rates yet. A selection of other public universities nationwide – including UCLA, Indiana University and the University of North Carolina (Chapel Hill) – showed a range of increases for first-year in-state tuition, from 4.5% (Purdue) to 8.9% (University of Virginia).

Only five of Michigan’s public universities had set tuition by Thursday’s meeting – Oakland University showed the highest increase at 7%, with Western Michigan at the low end with a 6.4% increase. [The following day, Michigan State University's trustees approved a 6.9% tuition increase. Eastern Michigan University has not yet voted on tuition rates.]

Hanlon concluded by saying the recommended budget enables the university to manage the largest state appropriation cut in its history, while significantly cutting costs and putting a priority on investing in academic programs.

The budgets for the Flint and Dearborn campuses were presented separately by UM-Flint chancellor Ruth Person and UM-Dearborn chancellor Daniel Little. UM-Flint proposed a 6.8% increase for in-state undergraduate tuition and fees, and 4.9% for graduate students. UM-Dearborn proposed a 6.9% increase for both undergraduate and graduate tuition and fees.

Budget, Tuition, Financial Aid: Fee Increases

Royster Harper, UM’s vice president for student affairs, gave a brief presentation on a proposal for various student fees:

• $7.19 per student per term to fund the Michigan Student Assembly (unchanged from FY 2011)
• $1.50 per student per term to fund school/college governments (unchanged from FY 2011)
• $8.50 per student per term for Student Legal Services ($2.50 increase from FY 2011)
• $172.40 per student per term for the University Health Service ($1.20 increase from FY 2011)

Harper said that current fees for Student Legal Services didn’t cover its costs, and that additional fees for the University Health Service were necessary to cover expenses, including a 2% salary increase.

Budget, Tuition, Financial Aid: Regents Discussion

Before voting, several regents gave statements about the proposed tuition increase.

Denise Ilitch began by noting that amid all the other changes that are taking place at the university, one thing remains the same – the dramatic escalation of tuition costs, for the 14th year in a row. And this year, she said, the percentage increase is higher for Michigan students than for out-of-state students. She quoted an editorial from the Detroit News that called it a “destructive cycle.” Ilitch said she remains firm in advocating for affordable, accessible, quality education, and she’s concerned that it’s becoming out of reach for middle-class and working-class families. With each dollar that tuition is increased, they limit the ability for everyone to share in UM’s unparalleled education.

Acknowledging that the university has made great strides in cost containment and financial aid, Ilitch said they need to look deeper to find savings from academic enterprises. ”Our decentralized structure comes at a high cost, as it leads to inefficiencies,” she said. They need to develop a strategic plan and seek new sources of revenue – it can be done without compromising standards and quality, she said. Ilitch concluded by encouraging the university to act boldly and encourage change.

Larry Deitch spoke next, saying this would be his 19th budget and tuition vote, and the first time he would vote against it for the Ann Arbor campus. He didn’t want it to be interpreted as a criticism of the provost or his staff – Deitch said he respects them. But he doesn’t like anything about this year’s budget process at the state level. The “cut and cap” approach is resulting in many institutions raising tuition near the capped level, he said. [The budget proposed by Republican Gov. Rick Snyder set a 7.1% cap for in-state tuition increases – universities that raise their tuition more than that would be subject to deeper state appropriation cuts.]

Secondly, Deitch said he’s concerned about the allocation of tuition increases – 6.7% for in-state students, and 4.9% for non-residents. He would prefer a 5% increase for Michigan students and 5.8% for non-residents, but could have lived with an equal 5.6% increase for both. His concern is for the middle-class and working-class family, with several kids in college, who might not qualify for financial aid – or who might qualify for only minimal aid. The quality of a UM education is one of the things that attracts people to live in this state, he said. It’s expensive, but still a bargain for in-state students – it needs to stay that way. He said he would support increases at the Dearborn and Flint campuses, because they don’t have the resources that Ann Arbor has.

Deitch also took issue with comparisons to tuition increases at Big 10 schools. Most of the time, UM compares itself to institutions like Princeton, he noted, but for purposes of comparing tuition, “we compare ourselves to Indiana.”

Andrew Richner said Deitch made a compelling case, and he asked Hanlon for a response. Hanlon explained that there were two considerations in setting a lower percentage increase for non-residents. Anecdotally, he was hearing from deans and admissions officers that the cost for non-residents was having an impact on UM’s competitiveness with other institutions. Secondly, he’s concerned about the socioeconomic diversity of non-resident students – there’s a clear decline of students at the lower income levels. UM isn’t able to meet the financial aid needs of non-residents as much as it can for in-state students, so that’s a factor, he said.

Deitch agreed with the concerns about socioeconomic diversity, but said he had a different view. A few hundred dollars per year won’t make a difference in someone’s decision, he said, but it’s a question of who best to bear that cost.

Andrea Fischer Newman said she’d like to see some non-anecdotal data about how out-of-state students make their decisions. Hanlon reported that they’ll be doing a survey of admitted students, including those who ultimately decide not to come to UM, and that question will be addressed.

Newman defended the comparison with Big 10 schools, saying Michigan does get compared to them when students are making choices. She observed that she can’t always be counted on to support tuition increases – she voted against the increase last year – but this year she’d  vote in favor of the proposal. The deep cuts UM has seen from state appropriations are impossible to recover without raising tuition, she said – and she agreed with cuts that are being made in the state’s budget. Though she worries about pricing students out of an education, Newman said that as a regent, she has to put the interests and future of the institution ahead of those concerns.

Julia Darlow also spoke in support of the budget and tuition increases. It’s important to look at the actual dollar amounts of the increases, not just the percentages, she said. By that measure, out-of-state students are paying double the increase – $1,781 more per year for non-residents, compared to $797 more for in-state students.

One of the main reasons she supports the increase is because of the increase in financial aid, Darlow said. In-state students from families with incomes of $80,000 or less will end up paying less than in 2004. Darlow noted that this income level is well above the state’s median income. [Michigan's median household income is about $45,000.] It’s important to her that students who need financial aid won’t be impacted. That said, Darlow added, they do need to turn their attention to non-resident tuition and the issue of diversity. She also noted that the rate of increase isn’t sustainable. Last year’s 1.5% tuition hike was “refreshing,” she said, but now they’re heading back up, and can’t stay at that rate.

Libby Maynard was the final regent to speak, also voicing support for the tuition increase. She said it does point to the need for stepped up efforts to fundraise for financial aid to students, both in-state and out-of-state.

Outcome: In separate consecutive votes, regents approved: (1) the overall operating budget for FY 2012; (2) the Ann Arbor general fund budget; (3) the Ann Arbor campus tuition and fee rates; (4) the Dearborn campus general fund budget; (5) the Dearborn campus tuition and fee rates; (6) the Flint campus general fund budget; (7) the Flint campus tuition and fee rates; (8) fee assessments for the Michigan Student Assembly, Student Legal Services, and school/college governments; and (9) the University Health Service fee. They also approved the University of Michigan Hospitals and Health Centers (UMHHC) operating budget – see the section below for details of that budget.

Regents Denise Ilitch and Larry Deitch voted against the Ann Arbor campus tuition and fee rates. Ilitch also voted against the tuition and fee rates for the Dearborn and Flint campuses, and the proposed budgets (except for the UMHHC budget), and the fee assessments for the Michigan Student Assembly, Student Legal Services and school/college governments.

Budget, Tuition, Financial Aid: Michigan Student Assembly

Later in the meeting, DeAndree Watson, president of the Michigan Student Assembly, addressed the tuition increases in his monthly report to regents. Though he expressed confidence that regents and the administration would do everything they could to help students in light of tuition increases, many students have deep concerns about the issue. There’s a diversity of needs on campus – he noted that he is one of the students who relies on scholarships and financial aid.

The concern is that a degree from UM will eventually be out of reach to many students. That’s why he ran on a platform partially dedicated to reducing the financial strain on students in two ways: (1) advocating for lower tuition costs; and (2) working with the state legislature to establish a grant that will subsidize the cost of higher education for underrepresented minority students, and to protect the diversity that defines the campus community.

Watson urged regents to consider the implications of their decision to raise tuition. ”One of the things that makes Michigan special is that it has a longstanding tradition of providing a world-class education, at or above Ivy League standards, for students like me who wouldn’t otherwise have such an opportunity due to financial limitations,” he said. “We are a flagship institution that produces great leaders by making education accessible to all members of our community, and it is my hope that the University of Michigan can continue to provide that service and hold that special place in our society.”

UM Hospitals and Health Centers Budget

Doug Strong, CEO of the UM Hospitals and Health Centers, made a presentation on the FY 2011 budget, which ends June 30, as well as a budget plan for FY 2012. He began by noting that UM stands alone in terms of its reach – it’s the only health system in Michigan that serves people in every county throughout the state.

For the current fiscal year, revenues are expected to reach $2.097 billion, with a 2.1% positive operating margin of $44.7 million. This will mark 15 straight years of positive operating margins for the three hospitals – University Hospital, C.S. Mott Children’s Hospital, and the Von Voigtlander Women’s Hospital – and 40 outpatient locations. Though they have a solid financial base, Strong said, they were disappointed in the lower-than-expected operating margin this year. [At last June's board meeting, Strong told regents that FY 2011 projections called for  a surplus of $83 million, for a 4% margin.] They took on nearly $8 million in expenses this year related to hard-to-recruit staff and other items for the new children’s and women’s hospitals, which impacted the FY 2011 operating margin, Strong said.

Doug Strong, left, CEO of the UM Hospitals & Health Centers, talks with athletic director Dave Brandon before the start of the June 16 regents meeting. Both executives presented summaries of their organization's budgets during the meeting.

While revenues are projected to increase to $2.169 billion in FY 2012, an operating loss of $23.5 million is anticipated. The loss is due in large part to $89.4 million in costs related to the opening of the new C.S. Mott Children’s and Von Voigtlander Women’s Hospitals, which will open this fall. Strong noted that the system’s operating margins fluctuate historically, and downturns are tied to the opening of new facilities – like the Cancer Center in the mid-1990s, and the Cardiovascular Center in 2007 – or to changes in payment rates, such as Medicare and Medicaid reimbursements.

The system faces several challenges and uncertainties in the coming year, Strong said. Those include budget reductions at the state and federal level, the pace of economic recovery in Michigan, and levels of patient activity, which impact revenues.

Financial performance is tied to three things, he said: patient activity levels, revenues per case, and expenses per case. Though activity levels continue to rise, they’re now being paid at rates reflecting the overall rate of inflation, not the health care rate of inflation, which is higher. They need to adjust to a new reality of revenue levels, he said.

Personnel accounts for the highest expense, Strong said, and they’ll need to keep up the pace of productivity improvements to reduce the cost per case.

Strong outlined several major projects that will be completed in the coming year. The new children’s and women’s hospitals will open in November, followed in January 2012 with expanded adult emergency services. In early 2012, the adult nursing Unit 8A will be moved to cancer services, and later in the year, ambulatory care will be expanded in the Taubman Health Center.

