State of the University Address
President Michael J. Garanzini, S.J.
Welcome and thank you for taking the time from your busy schedules to be here. The beginning of a new academic year is always an exciting time. We at Loyola are especially fortunate to have healthy undergraduate enrollments this fall, some exciting new projects underway, such as the new Life Sciences Center now under construction, a considerable amount of planning for more renovation and expansion, and a growing sense of direction.
The new spirit on campus is the result of many factors but most of all the work of many people. As I have in each previous report to you, I want to begin by thanking Terry Richards and his colleagues in enrollment management for their successful recruiting efforts. We have, once again, a record freshman class of 1,930, an all-time high for Loyola, and record numbers of transfers. For the first time in our history, we went to a waiting list on May 1st. This freshman class is more than twice the size of our senior class, a national record in recruiting. Our residence halls are full, with approximately 3,000 students living on campus, bringing a new life to the campus community.
The orientation and move-in of these new students were expertly accomplished by Fr. Salmi, Jane Neufeld, Warren Hale and their staffs. Dean Linda Heath worked all summer and especially these past few weeks to make sure that our new students are enrolled in classes and settling into their programs. I've heard from many parents and neighbors about the professionalism and friendliness of our staff and the entire campus community. Those of you students, faculty and staff who were involved in Discover Loyola, orientation activities and move-in have built a positive and exciting atmosphere and continue our tradition and reputation of friendliness and acceptance. We are all grateful.
The first eight months of 2003 also brought some new additions to the Loyola administration team. Our new CFO, Mr. Bill Laird, joined us in February. He helped us complete the new fiscal year budget and is now reorganizing the financial services operation to better meet our needs for fiscal information and sound management. Mr. Jon Heintzelman, who came on board January 1st, continues to build a stronger and more extensive alumni and development program. Jon has recruited several professional staff who have worked with him before, and together they promise to bring new energy and insight into our development and fund-raising operation. For example, some of the plans and programs that are in process include targeted campaigns to complete the funding needed for the Life Sciences Center, endowments to enhance the Law School and the Rome Center, funds to refurbish Madonna della Strada Chapel, and complete the renovations of Piper Hall.
On this last point, the name and legacy of Mundelein College will continue to be celebrated and lived in the Ann Ida Gannon Women's Center slated for Piper Hall and the building we often call "the Sky" building will now be known as the Mundelein Center. We are studying how to more completely utilize this impressive structure and how to preserve it for decades to come. University Ministry has moved to its new home on the second floor of the Mundelein Center. Plans are in development to create a thriving and exciting complex for performing arts, student services and other academic and support operations in the underutilized space in this building.
Campus master planning continues to be the province of Wayne Magdziarz. You will be invited to consider and contribute ideas for a tax increment financing district on Lake Shore Campus's west side, especially around the Loyola el stop. The University has considerable interests and hopes for this area, everything from safety to affordable housing and retail development. In fact, in the coming year, many of you will be invited to contribute to a process that reconsiders how we use all of our space and facilities both at Lakeshore and at Water Tower. Before we add or plan further in the area of facilities, we will take a comprehensive look at what we have and how it might be used for decades to come. In addition, we've sold or removed several buildings that have little use to us now. We've incorporated into our housing stock two new student residences, Creighton Hall and Fordham Hall, or what used to be Granada Center. And, we will begin construction of a new, expanded dining hall at Simpson and a new 400-bed residence hall across the street from Simpson.
Our student residence halls are completely full and the two halls that are new to the system make excellent additions to our student life space. Fordham's lower floors house Information Systems which moved from the Administration Building in Maywood, near the medical center. The Admin Building has considerable debt attached to it and we have put it on the market. All existing offices in this four-story office complex can be accommodated in existing University-owned facilities, with the exception of a few offices belonging to the Medical Center. Parts of finance, advancement and information systems were there and the fracturing of these divisions, in my opinion, has fractured services to the University community, despite the best efforts of those who worked in Maywood.
On the academic front, Provost Facione and the deans have continued to work on a variety of projects, from the re-examination of the core curriculum and core undergraduate experiences, strategic plans for the individual schools, research support services and faculty development, and marketing the professional adult programs at Water Tower, among a dozen or more other projects.
My purpose in briefing you on all these is to assure you that progress is well under way in correcting what, in hindsight, now seem to be mistaken projects or programs that no longer serve our needs. Gradually we are leaving behind strategies of the past that were not fiscally sound or forward thinking. So, thanks to the hard work of many people, we are moving forward rapidly, more rapidly than many might have expected, to deal with fiscal and other challenges, and to regain a sense of momentum, direction and mission.
