Tuesday, February 14, 2012

It’s my great pleasure to join you to address this most important topic, investing in education. No doubt you have heard many facts, figures, concerns, and ideas over the course of this conference regarding how our country and our states individually need to invest more in education. You certainly won’t get an argument from me, and I will address these issues in a bit. But I want to emphasize that first and foremost, the most important investment in higher education is the personal one. I’m not really talking so much about individuals paying their full way through college. What I’m talking about is higher education as an investment—intellectual and cultural as well as financial—in one’s future. I believe that the American dream is still a powerful concept and very much alive in this country. I can think of no better way to achieve the American dream—of personal fulfillment, professional success, and a better life for oneself and one’s family—than attending college.

I can speak of this from personal experience. I come from a family that strongly believed in the power and privilege of education, even though my parents were not able to pursue its higher levels. My mother barely finished high school before she entered the workforce. My father, an immigrant from Czechoslovakia, only finished the eighth grade. But the spirit of learning was fierce in them. Upon arriving in this country at age 12, my father spoke no English. He was mortified—but his solution was to read the dictionary and learn English on his own. Within a year, he was placed in the sixth grade. Although my parents’ educational attainment was limited, they passed their strong beliefs in learning on to their children. I was the only child in my family to go to college, but they supported me wholeheartedly, even when it was financially difficult.

As I’m sure you can guess, my dream was not initially to become a university administrator, let alone a president. My dream was to be a scientist. That had been my dream since watching the Sputnik program unfold on TV. In the late 1950s and throughout much of the 1960s, it was considered patriotic to pursue a career in the sciences, if for no other reason than to win the space race back from the Soviet Union. For a young woman in the 1960s and 1970s, however, science turned out to be an interesting and sometimes tough hill to climb.

What provided me the key to opportunity, though, and what led me to my success as a scientist, a university faculty member, and ultimately a university president, was a scholarship—and a scholarship at a public university, the University of Kentucky. In fact, my entire career—from my undergraduate degree, to my graduate degrees, to my postdoctoral work, to my faculty appointment, to my administrative posts—has taken place in public universities.

I have lived the American dream. I think I can safely say that many—if not most—of you here feel the same about the success and privileges that you have garnered throughout your careers and lives. Both my family and I did make sacrifices—of time and treasure—in order to set me on the path of fulfilling my dreams and ambitions. But even so, I likely could not have done so without the excellent public higher education system that our country has been known for since the nineteenth century.

Today, our country is still a nation of immigrants. People from all over the world come to our shores to build a better life for themselves and their children. We are also a nation full of bright, ambitious, hardworking native-born citizens who have all the intellectual and character resources to be great successes but not the financial resources to do so independently. For these people, and for many more, the American dream is still very much alive. As a society, we owe it to them to support that dream and provide the educational opportunities that I—and I’m sure many of you—were able to enjoy.

In this day and age when costs are skyrocketing and public support for higher education is waning, we as a country and society are moving in the wrong direction. As we face our economic, social, cultural, and global challenges of the twenty-first century, we need to do all we can to provide more, not less, access to higher education.

Let me briefly sketch out some of our current situation. I know you’re all pretty familiar with this, so I won’t dwell on it. I will then move on to a discussion of how we are committed to providing as much access as possible to a University of Iowa education in today’s environment. And in the process, I’d like to poke holes in some of the myths that are out there about what colleges and universities are and are not doing in terms of where we are investing our resources.

The Association of Public and Land-Grant Universities—APLU—has been studying, analyzing, and discussing these issues for some time. My comments will be focusing mostly on our public and land-grant universities and state university systems, which is what I have been asked to talk about. However, the situations I describe are often the same for other types of institutions, and even if they are not, all of our situations are interrelated and affect each other.

Through a series of meetings with member institutions and resulting papers, APLU has cogently expressed where we are today. In late 2010, APLU President Peter McPherson delivered a summary of the organization’s work on this point to the National Research Council Division on Policy and Global Affairs, Board on Higher Education and Workforce, Committee on Research Universities. Let me share with you a few of the points he made.

Public research universities educate 85 percent of the undergraduates with research university degrees and serve as the primary route by which minority students (800,000 per year) receive undergraduate degrees. Although our public research universities remain strong, “many forces threaten that strength”: Real state funding per student has declined steadily over the 20-year period from 1988 to 2008. During the subsequent two years, when the Great Recession hit, the average state cut higher education appropriations by an additional 6.9%. Just last month, APLU reported that per-student funding for major public research universities was reduced by 20 percent during the past decade. APLU also reported last month that the National Science Board found “state funding for the top 101 public research universities declined by 10 percent between 2002 and 2010 in inflation-adjusted dollars.”