Following FY 2012, Strong said he expects operating margins to improve – the new hospitals will be open, and they also expect to see additional productivity gains. Strong expects to return to 3% or better margins in future years.

Members of the Michigan Nurses Association, wearing red T-shirts, attended the June 16 UM board of regents meeting.

Strong concluded by noting that the system remains financially strong, though revenue pressures will continue. Finally, he noted that there were roughly 13,000 FTEs in the UMHHC alone, and many more in the health system as a whole. The largest group of employees are nurses – he noted that nurses were well-represented at the regents meeting that day, and said he was proud of their work.

[More than a dozen nurses wearing red shirts with the Michigan Nurses Association logo attended the regents meeting. The union is currently in negotiations with the university. No one from the union spoke during public commentary. Katie Oppenheim, chair of the UM Professional Nurse Council, had made a statement at the April 2011 board meeting, asking regents for their support. On Thursday, members of the union told The Chronicle that they were at the meeting to remind regents of the ongoing negotiations.]

Outcome: As part of a series of budget votes, regents unanimously approved the UMHHC budget for FY 2012.

Athletic Department Budget

In beginning his presentation, UM athletic director Dave Brandon – a former regent – joked that compared to the scope and scale of the other budgets, ”I think I’m comedic relief.”

He provided an overview of the department’s finances, noting that they’re projecting a surplus of $11.4 million for FY 2012, after allowing for $4.5 million for deferred maintenance. Revenue growth is positive, budgeted for an increase to $121.2 million in FY 2012, he said – 15% more than the amount budgeted for FY 2011. The largest piece of that comes from ticket sales, which are budgeted at $45.6 million, up from $38.6 million in FY 2011.

Breaking down the revenue side of the budget, Brandon said an extra home football game this fall is expected to increase revenues by $4.6 million. An increase in football ticket prices will add $5.1 million in revenues. Brandon noted that premium seats at Michigan Stadium are sold out, with a waiting list – that’s expected to bring in an additional $3.7 million, compared to FY 2011. Other revenue sources include conference distributions ($21.9 million), priority seating and gifts ($26.1 million), corporate sponsorships ($14.3 million) and licensing royalties ($8.4 million).

The only negative on the revenue side is that they aren’t holding a Big Chill event next year – an outdoor hockey game between Michigan and Michigan State, which brought in about $2.2 million for the current fiscal year.

The $109.8 million in expenses for FY 2012 includes $39.2 million in compensation, $17.3 million in student financial aid, $18.1 million in team and game expenses, $9.8 million in facilities expenses, and $13.2 million in debt service. Debt service payments will increase by $2.2 million, related to Crisler Arena projects.

An expense line item in the FY 2011 budget – for $1.9 million in restructuring costs – won’t recur in FY 2012.

A summary of UM's athletic department budget for FY 2012. (Links to larger image)

Several projects are in progress, Brandon noted, including a major renovation of Crisler and Yost arenas, plus installation of scoreboards at those venues and at Michigan Stadium – in all, totaling more than $134 million of investments.

The department expects to end FY 2011 with $310 million of net assets, with an endowment of roughly $65 million as of March. Total debt of $197 million will increase to $234 million due to the Player Development Center and Crisler Arena projects, which regents have previously approved.

Brandon said they’re aggressively investing and aggressively fundraising to support their current and future capital projects. Financial forecasts show that the department has the capacity to absorb the two new varsity sports it recently added – men’s and women’s lacrosse – with minor financial risk and significant upside fundraising potential for capital and endowment.

UM athletic department projects. (Links to larger image)

Brandon also talked about the department’s strategic planning process, saying that the outcome sets a high level of accountability for individuals and units within the department. The mission statement for Michigan athletics was developed from this process, he said: “Relentlessly Striving to Make Michigan Athletics the Leaders and Best in Every Way.”

A set of guiding principles shapes their decisions, Brandon said, and at the top of the list is integrity. ”We don’t hope for it. We don’t wish for it. We demand it,” he said. Given the context nationally, he added, it’s important to send a loud, clear message that Michigan athletics demands integrity in everything they do. [This was likely an allusion to NCAA investigations into rules violations under former UM football coach Rich Rodriguez, who was fired by Brandon earlier this year, or the more recent resignation of Ohio State football coach Jim Tressel, who resigned amid an NCAA rules violation investigation.]

Brandon wrapped up his presentation by outlining a set of long-range goals for the department:

• Compete for championships in a minimum of 29 Division I sports.
• Achieve annual revenues of $160+ million.
• Achieve a top five ranking in the Director’s Cup for three consecutive years, and a top three finish in at least one of those years.
• Achieve a two-year combined fundraising total of $100+ million, grow the department’s endowment to $100+ million, and grow Victors Club membership to 25,000+ active members.
• Achieve the No. 1 national ranking in licensing revenues and total football attendance in the same year.
• Achieve an upper quartile score on the top 12 measures of a department-wide Denison Survey, which evaluates corporate culture.
• Be among the top three in the multi-year Academic Progress Rate rankings for each of the university’s individual teams that compete in the Big Ten Conference. APR is a metric used by the NCAA to evaluate the progress of student athletes toward graduation.
• Complete all key projects identified as part of the department’s master facilities plan.

Athletic Department Budget: Regents Discussion

Andrew Richner asked how many Division I athletic departments rely on financial support from their institution’s general fund. Brandon said that 12 Division I athletic departments are self-supporting. Of those, many rely on general fund support for capital projects, he noted. UM is unique in that its athletic department as a whole is self-supporting and doesn’t use general fund support for capital projects either, he said.

Richner then clarified that adding the two varsity sports won’t jeopardize the budget in any way. Brandon confirmed that the athletic department could absorb the expenses.

Andrea Fischer Newman pointed out that not only did the athletic department support itself, it also gave money back into the general fund. Brandon said the FY 2012 budget includes a $1.8 million contribution to the general fund for student scholarships. “We’re very proud of that,” he said. Tim Slottow, the university’s chief financial officer, added that the scholarships are for non-athletes.

Brandon noted that the department pays full tuition for athletes, and that 74% of UM athletes are recruited from out of state – meaning that the tuition paid by the department for those students is at the higher, non-resident rate.

He closed by saying that this is all possible “thanks to that really big stadium” and many generous donors.

The athletic department does not use general fund dollars and does not require regental approval.

Election of Officers, GSRA Coda

One of the first actions taken at Thursday’s meeting was to elect new officers – an event that happens annually in accordance with the regental bylaws. In unanimous votes, vice chair Denise Ilitch was elected chair, replacing Julia Darlow. Larry Deitch was elected vice chair. Both positions are effective July 1, 2011.

In her first action as board chair, Ilitch asked to enter a statement into the record – she did not read the statement or indicate what it concerned, and there was no other discussion.

After the meeting, university officials clarified that it was a statement responding to a May 27, 2011 editorial in the Detroit Free Press about a resolution approved at the regents’ May 19 meeting. That resolution supported the right of graduate student research assistants to unionize. The editorial was critical of the decision itself, and of the way it was introduced as a last-minute agenda item: “This was sandbagging, for sure – an expansion of union membership without much thought to the consequences at the university.”

The statement issued on Thursday was signed by the six regents who had voted in favor of the resolution – the two Republicans on the board, Andrew Richner and Andrea Fischer Newman, had dissented. The statement lays out the rationale for the vote, and begins:

To be clear, the Regents of the University of Michigan did not vote to allow graduate student research assistants to form a union. Rather, we voted to support the right of these 2,100 employees to choose whether or not they wish to be represented by the existing Graduate Employees Organization, which has represented graduate student employees within the University for more than 30 years. The effect of our action was merely to terminate the University’s efforts (in a proceeding before the Michigan Employment Relations Commission) to stop the graduate student research assistants, or GSRAs, from even considering the question. We did this because we believed that there is no defensible factual basis for preventing their right to choose.

[A truncated version of the statement was published in the Free Press on Thursday. The statement in its entirety was posted the following day on the University Record website.]

For Chronicle coverage of the issue as discussed at the May 19 regents meeting, see: “UM Grad Researchers Get Right to Unionize.”

Construction Projects

Regents unanimously approved several construction projects during their meeting, without comment.

Construction Projects: Yost Renovation

Yost Ice Arena was originally built in 1923 as a field house, and was converted in 1973 to its current use as a venue for the UM hockey team, with seating for more than 6,600 people. The $14 million renovation of Yost, approved by regents on Thursday, is the third overhaul to a UM marquee sports venue – a massive expansion of Michigan Stadium was completed last year, and a major upgrade and expansion at Crisler Arena is underway. And at the regents’ January 2011 meeting, they also had authorized a $20 million project to install video scoreboards at Michigan Stadium, Crisler and Yost.

The Yost project approved on Thursday includes replacing seating on the east, south and west sides of the rink, improving accessibility and emergency exits, converting the west side media balcony into a series of loge boxes, adding a new level five on the west side for media, and constructing new corner and stair platforms for additional seating. The project will be paid for out of athletic department revenues.

Regents also approved hiring Rossetti Architects Inc. of Southfield, Mich. to design the project. Regents will be asked to approve a schematic design for the project at a future meeting.

Construction Projects: ISR Expansion

Regents authorized staff to issue bids and award contracts on a $23 million addition to the Institute for Social Research building. The regents had previously approved the project’s schematic design at their July 2010 meeting, and had given initial approval of the overall project in April 2010.

A four-level addition is planned, adding 44,700 square feet to the existing building at 426 Thompson St. Another 7,200 square feet will be renovated. The project will be paid for in part by federal stimulus funds via a grant from the National Institutes of Health. The expansion will allow the institute to house its research programs under one roof.

Construction Projects: Med Sci II Building

Regents approved a $2 million renovation to the sixth floor of the Medical Science Unit II building. The project includes modernizing roughly 5,200 square feet of research labs for the UM Medical School, with upgrades to heating, ventilation, air conditioning, plumbing, and electrical systems, and installation of new energy-efficient lighting.

The project’s design will be handled by UM’s Department of architecture, engineering and construction, with a projected spring 2012 completion date.

Outcome: Regents unanimously approved projects for Yost, ISR and the Med Sci II Building.

Health System Items

In addition to approving the FY 2012 budget for the UM Hospitals and Health Centers, regents acted on several other items related to the health system during Thursday’s meeting.

Health System Items: Facilities Projects

Regents were asked to authorize two facilities projects for the UM Hospitals and Health Centers. One involved an estimated $5 million demolition of the Parkview Medical Center and Scott and Amy Prudden Turner Memorial Clinic buildings. According to a staff memo, the operations formerly housed in these buildings have been moved to the W.K. Kellogg Eye Center and Brehm Tower. In addition to tearing down the buildings, the project includes renovating the existing east side of the Kellogg Eye Center that connects to these buildings, adding a new entrance, and expanding the parking lot, for a net gain of 75 parking spaces.

