Greetings —

Last week, I provided testimony on the University budget situation to the State Senate Higher Education Sub-Committee on Higher Education:

My primary message to the Senate sub-committee indicated that the state has presented us with a budget proposal that is a short-term fix during the current economic downturn. However, our true need is a long-term solution to the funding situation for higher education. If we are going to maintain strong institutions, we must have stable funding.

We are assessing the current budget proposal the state has presented. The plan would return a portion of the 2004 mid-year cut and mitigate the severity of the reduction in the 2005 base appropriations, while requiring us to limit the tuition increase for resident undergraduates.

Under the terms of the proposal, the University would realize a reduction in its ongoing state support by $43 million since 2002. Also, we will have had to accommodate $19.2 million in mid-year cuts over the past two years.

The Provost and I are engaged in budget planning with the vice presidents and deans. Our analysis indicates we will need to cut a minimum of $20 million from the 2005 operating budget in addition to the deep reductions previously instituted.

We have developed a set of guiding principles that will help us make decisions about the best way to proceed with the recent budget eductions. Our core principle, now as well as last year, is to maintain the high quality and excellence of the University, as stated below:

1. The outstanding quality of academic programs, both teaching and research, and the contribution of non-academic programs to that excellence will be paramount in budget decisions. Restructuring of some programs may be necessary. The academic excellence at the University of Michigan is unparalleled and must remain so.

2. Financial aid will continue to be a University priority; we are committed to assuring that a U-M education is affordable for students and their families.

3. Short-lived or illusory savings arising from cutting activities that are self-supporting and growing, such as clinical care, will be avoided.

4. Alternative revenue sources that may be enhanced, most notably, fundraising, will be emphasized.

5. The costs and consequences of our activities must be evaluated so that the highest priority activities may be funded and where necessary, lower priority activities eliminated. In doing so, resources will be generated to make new investments in vital areas of research and teaching, and in our faculty and staff, as well as to meet current budgetary challenges.

6. Collaborative approaches will be encouraged to enhance quality, eliminate duplication, consolidate programs and services, be prudent in expenditures, examine cost effective purchase of services, and utilize all University resources efficiently and effectively.

I will keep you informed as we proceed in our discussions regarding the budget situation. If you want more information on the state and university budgets, please visit http://www.umich.edu/~urel/budget/.