Moving away from APLU for a moment, Illinois State University’s annual Grapevine study released last month reported that state appropriations for colleges and universities declined by an average of 7.6 percent for the current year, 2011-2012, the largest such decline in at least fifty years. According to the study, 41 states cut their spending, with New Hampshire topping the list at an incredible 41 percent cut, and a full third of states seeing double-digit drops. Of course, much of this decline was a result of the depletion of federal funds from the 2009 stimulus legislation, but in the end, 29 states allocated less money to higher education this year than they did in 2006-2007 before the recession began.

While federal stimulus funding has played a part in the recent ups and downs of public higher education funding, APLU points out that “public universities have largely substituted tuition increases for lost state funding.” Nearly every institution, no matter what type, has certainly faced funding challenges, especially in recent years, including our private college and university partners. But President McPherson points out that, according to the APLU study, “Over the last several decades a large gulf has opened between funding per student at public and private research universities. “While real state appropriations declined for the public universities, private universities raised tuition in nominal terms at a faster rate than publics and some had much more success at raising endowments. In other words, private universities had the steady financial base of tuition in contrast to the public universities with their combined base of tuition and eroding state appropriations.”

These disparities do show up in real ways. As President McPherson says, “As a result of these financial stresses, faculty salaries at public universities have declined from parity with those at private research universities in the late 1970s to about 80% of their level now. “Faculty course loads at public universities also have increased relative to those at private universities. The test scores of students recruited to public research universities have declined relative to the private universities in part based on the relative capacity to provide merit scholarships.”

At an institution like Iowa, we enjoy an additional buffer that many of our fellow institutions with a broader teaching mission do not—federal research dollars. But even those public funds do not support what they used to. According to APLU, “Federal Government compensation for the overhead arising from research grants has been artificially limited and rate setting and administration have been uneven across regions and agencies. Research F&A payments are no longer sufficient to compensate for the fair share of research costs which they were originally designed to cover. The subsidy that universities provide for federal research has increased over time and the ability to sustain this subsidy is in question.”

Even as public institutions’ financial squeeze increases, we are teaching more and more of the nation’s undergraduates. According to APLU, “In 1947, private colleges and universities enrolled about 50% of four-year students in the country, and today it is about 20%.” Affordability and access are becoming only more and more important at our public institutions of higher education. Let me turn my attention to Iowa and the University of Iowa specifically. And as I do so, I want to keep all of this information in perspective, both for us individually and for higher education overall. For even though we have our challenges and problems, many of the popular charges against today’s colleges and universities don’t fully bear up under scrutiny.
In the last three years, state dollars for Iowa’s public universities were slashed by about 25%. That included two mid-year reversions, which played special havoc with our planning and budgeting. The UI’s appropriated budget fell below the level of the mid-1990s, adjusted for inflation. At the height of the state budget slashing during the recession, cuts over a mere 15 months wiped out the appropriation increases of the previous 15 years.
Despite these staggering losses, I know our story is not unusual. We are worse off than some and probably better off than others. Regardless of the relative extent of our financial difficulties, public universities nationwide are confronting fundamental questions about not just where the money is going to come from, but the larger—and admittedly related—questions of what our very character is to be, and who are to be our partners in fulfilling our mission.

For public higher education, the vast majority of our institutions have been partners with our states. We’ve seen the shift from state-supported, to state-assisted, to what now feels like state-located institutions, at best. And while there is still a relationship that exists in the State of Iowa between our universities and our citizens, it is now largely with those citizens who pay tuition and not with the citizenry as a whole. Despite this shift in support, we continue to say—and we mean it—that our primary mission is to provide a high-quality, accessible education for Iowans (especially) who are prepared to go to college. And, as with so many of our public institutions in this country, we’ve now seen the pendulum swing wide, such that tuition dollars make up the majority of our General Education Fund while state appropriations continue to be diminished. In fact, state appropriations now account for less than 8% of our total operating budget.