Regents were also asked to approve an $8.5 million renovation of a patient food kitchen on level B2 of the University Hospital. The kitchen, which serves the hospital and cardiovascular center, will shift from a “cook-chill-reheat” production to an on-demand “room service” approach. During construction, food service operations will be relocated to the North Campus Research Complex facility. As part of this project, regents also authorized the hiring of the architectural firm Integrated Design Solutions to design the renovation.

Outcome: Regents unanimously approved both demolition and renovation projects.

Health System Items: Michigan Health Corp.

Regents were asked to approve the FY 2012 annual report and business plan for the Michigan Health Corp. MHC is a nonprofit founded in 1996 that is part of the UM Health System, with 10 subsidiaries. The subsidiaries are operated as partnerships with other entities statewide. [.pdf of annual report and business plan]

Changes highlighted in the plan include a decision to leave the Central Michigan Community Hospital Radiation Oncology venture. MHC officials are also considering participation in the Particle Therapy Institute of Michigan, and possibly establishing gastroenterology and/or geriatrics joint ventures. MHC is also investigating moving UMHS nurse managed centers to MHC, in preparation for achieving the federally qualified health plan status.

For FY 2011, several MHC units are projecting losses or lower-than-anticipated gains, according to the report. Excess revenue from consolidated operations is projected at $1.4 million for FY 2011, compared to a budgeted $2.76 million.

Outcome: Regents unanimously approved the FY2012 Michigan Health Corp. business plan and annual report.

Health System Items: Bylaws

Regents were asked to amend bylaws of the UM Hospitals and Health Centers executive board, as well as the regents bylaws – in both cases adding the position of UM Health System’s chief medical officer as a voting member of the HHC executive board, effective July 1, 2011. The current CMO is Darrell Campbell Jr.

According to a staff memo, the CMO is responsible for communication between the medical staff, the HHC executive board and UMHS executive leadership, and for educating these entities on clinical quality performance, expectations and necessary revisions to practice and policy.

Regent Libby Maynard commented that she thought this was an excellent decision.

Outcome: Regents unanimously approved the bylaw amendments adding the UM Health System’s chief medical officer to the UMHHC executive board.

Conflict-of-Interest Disclosures

Regents voted on eight items that required disclosure under the state’s Conflict of Interest statute. The law requires that regents vote on potential conflict-of-interest disclosures related to university staff, faculty or students. Often, the items involve technology licensing agreements or leases.

This month, the items included three licensing and four option agreements with various companies, including several based in Ann Arbor, and the reassignment of international patent rights. The items related to the following companies and individuals: Electric Field Simulations Corp. (formerly known as EngXT); FlexDex; ImBio; NanoBio Corp.; ONL Therapeutics; Xondas; and Dr. Richard Laine.

There was no discussion on these items, which were considered as a block.

Outcome: Regents unanimously authorized the conflict-of-interest disclosures.

IAS Lawsuit Settled

Each month, regents receive an update on litigation involving the university – they typically do not discuss these items.

This month’s report notes that the university has settled a lawsuit with Internet Applications and Solutions Inc. (IAS), which filed the suit on May 16, 2011 in Washtenaw County Circuit Court. From the report by UM general counsel Sue Scarnecchia:

Plaintiff IAS leased space from Michigan Information Technology Center (MITC) at the data center on 1000 Oakbrook in Ann Arbor. After the University purchased the data center assets of MITC, Plaintiff claimed it had a vested, ongoing right to continue use of the computing capacity, alleging it had lease rights. Plaintiff sought to continue the use until December 31, 2011.

The case was settled, according to the report – terms were not disclosed. Although the IAS website features a photo of the MITC building on its home page, the site does not indicate an address for its operations. [Previous Chronicle coverage of IAS from late 2008: "Local Groups Scramble after IAS Eviction"]

At their July 15, 2010 meeting, University of Michigan regents had approved a $1.25 million purchase of assets from the Michigan Information Technology Center Foundation (MITC), located in the South State Commons on Oakbrook Drive. The sale was made through a voluntary turnover foreclosure. Tim Slottow, UM’s CFO, told regents at the time that MITC “is not succeeding in their mission.” The center opened in the spring of 2005, and marketed itself as an “information technology industry accelerator.” UM was already a tenant in South State Commons, and the purchase allowed it to expand its operations and data center there.

Public Commentary

Three people spoke during public commentary at the end of Thursday’s meeting.

Douglas Smith warned regents of legal issues facing the university. He noted that he has previously warned them about other issues – problems with the UM Dept. of Public Safety oversight committee, about the misuse of trespass warnings, about the mistreatment of Andrei Borisov, who Smith said was a whistleblower trying to report fraud and plagiarism. In all cases, Smith said, regents ignored him and have ended up revising their policies or being sued – they recently settled a lawsuit involving Borisov for $550,000, he said.

Now, he was there to warn them that the administration is abusing another whistleblower, Yusong Gong. “I am afraid that you are headed to another seven figure verdict against the university,” he said. Gong was a research staff member who worked for Martin Myers, an associate professor at the UM medical school. Smith described discrepancies in research publications and poster presentations by Myers and one of his students, which Gong pointed out. She was retaliated against, Smith said, and though she contacted several UM administrators about the situation – including UM president Mary Sue Coleman, vice president for research Stephen Forrest, and regent Andrea Fischer Newman – she received no help.

Gong has been told she must attend a disciplinary review conference, and she expects to be fired, Smith said. This has caused her emotional distress, and she’s been hospitalized twice for severe depression. He urged regents to demand an inquiry, as required by university and federal policy.

Bill Kauffman called for the abolishment of UM’s Dept. of Public Safety, saying there are too many aspects of it that are similar to the Gestapo and other totalitarian instruments of terror. He accused Wei Shyy, former chair of UM’s department of aerospace engineering, of terminating the education of U.S. students who were studying defense-related technologies. There’s a pattern among UM administrators that includes plagiarism, exporting technology, and retaliating against whistleblowers, he said.

This behavior results from a lack of supervision and accountability for the UM business enterprise, he said. There’s been no oversight of DPS, and the current board of regents seems to give carte blanch endorsement of the administration’s policies while “bamboozling the electorate through the alleged democratic selection process at the two major party conventions,” he said.

Kauffman pointed to the website www.china-threat.com, saying it provides documentation “regarding the diabolical commonly occurring activities” of the UM administration and regents. He concluded by noting that two other people who wanted to speak during public commentary were prevented from doing so by the “totalitarian Coleman regime,” even though it violates their First Amendment rights and the Open Meetings Act, he said.

Dan Benefiel of Ypsilanti Township told regents he was a member of the Willow Run Tea Party Caucus and the Washtenaw County Republican executive committee. He spoke on two topics. First, Benefiel expressed concern over the resolution passed at the regents May 2011 meeting that supported the right of graduate student research assistants to unionize. He noted that the vote had been clearly partisan. [The two Republican regents, Andrew Richner and Andrea Fischer Newman, had voted against it.] He’s concerned that it will eventually lead to the unionization of college athletics and athletes, and called it a “leftist intrusion on American educational institutions.”

Secondly, Benefiel echoed sentiments expressed by Kauffman regarding China, and said he believes academic institutions like UM are “selling our country out on the altar of commerce.” He quoted a statement by Kauffman that UM is giving away technology to China that can be used for military purposes. He called for thorough investigations of the relationship between the university and several companies, including Ardesta, Discera and NeoPhotonics. [Ardesta is a venture capital firm founded by Gov. Rick Snyder. Discera and NeoPhotonics are among its investments, and have business connections to China.]

Benefiel also questioned why the university hasn’t investigated technology transfers involving Wei Shyy, former head of UM’s aerospace engineering department who returned to China to become provost of Hong Kong University last year.

Benefiel noted that two regents seats will be on the ballot in 2012, and said they should be filled by people who can give guidance for UM’s academic future. [The terms for Martin Taylor and Libby Maynard end on Jan. 1, 2013 – those seats will be on the November 2012 ballot.]

Present: Mary Sue Coleman (ex officio), Julia Darlow, Larry Deitch, Denise Ilitch, Olivia (Libby) Maynard, Andrea Fischer Newman, Andrew Richner, Martin Taylor, Kathy White. Deitch left the meeting soon after the budget and consent agenda votes.

Next board meeting: Thursday, July 21, 2011 at 3 p.m. at the Fleming Administration Building, 503 Thompson St., Ann Arbor. [confirm date]

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University of Michigan graduate student research assistants and members of the Graduate Employees' Organization (GEO) crowded the boardroom at Feb. 17, 2011 board of regents meeting. (Photos by the writer.)

They came to support four speakers during public commentary, who were advocating for better benefits and working conditions for graduate student employees. Also speaking during public commentary were five professors from the medical school, urging regents to support a flexible “tenure clock” that would give faculty more time to achieve that professional milestone.

The meeting’s main presentation focused on international aspects of the university – students from other countries who study at UM, and American students who study abroad. Mark Tessler, vice provost for international affairs, told regents that three-quarters of the UM students who study abroad are female – they’re trying to find out why male students aren’t as interested.

The presentation led to several questions from regents, who wanted clarification about why UM doesn’t offer an international program in Israel. They also cited the importance of finding incentives to keep international students in Michigan after graduation.

Regents also voted on several items, mostly without discussion, including: approving the next step in a major renovation of Alice Lloyd Hall; giving departmental status to the Center for Afroamerican and African Studies; and officially naming the new Law School commons in honor of Bob Aikens, a UM alumnus who donated $10 million to the project.

Another UM alum, Gov. Rick Snyder, had released his proposed state budget earlier in the day. Prior to the meeting, several university executives huddled with Cynthia Wilbanks, vice president for government relations, to get updated on the implications for their own budget – funding for higher education is among the many cuts Snyder has proposed. President Mary Sue Coleman also addressed that issue in her opening remarks.

President’s Opening Remarks

President Mary Sue Coleman began by acknowledging that Gov. Rick Snyder had released his state budget proposal earlier in the day. Clearly the state faces severe budget challenges, she said, and will require shared sacrifices.

The university has anticipated this day, she said, and for years has been preparing for a reduction in state funding. The university faces substantial cuts in the governor’s budget, she noted. “There’s no denying this will be painful, but we are fully prepared to do our part.”

Before the start of the Feb. 17 regents meeting, Cynthia Wilbanks, UM vice president for government relations, confers with other executives about the state budget that Gov. Rick Snyder had proposed earlier that day. From left: Tim Slottow, chief financial officer; Jerry May, vice president for development; and provost Phil Hanlon.

[Under the proposal, state appropriations for UM's Ann Arbor campus would be cut 19.4% from FY 2011 levels, to $254.9 million. If the university complies with tuition increases recommended by the governor, it would receive an additional $13.8 million. Under that scenario, the university would receive a total of $268.8 million – a cut of $47.5 million, or 15%, from the FY 2011 appropriation of $316.3 million. It would reduce funding levels to about the amount received in 1990-91.]