So what have we done? Many institutions like Iowa have simply outgrown or outstripped the aspirations of and ability to be supported by our states alone. Perhaps it’s because at Iowa we were the beneficiaries, so to speak, of the worst natural disaster in our history shortly before the economy collapsed that we were better prepared than many for what is transpiring.
Having suffered nearly $1 billion in damage from a flood three summers ago that affected more than 20 buildings on our campus—or almost three million square feet of residence hall, classroom, research, office, and common space—we began pulling back on budget almost immediately. We had to do so until we knew the extent of the damage and the extent to which we could or would be made whole by state, federal, and private insurance and other funding sources. While we were in the throes of recovery, the economy collapsed. As a result, while flood recovery money was flowing in, state appropriations began to flow out. When faced with disaster, be it physical or economic, you set and hold to priorities that take a long view, not a short view. This was true for our flood recovery, and it’s true as we have attempted to navigate the economic disaster.

In the context of the state budget crisis, student success will and must continue to be one of our top priorities. However, we are no longer looking to the State of Iowa even for improving—or maintaining—the excellence of the undergraduate education we offer. Regretfully, we must look more and more to our students and families through tuition revenue. Similarly, we remain committed to providing affordable and accessible higher education to all Iowans, but, frankly, we’re a bargain to anyone who looks at us from anywhere in the world. Currently, Iowa boasts the second lowest resident tuition in the Big Ten. In fact, Iowa residents pay $3,600 less than the average in-state Big Ten student. As with many of you, as tuition goes up, so does financial aid. And we’re committed to providing more and more of that aid in the form of need-based aid or a combination of merit and need.

We are certainly cognizant of the student debt problem in our country. According to the latest Project on Student Debt report, Iowa as a state ranks third in average debt and fourth in percentage of students with debt. University of Iowa students actually carry somewhat less debt than Iowa State students, but even so—and not to minimize the student debt problem—our state’s percentage of students with debt is at 72%. That puts 28% of our students graduating college with no debt. Nine states have fewer than 50% of their students carrying debt, with Hawaii at the rear (or front) at 38%.

An important question, too, is exactly what our students are paying for with their tuition. At Iowa, nearly all of our tuition goes straight back to students into their educational instruction and infrastructure and our financial aid set-aside. One major reason for this is that Iowa has been assiduous in making sure as many of our ancillary enterprises as possible are self-funded. That is currently the case with our residence halls and hospital enterprise. And thanks to a very strong and very loyal fan base, Hawkeye athletics is one of the few intercollegiate programs in the country that is truly and entirely self-supporting.

One of the criticisms our universities face more and more today is that tuition is skyrocketing because of student luxury amenities. Two years ago, Iowa did open our $69 million state-of-the-art Campus Recreation and Wellness Center. But we did not do so unless we were very clear that the students wanted it and were willing to pay for it. They did, they were, and they are. Students do pay a fee for the center, but it is a fee they were willing to pay. And, in any event, I really don’t consider a robust, quality wellness center a “luxury.” The health and well-being of our students—and our entire campus community—is necessary to the education we provide and the effectiveness of the work that we do.

Despite the fact that the price of public higher education remains, in most states and sectors, an absolute bargain, the national tide of calls for controlling higher education costs will not recede soon. We have been painted, fairly or unfairly, with the brush of out-of-control price increases and bloated spending habits. Many—maybe even most—Americans believe that the cost of attending college is far greater than the reality, often because we see headlines touting the fact that a number of private universities now have tuition that exceeds $50,000 a year. It’s not a huge leap to begin to believe that college in general is incredibly expensive.

Public higher education cannot and should never just shut out those who cannot pay. That violates the trust that citizens and their universities have held together, often since the founding of a state. We were reminded of the scope and scale of this issue when President Obama recently held a meeting with American higher education leaders at the White House to discuss this very issue—college access and affordability. But we also must keep perspective on the reality of price tags versus real costs.

It’s been a little while since the last comprehensive study of college access and affordability in the United States, and the report to Congress on this issue by the Government Accountability Office is now a few years old. But it does contain some surprising numbers that we should keep in mind, even if they may have shifted some. According to the GAP report: Nearly half of all students attended institutions where the published average annual in-state tuition and fees were less than $2,550. Only three out of every 100 students were enrolled at institutions where the average annual tuition and fees were more than $25,000 per year. Seven out of 10 full-time students received some sort of financial aid. Overall, 44% of full-time students faced tuition charges less than $3,000 after grant-aid was awarded. Aid is available for middle-class as well as poorer families. At public four-year colleges, students with family incomes between $40,000 and $80,000 received financial aid grants averaging $3,400. At private institutions, grant aid for that income group averaged $9,500. Most, if not all, colleges and universities with the largest endowments covered approximately 80% of the cost of tuition.

Let me step back a moment, return to the University of Iowa, and address other priority areas of the University besides undergraduate education, and this in turn will illustrate how some of us can weather and are weathering this storm in spite of sagging state support. In fact, for Iowa, I have more good news to tell than bad, which unfortunately makes some in our state believe that there is still ample opportunity to take back from the university.

Even in the midst of difficult economic times, our research funding remains strong. Two or three years ago, we were able to post 10% back-to-back annual increases, and even last year, as stimulus funding came to an end, we held our own.

In addition to that, our private fundraising continues very strong, even in the midst of recessionary times. Gifts and gift commitments made to the UI Foundation and the UI approached record levels in FY 2011, with an increase of 12.2 percent over the amount raised during the previous fiscal year. Our fundraising total last year ranked second only to the final year of the university's $1 billion capital campaign a few years ago. In addition to that, these gifts came from a new record number of contributors, whose donations constituted the second-highest number of gifts in a year in the UI Foundation's history.

While some areas of our universities are holding their own, and sometimes even experiencing robustness, others—including their core functions—have been significantly reduced because of restricted resources. At Iowa, we’ve eliminated more than 400 positions from the university that previously had been supported by the General Education Fund, largely through attrition and incentivized early retirement programs, saving us an estimated $80 million over five years. At the same time, we’ve increased efficiency. For example, we’ve managed our telecommunications and IT staff down while increasing their activity level. We’ve continued successful joint purchasing with our fellow Regents university institutions while looking for additional opportunities to manage down purchasing costs. We’ve managed downward this way also because we have become ever more efficient electronically, with integrated business systems across the entire enterprise. And on the academic side of things, we’ve terminated programs that were not attracting students and were not central to our mission.

One of the biggest myths out there is that college costs are going up so much because of growing administration and salaries. The first point to make is that competitive salaries for talented faculty, administrators, and staff are necessary to provide the excellence our public expects of us. But that doesn’t mean administration needs to be extravagant or top-heavy. At Iowa, we have one of the leanest administrations for an institution our size, and our costs are modest. What is presenting the greatest challenge to our budget—which I know everyone is feeling and experiencing—is the cost of benefits. At Iowa, we have tackled that issue head-on. We have completed a major overhaul of our benefits system, which has realigned both the benefits themselves and the costs to the university so that we could realize savings both this year and in the coming fiscal year 2013.

I’m proud of the good news about the University of Iowa that I am able to share with you and have been able to share with our constituents back home. But this is a double-edged sword. For many, at least on the surface, the University of Iowa appears to be perfectly fine. We all know that this is very much not the case. But we at public research universities must resist the temptation to think only for the short term and not plan for a time when we come out on the other side of the crisis stronger, more focused, and poised to address our nation’s most pressing needs even more robustly than we are now.

As I said at the beginning, we cannot forget that we remain among the greatest hopes—if not the greatest hope—of the fulfillment of the American dream for millions and millions of our nation’s citizens. But given the seismic shifts in where our dollars are coming from, the questions we need to ask ourselves are obvious: Has the traditional partnership that we have historically enjoyed with our states come to an end? Should we—or can we—detach ourselves from the dramatic ebbs and flows of state budgets that are so dependent on politics and local economic conditions?

So where are public universities to look for revising their funding models in order to keep the American dream alive? Certainly we need to look internally and make sure we are conducting our business in the most efficient, productive, and responsible ways possible. We have done that—and are continuing to do that—at Iowa. But we also need to expand our partnership—as we have been doing at Iowa and institutions like ours. Traditionally, the public university partnership was between the state and the student, with the state taking on the lion’s share of the expense. We know that’s no longer feasible, and there certainly is a limit to the share of a public education that we should expect our students and their families to burden. Inside Higher Ed had a brief story just last week about a new book coming out in April from Stanford University Press called Public No More: A New Path to Excellence for America’s Public Universities. This book is co-authored by Andrew Policano, dean of the business school at the University of California at Irvine, and Gary Fethke of my own University of Iowa, who was in fact our former business dean and interim president preceding my own tenure. Professors Fethke and Policano state unequivocally that the traditional subsidies we’ve enjoyed from states, now cash-strapped, are a thing of the past. They argue that we need to work on strategic shifts, including identifying ways that allow an institution to stand out from the competition, such as the University of South Carolina’s international-business focus and Babson College’s emphasis on entrepreneurship.