The university is committed to providing a world-class education that is accessible to Michigan residents, regardless of income, Coleman said. The budget proposal is the beginning of a conversation, and there’s much to review – including the impact on the University of Michigan Health System. They expect to be fully engaged, she said, adding that Snyder – a UM graduate – understands the importance of higher education to the state’s economy. She noted that they’d be able to demonstrate that importance the next day, when Snyder was scheduled to attend the Feb. 18 awards ceremony on campus for the Clean Energy Prize competition.

Coleman also highlighted some achievements of UM’s arts community. Michael Daugherty, a professor of music, earlier this month won three Grammy awards for his composition “Deus Ex Machina.” Daugherty won the award for Best Classical Contemporary Composition, and the album was awarded Best Orchestral Performance and Best Engineered Album in the classical music category. Also, Ken Fischer, president of the University Musical Society, received the Fan Taylor Distinguished Service Award from the Association of Performing Arts Presenters, which recognizes those whose outstanding service, creative thinking, and leadership have had a significant impact on the profession. “Ken certainly fits that criteria,” Coleman said.

UM president Mary Sue Coleman, left, goes over her prepared remarks with Kim Clarke, director of executive communications.

She pointed out that spring break begins soon – from Feb. 28 through March 4 – and she was pleased that 450 students are participating in alternative spring break programs, doing community service across the country. She commended them for giving up their vacations.

Finally, Coleman noted that next month’s regents meeting will be held in Detroit, on March 17, to highlight and celebrate the university’s partnerships there. UM was founded in Detroit, she said – it is the state’s most important city, and the university is committed to strengthening the community and its citizens. [The meeting will be held at the Westin Book Cadillac hotel, site of last year's Washtenaw Community College trustee retreat.]

Internationalization at UM

The main presentation at Thursday’s meeting was given by Mark Tessler, UM’s vice provost for international affairs. His talk focused on two aspects of international studies at the university: Students from other countries who study at UM, and UM students who study abroad. He began by noting that internationalization had been the focus of the university’s 2010 accreditation process.

About 5,200 international students are on campus, from 117 different countries. Of those, the mix is 70% graduate students and 30% undergrads. UM has the nation’s sixth largest international student population, he said. The number of international students has increased almost 35% since 2000, and is increasing as a percentage of the overall student population as well. In 2001, international students represented about 10% of the overall student population. Today, they make up 12.5%.

Having international students enriches campus life, Tessler said, and UM is looking for ways to deepen the relationships between U.S. and international students – many of whom will eventually become leaders in their respective countries.

Tessler said students are drawn to the university for many reasons, as a result of UM’s reputation, its partnerships with institutions in other countries, and its international network of alumni recruiters. One example is a student from Oman, he said, who won a scholarship to attend a U.S. university, and was advised by the country’s cultural affairs officer to pick UM. The student, an Arab, got involved in Judaic studies at UM, and is now back in his country active in political affairs.

Of the roughly 5,200 international students at UM, about 80% come from 10 countries: China (38%), India (20%), South Korea (18%), Taiwan and Canada (6% each), Malaysia (4%), and Singapore, Japan, Turkey and Brazil (2% each).

Turning to UM’s American students, Tessler said each year they send about 3,200 students to 85 different countries, including semester- or year-long studies and shorter summer programs. Most students still go to Europe, though proportionally that number is declining. They’re trying to develop more programs in Asia, Africa and Latin American. He noted that he had studied abroad two times as a student – in Israel and Tunisia – and described the experiences as life-changing. It’s important, as U.S. citizens, to develop “global competence,” he said, and the experience enriches life on campus when you return.

In the last five years, the number of students studying abroad has doubled, but they’re hoping to increase those numbers even more. Some of the reasons that students don’t go is a lack of financial aid, he said, or they have concerns that they won’t be able to graduate on time. So the university is offering a broader array of programs, including some that are shorter in duration. The university is also working with students to help them better plan for an international experience earlier in their academic career.

Tessler also pointed out that about three-quarters of the students who study abroad are female – it’s a national trend, he noted, but they’re trying to see what it would take to get more male students interested.

Internationalization: Regents Comments

Andrea Fischer Newman noted that Tessler had mentioned studying in Israel. There’s currently a student petition being circulated that advocates for UM to start a program there, she said. Though there’s no official program, UM students can study in Israel through programs at other universities, and transfer credits, Newman said. She asked Tessler to talk about why the university doesn’t have an international program in Israel.

Tessler said they have a lot of partnerships with institutions in Israel, but it’s a university policy to suspend programs in countries that are on the U.S. State Department’s travel advisory list, as Israel is. Students can go, he said, and it’s common for them to travel there through programs at other universities. There are also “non-regular” programs that UM faculty and students can create independently in countries that are under travel advisories – in that case, they sign a waiver before traveling.

Newman asked if it were fair to reconsider that policy. Tessler said it’s a fair question – some other institutions ignore the advisories, or ask students to sign waivers for their official programs. There are also universities like UM that take a more conservative view, and don’t feel they should substitute their own judgment for that of the state department. Ultimately, it’s not his decision to make, Tessler said.

At that, Newman turned to provost Phil Hanlon with a questioning look. Hanlon said it’s worth looking at the policy again, to see if it is still appropriate. Tessler noted that there are several other countries on the travel advisory list that they’d like to look at as well.

Denise Ilitch observed that regents had recently received an update on the status of UM students studying in Egypt, in the wake of the uprising there. Tessler said Egypt hadn’t been on the advisory list, but it would be now – a remark that elicted laughter.

Andy Richner asked whether Tessler had data on the number of international students who stay in Michigan after graduation. Tessler said he didn’t, but he imagined it would be a small number. Richner said he’d heard otherwise.

Larry Deitch said they might consider how to incentivize people to stay. Some of the innovation in Michigan has been driven by immigrants, especially those educated here. Richner noted that the governor has expressed interest in this as well.

Internationalization: Student Perspective

Two undergraduates who’ve been involved in UM’s international programs talked about their experiences.

UM undergraduates Grace van Velden, left, and Bianca Renae Lee chat before Thursday's regents meeting started. They both spoke to regents during a presentation on the university's international programs.

Bianca Renae Lee, who’s studying sociocultural anthropology and is graduating in April, described a wide range of programs she’s attended abroad, including studies in Ghana and Ireland. She also worked in New Orleans through UM’s Global Intercultural Experience program – because of that, she’ll be going back to Louisiana after graduation, as a Teach for America worker.

Lee said her international experiences allowed her to grow academically and spiritually, and to build many important relationships. “My life wouldn’t have been the same without these international opportunities,” she said.

Grace van Velden – a junior and president of the UM chapter of Sigma Iota Rho, an honor society for international studies – thanked regents for allowing her and Lee to represent the voices of their peers. Originally from South Africa, she moved here when she was in grade school, but returns in the summers to work in HIV/AIDS and malaria clinics outside of Johannesburg. She also has worked at the Pine Ridge Indian Reservation in South Dakota. Van Velden said she’s grateful that UM pushes students and nurtures their desire to travel, both internationally and within the U.S. – she hopes those efforts will continue.

Michigan Student Assembly Report

Chris Armstrong, president of the Michigan Student Assembly (MSA), gave a brief report to regents, summarizing the student government’s recent work. On Feb. 19 they were co-hosting the Stand Up to Bullying event at the Ypsilanti District Library – speakers would include Washtenaw County sheriff Jerry Clayton and former state legislator Alma Wheeler Smith. The MSA is continuing to work with university administrators on an open housing initiative, he said, and is working on a campuswide campaign to solicit ideas about what to fix on campus. He reported that the MSA’s environmental commission had collected over 1,400 signatures to ban plastic bottles on campus. Armstrong also urged regents to strongly encourage negotiations between the administration and the Graduate Employees’ Organization as they discuss their upcoming contract.

CAAS To Become a Department

Regents unanimously approved reorganizing UM’s Center for Afroamerican and African Studies (CAAS), an institution founded in 1970, into the Department for Afroamerican and African Studies, part of the College of Literature, Science and the Arts. The new status aims to strengthen the undergraduate program, allow the unit to develop additional graduate studies, and aid in recruiting and promoting faculty.

No financial costs are anticipated as a result of the change, which would take effect on Sept. 1, 2011.

Law Commons Named for Aikens

Regents voted to officially name the new UM Law School commons in honor of Robert B. Aikens. A 1954 graduate of the law school, Aikens gave the university a $10 million donation for the school’s current expansion and renovation project, which includes the new commons. It’s the largest gift ever given to the law school by a living individual, according to Jerry May, vice president for development. May praised Aikens and his wife Ann Aikens as being lifelong supporters of many parts of the university, with previous gifts to the UM School of Art & Design and the athletics department.

Capital Projects: Alice Lloyd, School of Social Work

Several capital projects were unanimously approved by regents at their Feb. 17 meeting, with little discussion. They include:

• Authorization to seek bids and award construction contracts on a $56 million “deep” renovation of Alice Lloyd Hall, located at 100 S. Observatory. Regents had previously approved the project’s schematic design at their Dec. 17, 2010 meeting. The 176,000-square-foot dorm houses about 560 students. Construction is scheduled for completion in the summer of 2012.
• A $1.85 million renovation project at the School of Social Work. About 18,400 square feet in the atrium of the building – located at 1080 S. University Ave., at the corner of East University – will be renovated into a new clinical suite to allow students to practice and observe clinical approaches, and to accommodate expanded continuing education programs. The project is scheduled for completion in the summer of 2011.
• A $2 million renovation project on the fourth floor of the C.C. Little Science Building, located at 1100 N. University Ave. The roughly 10,600 square feet of renovated lab and support space will be used by recently recruited faculty for the Dept. of Geological Sciences. Construction is expected to be finished by the fall of 2011.

Bylaws Revised

Regents approved three revisions to their bylaws, with no discussion. [.pdf of bylaws revisions] Changes were made to:

• Reflect the fact that recreational sports programs are now overseen by the division of student affairs, not the athletics department.
• Delete the entire Chapter VII on student affairs, which refers to entities that either no longer exist or that are covered in other sections of the bylaws.
• Reflect a change in the reporting lines for the Museum of Zoology and Herbarium.

Conflict of Interest Disclosures

Regents authorized five items that required disclosure under the state’s Conflict of Interest statute. The law requires that regents vote on potential conflict-of-interest disclosures related to university staff, faculty or students. Often, the items involve technology licensing agreements or leases.

Items included: (1) a contract between UM and the Gladwin Center – a meeting facility on Liberty Road, just west of Wagner; (2) option agreements with Cardiavent LLC and Wolverine Energy Solutions Technology Inc.; and (3) licensing agreements with Omni MedSci Inc. and Atrial Innovations Inc.

All items passed unanimously, with no discussion.

Public Commentary

Public commentary occurs at the end of regents meetings. On Thursday, two topics dominated speakers’ remarks: a proposed flexible “tenure clock” for faculty; and issues affecting graduate student workers.