I agree that we need new, strategic thinking. Even more broadly than focusing on niche strengths, we also need to expand the higher education partnership, even in state public institutions. And I believe the most important partnerships are with two sectors that I mentioned earlier—private dollars and the federal government.

As I noted previously, these are actually the two areas where we are doing quite well at the moment at Iowa, providing much-needed resources, morale boosts, and, quite frankly, a bright light in an otherwise dark tunnel. For some, tuition will become or continue to be a way of maintaining strength and quality. The University of Michigan and Pennsylvania State University practice perhaps the most well-known high-tuition/high-financial-aid business models, in which students who can afford to do so pay higher tuition so that more aid is available to those who can’t. Other universities are and will look to models like this if they can persuade their constituents of their wisdom. The Virginia partial privatization model is also being looked at more and more, as is Cornell University, where three colleges and a graduate program are public and seven colleges are private. Who among us has been able to resist the urge to apply differential fees to majors, often professionally oriented, when the opportunity has arisen? Whether or not a school plunges wholly into a public/private model, the widespread trend is clearly toward tuition differentials and at least some privatization of certain institutional sectors.

One other aspect of privatization is increasing the number of nonresident students who pay full tuition. Here again, Iowa is actually a bit different from some institutions. We are a small, aging state, and the number of Iowa high school graduates is declining rather than increasing. On the one hand, that is not an enviable situation, either for our state or for the university’s pool of prospective students. At the same time, we are only three hours from the Chicago area and an attractive option for many Illinois residents. As a result, demographics have made our institution one in which our nonresident population has steadily increased over the years, approaching half of our student body, with roughly half of our nonresidents from Illinois. This has helped our tuition situation greatly while we continue our admissions policies for Iowa residents—guaranteeing admission to all Iowa residents who meet our Regent institution admissions criteria. Many states are looking to increased numbers of nonresidents as a viable funding source, but it’s true that such a strategy can change the very institutional mission itself. Some schools and systems are even looking at capping the number of in-state students who receive in-state tuition. One might begin to ask just how far we can go poaching each other’s students before some states experience irreparable harm.

This last point emphasizes that we must take a hard look at the big picture: national higher education needs. For many of us, the federal government has played an increasing role in our institutions. Most of our research dollars at Iowa come from the federal government, predominantly the NSF and NIH—and right now we get well more than twice as many dollars from these agencies than we do from our state in appropriations. In the last couple of years, we have received an infusion of federal ARRA funds, and we are continuing our partnership with FEMA as we rebuild our campus from the flood

In the short-term events of the past couple of years and in the longer-range trends of more recent years, the federal government has become a more significant partner in higher education, especially at the research university. Mark Yudof and his colleagues within the University of California system have spoken eloquently, passionately, and with great insight on this topic. Research dollars are critical to the scientific and technological advancement of our nation’s intellectual infrastructure and economy. But those dollars rarely, if ever, trickle down to the education and training of our undergraduates and the development of a highly skilled mass workforce for our society. Collectively, those of us in this room educate thousands—and, over the years, millions—of undergraduates. As UC-Berkeley Chancellor Birgeneau and Vice Chancellor Yeary have noted, “The top 10 publics have more than 350,000 undergraduate students. By comparison, the eight Ivies educate less than a sixth of that number. Public universities with strong state support have an admirable cross-section of ethnically and economically diverse students. In essence, their student bodies look like America.” Is it indeed time for the federal government to play a significant role in the basic operating support of our public research universities? Is a hybrid federal/state model, at least for our greatest public research and teaching universities, essential not just to higher education, but to the nation itself?

Over 150 years ago, the University of Iowa opened its doors to 124 students and a handful of faculty. These mere dozens of students and teachers had admirable ambitions to become that frontier state’s leaders. Today, the University of Iowa educates 30,000 students in myriad disciplines and professions who will go on to careers within our state, but also across the nation and throughout the world. At Iowa, we conduct nearly half-a-billion dollars’ worth of research with global implications. Today’s UI is a remarkable achievement, but it is far beyond the wildest imaginings of the small group of state legislators who founded the University in the mid-nineteenth century. It is a national university—and in need of consistent, dependable support for both its most far-reaching innovations and its core services.

Since their inception, public universities have been conceived as partnerships. That partnership between the statehouse and the resident student has expanded greatly to include students from other states and other countries. In recent years, many of us have expanded that partnership further with more private donors and the federal government. To ensure that the American dream remains a real possibility for all, we need to continue developing and expanding these partnerships in the public university of the 21st century.