Flexible Tenure Clock

Five faculty members of the UM Medical School addressed the regents in support of a more flexible timeline for achieving tenure. The provost, Phil Hanlon, is considering extending the maximum allowable period to 10 years – the change would ultimately require action by the regents. The current maximum is eight years, though many units of the university set shorter timelines.

Timothy Johnson, chair of the department of obstetrics and gynecology, told regents it was the democratically right thing to do – faculty at the medical school have discussed it for more than a decade, and support it. Given their clinical duties, the medical school faculty are quite different in how they achieve scholarship, so a flexible tenure clock is required. There’s a great deal of uncertainty surrounding funding for staff – at the federal level, support from the National Institutes of Health (NIH) is changing, and health care reform will have an impact on reimbursement for physicians. These are turbulent times, he said, and people in Michigan are further stressed by the exigencies of this state’s economy. Having a tenure clock that’s shorter than their peer institutions puts them at a competitive disadvantage, he said.

John Carethers, chair of UM Medical School's department of internal medicine.

John Carethers, chair of the department of internal medicine, said he represented the medical school’s largest department, with over 640 faculty. Flexibility in achieving tenure is important for their ability to attract and retain the best faculty, he said, with diversity in race, gender and discipline. There are at least two dozen examples of faculty who had difficulty in achieving tenure over the past few years, and a disproportionate number of them were women, compared to the makeup of the overall faculty. There are many reasons for this, he said, including delays in getting NIH funding, the collaborative nature of their research, or health and child-related issues. He concluded by reading a letter from Maria Silveira, an assistant professor of internal medicine who practices palliative care. The letter described Silveira’s own health struggles, noting that she had to petition the dean to extend her tenure clock. Without flexibility, tenure is possible only for those who are privileged or lucky.

Toby Lewis, a pediatric pulmonologist and environmental epidemiologist, described her research, which addresses childhood asthma in low-income neighborhoods. The community-based approach is collaborative and interdisciplinary, she said, and is time- and labor-intensive. There are challenges in working with vulnerable communities, and a typical study takes five to seven years to complete. Lewis said she was giving regents this information because research like this needs to be done for intractable problems, and the university needs to embrace and promote faculty who are taking risks to do this work. Flexibility in the tenure clock is needed so that high-performing faculty have the time to complete their research.

Carol Bradford, chair of the UM Medical School's department of otolaryngology.

Carol Bradford, chair of the department of otolaryngology (ear, nose and throat), described her career path from the time she joined UM as an assistant professor in 1992. She listed many of the accomplishments she’s been able to achieve – she is president-elect of the American Head and Neck Society, the first woman to hold that role – but said that were it not for mentorship and some lucky breaks, she might not be here today.

Susan Goold, a professor of internal medicine, said that she’s an Ann Arbor native who also joined the medical school faculty in 1992 – she became the first tenured women in her division. She recalled that when she was a young resident, she had lunch with a national leader in her field. When Goold expressed admiration for another female researcher, he told her that the researcher wouldn’t have been as successful if she’d had children. Goold said that the pressure of a ticking tenure clock often coincides with the urge to have a family. More flexibility in the tenure timeline would help recruit more female faculty, she said. But it’s not just about women and pregnancy, she added – it would also help those who face illness, or whose research just takes longer to get rolling. She concluded by noting that some people are concerned about the potential for abuse – delaying tenure in order to keep salaries lower. That’s something to keep an eye on if they extend the tenure clock.

Graduate Employee Concerns

Four graduate students spoke during public commentary, but at least two dozen others attended the meeting, many of them carrying signs that lobbied on issues related to contract negotiations between the university and the Graduate Employees’ Organization (GEO).

Chelsea Del Rio, an officer in the Graduate Employees' Organization (GEO).

Chelsea Del Rio, a GEO officer, thanked the university for meeting with GEO representatives, and said they looked forward to talking about issues like parents’ rights, health benefits and wages. She described the kind of work that graduate student instructors (GSIs) do – teaching classes, writing letters of recommendation, holding office hours and more – and said they do this because they’re invested in the success of their students and of the university. They’re asking for resources necessary to be the best possible employees that they can be, she said. They want a reasonable contract that will protect GSIs, she said. Del Rio described a recent situation when a professor pressured GSIs into staying late to grade papers, even though a blizzard was on the way. Another GSI had to sneak out into the parking lot to breastfeed, because there was no place else to do it – the university needs to provide clean and secure areas for this. She also noted that graduate student research assistants (GSRAs) aren’t protected by a union contract – they aren’t represented by a bargaining unit like GEO. Like GSIs, GSRAs contribute to the success of the university. “The University of Michigan works because we do,” she said. Del Rio concluded by saying she was confident they could reach an agreement.

Alix Gould-Werth, a graduate student research assistant (GSRA), described the type of work she does in studying the impact of unemployment insurance. Sometimes she prioritizes the work over her own studies, she said, but she likes it. She asked the university to recognize it for what it is: work. As a GSRA, she doesn’t have any say over her benefits or working conditions. Now, the GSRAs are talking about whether to join the GEO bargaining unit, and she asked the university to be neutral about it and not oppose the move, if that’s what the GSRAs decide to do.

Daniel Marcin, treasurer of the Graduate Employees' Organization (GEO).

Daniel Marcin identified himself as the treasurer for GEO and a graduate student in economics. The GEO certainly understands the university’s economic constraints, he said, and they know that budgets are tight. They’re asking for a 3% raise in each of the first two years of the contract, and a 6% raise in the third year. “We know that you understand compound interest,” he said, adding that this is a fair starting point for the negotiations. Graduate student instructors earn $17,200 per academic year – “We do deserve a little more,” Marcin said, “and that’s what we’re asking for.”

Denise Bailey said she represented two minorities: graduate students with disabilities, and graduate student parents. Both bring unique perspectives to the university, and she hoped the university would make strides in accommodating them and integrating them fully into campus life. For graduate students with children, she advocated for: (1) removal of the current work/study requirement that’s needed to get a childcare subsidy; (2) sufficient parental leave that wouldn’t result in losing medical benefits; and (3) private space where lactating mothers could pump breastmilk or nurse their babies.

Regent Martin Taylor responded to the public commentary, saying he strongly supported the rights of workers to organize. He said he understood the administration’s concerns, but hoped they could come together and allow students to organize. Regents Kathy White and Julia Darlow indicated support for Taylor’s comments.

Present: Mary Sue Coleman (ex officio), Julia Darlow, Larry Deitch, Denise Ilitch, Andrea Fischer Newman, Andrew Richner, Martin Taylor, Kathy White.

Absent: Olivia (Libby) Maynard

Next board meeting: Thursday, March 17, 2011 at 2 p.m. at the Westin Book Cadillac in Detroit, 1114 Washington Blvd., Detroit. [confirm date]

University of Michigan president Mary Sue Coleman, seated, talks with Julia Darlow, chair of the UM board of regents, prior to the start of the Nov. 18 regents meeting on the UM Flint campus. (Photos by the writer.)

During their monthly meeting, held on the UM Flint campus, regents also approved a request to the state for a 2.6% increase in appropriations to the university for fiscal year 2012 – though regent Andrea Fischer Newman expressed concern that the request was too low. For the current fiscal year, state appropriations of $316 million represented a 2.8% decrease over fiscal 2010.

Regents got an annual report from the head of the faculty governance group, who proposed an idea to increase the ranks of faculty through a program that would tap retirees. The board also approved several facilities projects, including the purchase of three residential properties in Ann Arbor – two on South Division, next to the Institute for Social Research, and one on Wall Street, near the UM Kellogg Eye Center.

A request to approve a fireworks display at Michigan Stadium during the Dec. 11 “Big Chill at the Big House” generated some discussion, including a query from regent Libby Maynard about whether it would be dark enough to appreciate the display. The sold-out matchup between Michigan and Michigan State, expected to set an attendance record for outdoor hockey games, begins at 3 p.m.

Maynard’s question prompted regent Kathy White to quip: “Unfortunately, it’ll be December in Michigan – it’ll be dark.”

President’s Opening Remarks

As she typically does, UM president Mary Sue Coleman began the meeting with a roundup of remarks related to various university accomplishments. She congratulated the UM Flint campus for being the fastest-growing public university in Michigan, in terms of enrollment, for the fourth consecutive year. She commended Flint for being a powerful magnet to attract students.

Coleman also congratulated regents Andrew Richner and Andrea Fischer Newman for winning re-election on Nov. 2. The two Republicans were elected to their second and third terms, respectively. Each term lasts eight years.

Also related to the Nov. 2 election, Coleman pointed out that Michigan elected a UM graduate for the first time in more than 60 years. Rick Snyder actually holds three degrees from UM, she noted, and is very knowledgeable about the university. Coleman said she’s worked with Snyder to expand the role of the university in the state’s economic development, and has already had several conversations with him since his election.

Coleman also alerted regents that the students she’d mentioned in her Oct. 27 state-of-the-university speech – students who built the Radio Aurora Explorer satellite to collect data on space weather – would be launching it from Kodiak, Alaska on Friday evening. She urged everyone to watch the launch live on UM’s website.

Finally, Coleman congratulated Nancy Asin, assistant secretary of the university, for her 30 years of service, including 24 years working with the board of regents. “She has been patient and wonderful and we really appreciate her service,” Coleman said. Asin received a round of applause.

Contract Extension for Coleman

Immediately following Coleman’s remarks, board chair Julia Darlow moved to extend Coleman’s contract for an additional two years, through July 31, 2014. [.pdf file of Coleman's original employment contract] [.pdf file of Coleman's contract extension]

Darlow noted that Coleman is serving her ninth year, and that her current five-year contract – signed in 2006 – ends in July 2012. She praised Coleman’s service, noting that though other institutions have failed during this “unsettling and uncertain time,” Coleman has kept the university firmly focused on its mission, resulting in outstanding accomplishments.

Over the past few months, the regents have discussed with Coleman the possibility of extending her contract, Darlow said – those discussions resulted in this current proposal. The motion amended Coleman’s existing employment agreement, and includes adding six goals for the next four years:

1. To strengthen the university’s core academic mission and enhance its worldwide stature as a center for excellence in teaching and scholarship.
2. To develop financial strategies – including tuition, state support, research grants and contracts, philanthropy and other revenue sources – to preserve and enhance the university’s academic excellence, accessibility and affordability.
3. To enhance the university’s mission and its campus life with improved facilities across campus, including student housing.
4. To maximize the university’s reputation for quality and innovation in the global market for higher education.
5. To develop plans for a new capital campaign.
6. To strengthen the position and preserve the excellence of the university’s health care system.

In addition, the extension includes a provision to work on developing internal candidates for leadership within the university, including the presidency. Darlow said the intent is not to supplant national searches, but to enrich the university’s leadership pool.

The contract amendment does not alter her salary and benefits, which will be reviewed annually, but it does add a supplemental deferred compensation payment of $100,000 annually for this year as well as the following three years. [At their October meeting, regents approved a 3% salary increase for Coleman, bringing her salary to $570,105. In addition, her total compensation package includes $75,000 in deferred compensation, a $100,000 retention bonus, $24,500 in retirement pay, and an additional $30,850 supplemental retirement payment.]

The additional deferred compensation, which won’t be received until Coleman ends her service as president, is intended to build a substantial contribution to Coleman’s retirement, Darlow said, adding “certainly, she has earned it.”

Outcome: Regents voted unanimously to extend Mary Sue Coleman’s employment agreement through July 2014, adding a supplemental deferred compensation payment of $100,000 annually for this year as well as the following three years.

After the vote, Coleman received applause from regents and a standing ovation from her executive staff. Coleman said she was excited by the vote of confidence, and that she couldn’t imagine working with a better group of people. Directing her remarks to Kyle Swanson – a senior news editor at the Michigan Daily, who covers UM and who attended Thursday’s meeting – she noted that he had inquired about her plans recently, and she said she was sorry she couldn’t say anything about it at the time. Coleman said she’d had a lot of fun over the past eight years, and that she looked forward to the coming years.

Annual Operating Request to the State

Regents approved the university’s annual operating request to the state for fiscal year 2012 – this year UM’s Ann Arbor campus is asking for a 2.6% increase in state appropriations. [The Flint and Dearborn campuses make separate requests.] Provost Phil Hanlon told regents that they were asking for an increase in part to cover inflationary costs. The increase would also help replace scholarship funding to students in the wake of the state’s decision to discontinue the Michigan Promise scholarship, as well as the need for other student financial aid. [.pdf of request letter]

In October, UM-Ann Arbor received a $316 million state appropriation for the current 2011 fiscal year – a 2.8% drop from last year’s funding.

Before the vote, regent Andrea Fischer Newman asked Hanlon why they weren’t asking for more. The inflationary increase doesn’t account for tuition increases, she said. She felt the request was too low, and didn’t feel that they’d taken the opportunity to lay out their case.

Hanlon responded that they had carefully weighed the state’s economic situation in making this request. Cynthia Wilbanks, UM’s vice president for government relations, added that it was a balancing act, weighing the university’s needs with what’s happening in the state. Last year, she noted, they’d been told by legislators not to make a request at all, because it was a lean year – they did anyway, she said, taking the opportunity to lay out their benefits to the state.

As a new governor, Rick Snyder will have an additional 30 days to present his budget, Wilbanks noted – that will likely happen in early March. In advance of that, this request is intended to describe the university’s goals and aspirations. She acknowledged that it doesn’t cover everything they might have addressed, but in the past she’s heard legislators comment that the university needs to take into account the state’s economic realities. That’s what they tried to do, she said.

Newman again stated her concern that the university didn’t “put enough on the table.” She said she didn’t know how seriously this document was taken in Lansing, but it does help to tell the university’s story.

Hanlon said he’d be open to dialogue with regents in future years to prepare the request.

Andrew Richner pointed out that they could amend their request as the situation warranted – it’s not a binding document. If the state economy or the university’s situation changes, he felt they had some flexibility to change the request. Wilbanks said they’d look for those opportunities.

Outcome: Regents unanimously approved the university’s annual operating request to the state of Michigan, which asked for a 2.6% increase in appropriations for FY 2012.

SACUA Annual Report

Ed Rothman, UM professor of statistics, is also chair of the Senate Advisory Committee on University Affairs (SACUA), the faculty governance body. In making SACUA’s annual report to the board, Rothman began by noting that Coleman has the support of all the faculty. He then outlined several issues that the group is working on. They include developing a website that will allow SACUA to interact better with faculty, and efforts to be more proactive in dealing with issues affecting faculty members. One example is the issue of trespass: He said they were working with Sue Scarnecchia, UM’s vice president and general counsel, to develop an automated review process whenever a trespass order is issued. They want to ensure a safe campus, while also reviewing the circumstances associated with trespass orders, so that they can respond appropriately, if necessary.

[By way of background, the issue of trespass orders issued against faculty members has come up during public commentary at previous regents' meetings, with complaints about the circumstances under which such orders are implemented. By way of additional background – involving trespass orders about non-faculty – the undergraduate chapter of the ACLU recently sent a letter to the UM Department of Public Safety, expressing concerns with the trespass order that was filed against Andrew Shirvell. Shirvell was a state assistant attorney general, who was eventually fired in connection with a blog he created about the openly gay president of the Michigan Student Assembly, Chris Armstrong. From the letter: "Regardless of how offensive or mean-spirited Shirvell’s statements may be, DPS must not ban a person from campus solely for his speech."]

Ed Rothman, chair of the UM Senate Advisory Committee on University Affairs (SACUA).

Rothman noted that it’s a difficult time for the economy. He said he’d been a consultant at GM’s Buick City, an auto manufacturing plant in Flint, which not long ago employed some 13,000 workers. Now, the facility has “a lot of green space,” he said. [The plant ended production on Nov. 18, the day of the regents' meeting in Flint.] But even with all the bleak financial news, the university continues to attract students and research dollars, he noted, serving as a shining star that many hope will lead the state to better times.

Rothman then presented a chart showing the change in faculty, students and research spending from 1999 to 2009. Over that 10-year period, the number of faculty increased from 2,698 to 2,880 – not a large increase, he observed. Meanwhile, student enrollment grew from 37,828 to 41,674 and research dollars coming to the university have doubled – from $500,000 $500 million in 1999 to just over $1 billion in 2009. Faculty have been turning the crank and getting things done, he said, and it’s time to think about increasing their ranks. He noted that the administration has made a commitment to adding 150 faculty positions. But they need to find ways to add additional faculty without an appreciable increase in costs, he said.

About 45% of faculty are approaching retirement age, Rothman said. Surveys have found that a factor affecting their decision to retire is their desire to remain engaged with the university in some way. Rothman proposed formulating a plan of lifelong engagement for faculty who want to continue working at the university – adding a third option to their decision to either retire, or not. He gave the example of Ralph Williams, a popular English professor who recently retired – there are many faculty like Williams who could be retained on a limited basis, either teaching or doing research with scaled-back compensation. Rothman said his hope is that they could find 300 faculty members who’d be interested in this kind of arrangement. He acknowledged that the plan isn’t completely fleshed out, but expressed hope that they could work with the administration to develop it more fully. “The time to move forward is now,” he said.

Rothman concluded his remarks with a line that elicited laughs from regents and UM executives: “What about the state of the faculty? We’re a happy group. Not all – but you’ve met those.”

Financial Items: Audit, Facilities

Tim Slottow, UM’s chief financial officer, noted that the athletic department had received a clean audit for the fiscal year ended June 30, 2010. The regents received a supplemental report related to the audit, which did not require a vote. [.pdf file of PricewaterhouseCoopers supplement to the athletic department audit]

Regents voted on five items related to facilities – all were approved unanimously without discussion:

• A $2 million project to renovate the second floor and basement of the Modern Languages Building (MLB) at 812 E. Washington. The MLB houses classrooms and offices for nine departments in the College of Literature, Science, and the Arts, as well as studios for the Taubman College of Architecture and Urban Planning. It formerly housed the Language Resource Center, which recently moved to the new North Quad. That opened up space on the second floor of MLB – the college wants to relocate its Instructional Support Services Media Center from leased space elsewhere, to vacated space on the second floor. In addition, the LSA Department of Screen Arts and Cultures Film Editing group will move from the Argus Building to vacant space in the MLB’s basement level. The project will be completed by the summer of 2011.
• A $1.4 million project to renovate space in the School of Education building, creating the Brandon Professional Resource Center and Archive. The renovation, to be completed by the fall of 2011, will cover about 4,800 square feet on the second floor, creating space to house digital records of professional practice and study resources. It will also include a student study and collaboration areas. The project will be funded by a portion of the $4 million that David and Jan Brandon donated to the university as part of the Michigan Difference capital campaign. Brandon, a former regent who now serves as UM athletic director, received a bachelor’s degree in education from the university.
• Approval to buy two properties on South Division north of Jefferson, described as being strategically located next to UM’s Institute for Social Research: $919,425 for 439 S. Division St., which now includes a 3,210-square-foot apartment building; and $805,575 for property at 443 S. Division, where a 6,048-square-foot apartment building is now located. The closing date on these purchases is set for Dec. 17. A memo from Slottow related to these purchases states that the buildings have no known historical significance.
• Approval to buy a property at 963 Wall St., where a vacant, 1,056-square-foot single-family house is located. The purchase price is $350,000, with a tentative closing date of Dec. 1. The property, near Broadway, is adjacent to university property on Wall Street and consistent with their needs, based on the master plan of that area, Slottow told the regents. UM’s Kellogg Eye Center is located at 1000 Wall Street.

Tim Slottow, UM chief financial officer.

In addition, regents authorized seven items that required disclosure under the state’s Conflict of Interest statute. The law requires that regents vote on potential conflict-of-interest disclosures related to university staff, faculty or students. Often, the items involve technology licensing agreements or leases.

This month, the disclosures involved deals with the following entities: Optiprise Inc., the Institute for Social and Environmental Research, Hammzoco LLC, HistoSonics LLC, Vega Therapeutics Inc., Biomatrix Photonics Inc. An additional item reassigned international patent rights from UM to Drs. James Geiger and Shorya Awtar, for the invention of a laparoscopic surgical device. UM would get 15% of any payments received by Geiger and Awtar for licensing these patents.

There was no discussion on any of these items.

Fireworks at Michigan Stadium

Regents unanimously approved a request for a “close proximity” fireworks display at the Dec. 11 hockey game between UM and Michigan State, billed as the “Big Chill at the Big House.”

Fireworks would be displayed during player introductions and for about five seconds following each UM goal, according to a cover memo accompanying the request. A fireworks show lasting about 10 minutes and choreographed to music would close out the game. Fireworks during the game would be set from the field, while the pre- and post-game shows would be done from the rooftops of the east and west towers of the stadium.

ACE Pyro, a company based in Manchester, Mich., would produce the fireworks show.

Libby Maynard, noting that the game begins at 3 p.m., wondered whether it would be dark enough for fireworks to be effective. Kathy White quipped, “Unfortunately, it’ll be December in Michigan – it’ll be dark.”

Andrea Fischer Newman asked whether future fireworks requests would need the regents’ approval. Sue Scarnecchia, UM’s vice president and general counsel, replied that if they need to make a second request, they’ll seek a blanket approval for all future requests.

Newman then wryly observed that this item had generated more questions than any other item they’d voted on.

Public Commentary

Two people had signed up for public commentary, but neither of them showed up to speak.

Present: Mary Sue Coleman (ex officio), Julia Darlow, Larry Deitch, Denise Ilitch, Olivia (Libby) Maynard, Andrea Fischer Newman, Andrew Richner. Regents Martin Taylor and Kathy White participated in a portion of the meeting via conference call.

Next board meeting: Thursday, Dec. 16, 2010 at 3 p.m. at the Fleming Administration Building, 503 Thompson St., Ann Arbor. [confirm date]

University of Michigan provost Teresa Sullivan, left, and vice provost Phil Hanlon brief the media about tuition rates immediately prior to the regents meeting on June 17. Hanlon will become provost when Sullivan leaves at the end of the month for her new post as University of Virginia president. (Photos by the writer.)

This year, with two regents dissenting, a tuition increase of 1.5% for in-state undergraduates was approved for the Ann Arbor campus. UM executives noted that it’s the lowest rate increase in 26 years – but if their projections for state appropriations prove too optimistic, they cautioned that they might need to return to request raising tuition later in the fiscal year.

University officials say they’re buffering the tuition increase by substantially adding to the amount of financial aid available to students – $126 million, up $8.3 million from the current year. They’re also launching a new “economic hardship” program, adding $500 in financial aid per year for up to four years for qualified students.

Tuition makes up a large portion of the general fund operating budget. For the Ann Arbor campus, a budget of $1.55 billion in FY 2011, which begins July 1, marks a 6.75% increase from FY 2010.

Regents also approved the FY2011 budget for the UM Hospitals and Health Centers – revenues are projected to top $2 billion for the first time during this year, with a $66 million operating surplus.

And UM athletic director Dave Brandon gave a briefing on the athletic department budget, though it doesn’t require regental approval. Projected revenues of $105 million includes $38.19 million from ticket sales, while the budgeted $100.3 million in expenses includes a $9.22 million debt service payment for Michigan Stadium renovations.

In addition to budgets, regents approved several construction projects, including a $56 million renovation of Alice Lloyd Hall and a $1.6 million repair of Burton Memorial Tower, which will close the landmark site – and silence its carillon – for about a year, starting in August.

Budget Overview

Tim Slottow, UM’s chief financial officer, began the budget presentations with an overview of the university’s financial status. The university has $13.8 billion in assets – both financial and in its physical plant – and $4.5 billion in liabilities, resulting in net assets of $9.3 billion.

In discussing UM’s liabilities, Slottow cited several threats to the balance sheet. “People often ask what keeps a CFO up at night,” he joked. “This is the list.” Future liabilities include deferred maintenance of buildings, retirement health benefits and increasing future debt liabilities, he said.

Other threats include unprecedented market volatility, which will continue, he said, as will volatility in energy prices, which have swing “wildly” up and down. But the one thing that never seems to go down is health care costs, he said – this year, those costs for UM have increased 2.8%, compared to a national average of roughly 10%.

He discussed efforts to endow the general fund – in FY 2010, the general fund was supplemented by $210 million from the endowment. That money is used primarily for scholarships, professorships and academic programs, Slottow said. Strategically, the move to endow more general fund activities began five years ago, and has included gifts to endow building maintenance and operations for facilities like the Stamps Auditorium and Kelsey Museum. The endowment for the general fund today stands at $213 million, he said, yielding annual revenue of $12 million. The university’s total endowment is an estimated $6.7 billion.

Slottow reviewed the physical plant of the Ann Arbor campus, as a reminder of the infrastructure that the university supports. That includes:

• 25 miles of roads and 4.5 million square feet of sidewalks, steps, and plazas
• 7 miles of utility tunnels and 150 miles of fiber optic cable
• 280 acres of parking lots/decks
• 32 million gross square feet of buildings and core infrastructure
• 601 buildings, 1,807 classrooms and instructional labs, 1,113 study rooms, and 6,125 research labs/rooms
• 540 elevators and escalators
• 14,000 trees and 12 million square feet of turf
• 100,000 network desktop computers

For all three campuses, the university employs 28,809 regular staff and 6,967 instructional, clinical and research faculty. Slottow pointed out that about 40% of employees will be eligible for retirement within the next few years, as will more than 50% of UM’s managers. They need to start preparing for that with leadership training, knowledge transfer and career development for a smooth transition, he said.

As of March 31, 2010, the university’s debt totaled $1.58 billion. Slottow said a prudent debt management policy has helped the university earn the highest possible credit rating from Standard & Poor’s – a triple-A. And soon, he added, UM’s provost will be the only living person to have worked as a senior executive for three universities with that rating: Texas, Michigan and Virginia. Provost Teresa Sullivan, who previously was executive vice chancellor for academic affairs at the University of Texas, will be leaving at the end of June to become president at the University of Virginia.

Tuition Rates, Financial Aid: Ann Arbor Campus

Provost Teresa Sullivan presented the FY 2011 general fund operating budget for the Ann Arbor campus, which included tuition rates and fees. [Regents had approved housing rates at their May 20 meeting – a 3% average increase in room and board.]

For the fiscal year beginning July 1, total general fund operating revenues are projected at $1.55 billion – up 6.75% from the current year. Sullivan cited several reasons for the revenue increase, including higher undergraduate enrollment and increased research funding. [Stephen Forrest, UM's vice president for research, had briefed regents on the latter topic at their Jan. 21, 2010 meeting.]

Julia Darlow was elected chair of the board of regents at their June 17 meeting, succeeding Andy Richner. She's holding an iPad, which regents are starting to use as part of an effort to reduce paper documentation.

The budget assumes the university will receive $315.1 million in state appropriations. Given the state’s financial crisis, “there is the possibility that this assumption is too optimistic,” Sullivan said. She noted that since 1960, state support as a percentage of UM’s general fund has dropped from 78% to 20%. Conversely, tuition and fees accounted for only 20% of UM’s general fund in 1960 – today, it accounts for 65% of general fund revenues.

Sullivan also outlined the university’s cost containment efforts, noting that the budget assumes $39 million in cuts. Those cuts are coming from greater sharing of benefits costs with employees, the consolidation of information technology units, more efficient use of space, and reform of UM’s travel/hosting policy, she said.

Over the past seven years, Sullivan said the university has trimmed $159 million in recurring general fund expenditures – and more cuts are to come. There are five task forces looking at ways to find further budget savings, as well as exploring ways to increase revenues. And a committee that’s examining the costs of retiree health benefits will be presenting its report in the next few weeks.

Sullivan said these efforts also involve reallocating resources to fund academic initiatives – for example, the FY 2011 budget includes expanded funding for the popular undergraduate research opportunity program (UROP). The budget also includes funding for 50 additional faculty hires, above the previously targeted 100 positions that UM plans to add. The new hires are in response to increased undergraduate enrollment, she said, and will make smaller class sizes possible.

The university is increasing its centrally awarded financial aid to $126 million – $8.3 million more than the current year. That’s in addition to financial aid that’s available from individual schools and colleges, Sullivan said. She also pointed out that some families are eligible for a federal tax credit for tuition – as much as $2,500 for families earning up to $160,000 (in a two-income household) or up to $80,000 for a single-income household per year.

In addition, UM has launched the “economic hardship” program, which will provide an additional $500 in financial aid to in-state students with family income in the $60,000 to $100,000 range. The grant will be renewable for up to four years, and will cost the university about $3.6 million over that period.

All of this set the stage for the recommended tuition increase: 1.5% for in-state undergraduate students, and 3% for non-residents. First-year undergraduates would pay roughly $11,837 in tuition and fees, or $178 more than the current year. Non-residents would pay $36,001, or an additional $1,064 per year.

The 1.5% increase is the lowest since 1984, Sullivan noted. [Last year, regents approved a 5.6% increase, with regents Julia Darlow and Denise Ilitch dissenting.]

Tuition rates for both in-state and out-of-state graduate students will go up 2.8% –or $498 per year for in-state graduate students, $1,000 per year for out-of-state students. A tuition decrease of 15.4% for doctoral candidates will keep tuition revenue neutral, Sullivan said, due to a new continuous enrollment policy that requires students to pay tuition throughout their candidacy. [Regents were briefed on that policy change, which has been controversial among graduate students, at their December 2009 meeting.]

Tuition for UM and peer institutions. (Image links to larger file.)

Sullivan put the tuition increases in the context of peer institutions, noting that UM’s increase will bring its tuition rates to fourth among Big Ten universities. She also compared tuition for out-of-state students with a range of private universities, noting that UM tuition ranks near the bottom.

She ended her presentation with a caveat: If the state appropriations turn out to be lower than projected, the administration might return to regents to request a mid-year tuition increase.

Sullivan said the university takes very seriously its responsibility to students to keep tuition increases to a minimum. This budget does that, she said, while also ensuring continued quality.

Comments from the Regents

There was no discussion of the budget proposal, but several regents read prepared statements or made remarks before the vote was taken.

Julia Darlow, who voted against tuition increases last year, expressed support for the entire budget, but directed her remarks specifically toward the budget for the Ann Arbor campus. The limited tuition increase of 1.5%, coupled with significant increase in financial aid, show that the university is reaching out to hard-pressed Michigan families, she said – they know how difficult the economy is. This year, the university is also proposing a huge amount of help for middle-income families as well, she added, citing the new Economic Hardship Program that will add $500 in grant aid to qualifying students. Darlow said she did her own calculations, and was satisfied that, in fact, many families would be paying less in tuition than they do now. It’s not a resting point, she said, but it’s a step toward making the university accessible to all.

Regent Denise Ilitch talks with Tim Slottow, the university's CFO, prior to the start of the June 17 board of regents meeting. Ilitch voted against tuition and fee increases, as well as the overall budget for FY 2011.

Citing the challenges of Michigan’s economic crisis, Denise Ilitch argued against the tuition increase, saying that the university must solve its budget crisis from within, not on the backs of working-class families. She noted that she voted against increases last year, and would do the same this year. The university needs to be more innovative in finding ways to control escalating tuition. Michigan families are strapped, and with each dollar increase in tuition, the university limits the low- and middle-income students who can attend. The price of admission limits the economic diversity of the student body, she said. Ilitch acknowledged that the administration and regents have made progress, including more financial aid, a lower rate of tuition increase and an effort to cut costs – she noted that many executives at the table had foregone salary increases. “Yet we can do more, and we must lead by example.” It should not be the assumption that tuition is raised, she said, adding that the university saw new revenue this year that isn’t being passed on to students. Other universities have stepped up to control tuition, and UM should do the same. She said she’d keep prodding to make sure they did more.

Andrew Richner said he was happy and proud that his son will be one of the 6,000 or so freshman coming to UM in the fall. “I’ll be awarding him my own personal regents scholarship,” he joked. “I hope he appreciates it.” Richner said that’s why he has a very keen interest in this budget, and believes it balances the interests of affordability and accessibility, while preserving quality.

Libby Maynard said she would also be supporting the budget. She agreed with Darlow that it wasn’t an end game, but she felt that the budget preserved the quality of the institution.

Larry Deitch described the budget as restrained. He pointed out that regent Andrea Fischer Newman had been the first to advocate for endowing the general fund budget. He said he shared Ilitch’s passion for working families, and noted that no one worked harder than Darlow in coming up with a budget that balanced all of these interests. He planned to vote for the budget because they need to keep an eye on the long-term. Michigan is in the midst of an economic crisis, but they’ve lived through these before. And when the university celebrates its 200th anniversary in 2017, they’ll still be here, he said, leading the state and the world. They need to balance the needs of the people in the short term with the needs of the institution in the long term, Deitch said. The value of a quality education can’t be underestimated, he said, and unfortunately, it’s more expensive than they’d like it to be.

Votes on the Budget, Tuition, Fees

The board then voted on three budget-related items: 1) The university’s 2010-2011 revenue and expenditure operating budgets, which includes the general fund, designated fund, auxiliary activities and expendable restricted fund; 2) the Ann Arbor general fund operating budget; and 3) Ann Arbor tuition and fee rates.

The items passed, with dissent from Ilitch and Newman.

The budgets for the Flint and Dearborn campuses were presented separately. Both UM-Flint and UM-Dearborn had proposed a 3.9% increase in undergraduate tuition and fees, and a 2.9% increase in graduate tuition and fees.

Before the vote on these items, Newman commented that she would be supporting those increases, even though she had voted against lower tuition hikes for Ann Arbor. The reality is that the Flint and Dearborn campuses have less opportunity for bringing in new revenue, she said, compared to the Ann Arbor campus. The budgets from the three campuses aren’t intertwined, she noted, and Flint and Dearborn don’t get money from Ann Arbor. Newman said she was very aware of how important the general fund revenues were to Flint and Dearborn.

The tuition increases for UM-Flint and UM-Dearborn were approved, with dissent from Ilitch.

The board unanimously approved several fee assessments, which were not raised for the current year. They are, per student: 1) $7.19 to fund the Michigan Student Assembly; 2) $6 for Student Legal Services, 3) $1.50 for school/college student government organizations; and 4) $171.20 for the University Health Service.

UM Hospitals and Health Centers Budget

Doug Strong, CEO of the UM Hospitals and Health Centers, made a presentation on the FY 2010 budget, which ends June 30, as well as a budget plan for FY 2011. He began by noting that UM is the only health system in Michigan that serves people in every county throughout the state.

In looking ahead, he outlined some challenges and risks faced by the system, including a slow economic recovery and the impact of uncompensated care. There’s been a 17% increase in uncompensated care within the system in the past year, and a higher percentage of patients are being covered by government plans, including Medicare and Medicaid, which reimburse at lower rates than private insurers. Other risks include the consolidation in the industry – as other health care systems merge, that threatens UM’s referral base, he said. The state budget’s impact on the Medicare program is another concern, Strong said.

Completing the new C.S. Mott Children’s and Von Voigtlander Women’s Hospital is another challenge, Strong said, and they look forward to opening the facility in the fall of 2011. He also cited the uncertainties and impact of recently passed federal health care reform as a challenge the system will face.

Revenue for the current fiscal year is expected to reach $1.975 billion – next year, it’s expected to top $2 billion for the first time. This year’s operating surplus is expected to be $66 million, for an operating margin of 3.3%. Next year, the system is projecting a surplus of $83 million, for a 4% margin. The numbers for FY 2011 are premised on a nearly 6% increase in revenue, while keeping expenses down. Payroll for the coming year is projected to be $1.075 billion, up 4.6% from the current year.

Strong said the system remains financially strong, but needs to generate cash to invest in the future.

Vote on the UM Hospitals & Health Centers Budget

Regents had no questions or comments on the budget, which they unanimously approved.

Athletic Department Budget

The regents are not required to vote on the athletic department budget, but they heard a brief presentation by athletic director Dave Brandon. The department’s current cash flow is sufficient to sustain a healthy operating margin, he said, describing the budget as fairly conservative on the revenue side – they’re projecting $105 million in revenues for FY 2011, with $100.3 million in operating expenses. That leaves a projected operating surplus of $4.73 million. For the current fiscal year, which ends June 30, the department expects a $16.1 million operating surplus on $100.9 million in revenues.

Ticket sales account for the largest chunk of revenues – $38.19 million for FY 2011, including $32.5 million from football alone. Football revenues will take a hit because Michigan will have one fewer home football game this season, Brandon said, with only seven games played in Ann Arbor. This year, ticket sales brought in $38.26 million. An additional $11 million is anticipated from premium seating at Michigan Stadium.

The department expects to get $20.22 million in FY 2011 from Big Ten conference distributions, including $16.59 million from the TV broadcast of football and basketball games. This year, conference distributions accounted for $18.35 million in revenues.

Total debt – now standing at $175 million – has increased, Brandon said, primarily because of the Michigan Stadium construction project. The FY 2011 includes debt service payments of $9.226 million – $2.84 million in principal and $6.38 million in interest. The balance on the project as of June 2010 is $147.38 million. Two additional projects – Crisler Arena renovations and the adjacent Player Development Center – will increase debt to $215 million.

Endowment balances as of March 2010 stood at $56 million, Brandon said.

The FY 2011 budget includes a $1.5 million contingency line item, Brandon noted, which he said affords him the flexibility to restructure the department, as incoming athletic director. Brandon took over the job from Bill Martin earlier this year.

The athletic department budget also includes a $2 million transfer to the university’s need-based financial aid fund for non-athlete UM students. For the current year, the department transferred $1.6 million into that fund.

Construction, Facilities Projects

Regents approved several infrastructure-related projects, with no discussion. They include:

• $4.8 million for the annual Information and Technology Services maintenance and replacement program. Major project include replacing the networking infrastructure that supports the university’s data network, and upgrading the campus voicemail systems.
• A $56 million “deep” renovation of Alice Crocker Lloyd Hall, which is located on Observatory just south of Ann Street and houses about 560 students. Integrated Design Solutions LLC will design the project.
• A $1.6 million repair of Burton Memorial Tower, to be completed by the fall of 2011. The work will include repairs to the concrete and steel structure that supports the 55-bell, 12-ton carillon on the tower’s 10th floor – the carillon will be silenced during the project. In addition, workers will replace and waterproof the bell chamber floor, and replace the transmission system on bells affected by the structural work. This is only the second time that the carillon has been silenced in the tower’s 75-year history – the first time was in 2006, when a pair of peregrine falcons were spotted in the tower. Tim Slottow, UM’s CFO, told regents that workers would take care to accommodate the falcons. The engineering firm of Simpson Gumpertz & Heger Inc. will design the project, which also includes exterior work.
• A $1.7 million renovation of the molecular beam epitaxy (MBE) lab in the Carl A. Gerstacker Building at the College of Engineering. MBE is a procedure used in the design and manufacture of semiconductors, photovoltaics, and other devices.

In addition, regents acted on seven conflict-of-interest items. State law requires that regents vote on potential conflict-of-interest disclosures related to university staff, faculty or students. The items typically involve technology licensing agreements or leases, but cover other issues as well. This month’s batch, for example, included disclosure of plans by UM’s Office of New Student Programs to buy beverage break service during parent orientation sessions from Thayer Street Ventures. The item required a vote because Mark G. Pavach, a UM Health System employee, is a partner of Thayer Street Ventures.

There was no discussion of any of these items, which were all unanimously approved.

Additional Misc. Approvals

Regents unanimously approved several other items, without comment. They include:

• A new School of Nursing degree program – the doctoral of nursing practice.
• Renewal of the interlocal agreement for the Washtenaw Community Health Organization, a joint effort between UM and Washtenaw County. [The agreement has previously been approved by the Washtenaw County board of commissioners at their June 2 meeting.]
• The FY 2011 business plan for the Michigan Health Corp., a nonprofit entity that’s part of the UM Health System.
• Establishing a new regental committee on health affairs. Currently, there are two regental committees: the finance, audit and investment committee; and the personnel, compensation and governance committee.

Teresa Sullivan, outgoing UM provost.

Farewell to Teresa Sullivan

Earlier in the meeting, regents honored Teresa Sullivan, who was attending her last meeting as UM provost and executive vice president for academic affairs. In opening remarks, president Mary Sue Coleman noted that Sullivan is at the heart of the budgeting process, and expressed deep gratitude for her leadership, acumen and counsel. Coleman also highlighted Sullivan’s sense of humor, “which is more than required in her position.”

Regent Andy Richner, citing the budget challenges that the university has faced over the past few years and its ability to manage them well, joked that they are now “victims of our own success – we’ve lost our provost.” Sullivan has been appointed as president of the University of Virginia, starting Aug. 1. She’s leaving UM at the end of June.

Richner read a resolution in her honor, which highlighted her role in identifying funding for the hiring of 100 new tenure-track faculty, developing a systematic process of reviewing capital projects within the schools and colleges, and establishing task forces on cost reduction and revenue enhancements, among other achievements.

In thanking regents, Sullivan said that she and her husband, Doug Laycock – a UM law professor – “have enjoyed every day in Ann Arbor.” She thanked the board, her colleagues and staff. Regents and others in the boardroom gave her a standing ovation.

Public Commentary

Renee Echols was the only person to speak during the public commentary portion of the meeting. Identifying herself as a doctoral candidate and secretary for the Graduate Employees Organization, Echols told regents in the coming year the GEO will be entering contract negotiations with the university, as they do every three years, and they’d be coming to the regents to bring up issues related to that.

Renee Echols, an officer in the Graduate Employees Organization (GEO), spoke to regents during public commentary.

One concern is the issue of accessibility and accommodations for graduate student instructors with disabilities – she noted that she is visually impaired. The university has an excellent system of accommodation for students, she said, but that doesn’t extend to graduate instructors. When accommodations are requested from a department, they are usually turned down, she said, mainly due to a lack of understanding of what constitutes a reasonable accommodation.

In their upcoming contract negotiations, the GEO hopes to propose some procedures to help solve this problem, Echols said. Specifically, they’d like to develop concrete processes by which graduate instructors can request accommodations through their departments.

Denise Ilitch asked Echols for examples of requests that had been turned down. Echols said she’d twice been turned down for a request to have an assistant in the classroom to help during a course she was teaching. Other graduate instructors with chronic pain issues had requested a specific type of chair to use while teaching – those requests had been turned down, too.

Julia Darlow expressed concern, and asked the university’s general counsel, Suellyn Scarnecchia, whether graduate student instructors were considered as employees under the Americans with Disabilities Act. Scarnecchia said this issue hadn’t been brought to her office yet, and they’d follow up on it. It’s not just a matter of contract negotiations, she said – there’s a lot of law that applies to these issues.

Libby Maynard said the issues that Echols raised are essential to making the university what they want it to be – an inclusive institution.

Present: Mary Sue Coleman (ex officio), Julia Darlow, Larry Deitch, Denise Ilitch, Olivia Maynard, Andrea Fischer Newman, Andy Richner, Martin Taylor, Kathy White.

Next board meeting: Thursday, July 15, 2010 at 3 p.m. in the Fleming Administration Building, 503 Thompson St., Ann Arbor. [confirm date]