This has resulted in, or perhaps better said, necessitated a careful strategic planning process. This effort is led by Dr. Marge Beane, and is now in full swing. Planning that is linked to fiscal responsibility and sound management is of primary importance for us. We have every intention of making sure that projects and plans that are put into place can be supported and sustained by a realistic apportionment of resources, both financial and human.
But, I want to back up just a bit. Setting the groundwork for this strategic planning effort meant among other things, realignment of the budget. The University's budget for fiscal year '04, which began on July 1st, is the first balanced budget in ten years. The $34 million deficit of just two years ago was eliminated by a ten million dollar cut in operating expenses each year and a growth in revenue of approximately $7 million in each of the last two years. You all experienced the fiscal austerity we've been under. Getting control of our expenses could not have been accomplished without the good will and cooperation of managers at all levels, in our academic and support programs alike. Complicating our work and compounding our difficulties over the last three years were zero returns on our endowment portfolio.
Nevertheless, we were able these past two years to offer a 3% raise in compensation in order to keep from falling further behind in faculty and staff salaries. And, one of the biggest challenges we faced this year, besides the cuts and no help from the endowment, was a frightening growth in benefits that increased to 30% of salary last year, from 27%.
Loyola is not alone in dealing with difficult benefits decisions. Rapidly rising costs that are outstripping our ability to pay and the collapse of a return on invested pensions the past two and a half years has led many corporations like our own to face previously unseen financial drains. All corporations I know of are experiencing the same difficulties controlling benefits, especially pension funds and health benefits. In our own case, meeting pension and benefit obligations came on top of and exacerbated our already precarious and negative budget dilemma.
Unfortunately, in the years ahead, we are likely to achieve control and containment of benefit costs only by shifting a larger portion of the burden to cost-sharing plans with the employee. Again, if you follow what is happening around the country, you will know we are not alone. A UPC task force on benefits is preparing to make its recommendations to me, and we will study the potential impact of these proposals before deciding what our alternatives might be. I can assure you that we will work to protect the retirement and pension of those who worked long and hard for these benefits, and we will work hard to keep our promises to provide substantial assistance in health care.
While we may experience some relief in endowment income in the coming year and years, we must nevertheless work diligently to restore sadly depleted endowment and investment resources that dwindled over the past ten years to pay for those budget deficits. Indeed, restoring the University to full health requires us to build endowment resources back to their previous levels in the mid-90's, reduce institutional debt by half, and keep expenditures from over-taking our revenue growing efforts.
Still, you might want to press, with these larger entering classes, a balanced budget, and an enrollment picture that appears strong and steady, is Loyola now in a position to restore our previous staff and faculty numbers? Can we now return to supporting programs with budgets that approached those of the 90's?
The answer to this question involves several bits of information. First, enrollment in the freshman class may have reached an all-time high of 1,930 students, but declines in several places nearly offset any gains. CAS undergraduate enrollments are up considerably and graduate enrollment there is stable. Law is up as well. Indeed, Law has never been healthier. Medicine and nursing are healthy and growing. But other professional schools are down, and these nearly cancel the overall gain in tuition revenues.
So, the short answer is that we are not in a position to simply return to business as usual until we stabilize and turn-around enrollments in programs that are now in decline. The recent budgetary and leadership crisis was a wake-up call and a challenge to study carefully how Loyola was structured and how it supported itself in the past. The myth of abundance and healthy resources of the past was just that, a myth, and the proof is in the numbers. Unbalanced budgets, as I mentioned earlier, go back ten years. A hospital that was thriving in the early years of the last decade, was throwing off much more of what was then considered "excess income." I might add that this was money taken by the academic side of the house, a practice rightly ended in 1996, in order that the hospital might be in a better position to compete and address urgent needs for upgrades in facilities and for making itself attractive to patients and health care workers.
In addition to having a hospital that helped support University academic programs beyond those of the Medical School, back in the 90's we had an investment portfolio that was twice as large as it is now. The endowment for academic programs was supporting such things as scholarships and stipends, salaries, maintenance programs and facilities construction. Indeed, our income from hospital and endowment, as well as part-time enrollment at Water Tower was such that we rarely felt the need to approach our alumni and friends for support for these activities. Because of this, our alumni giving numbers have been historically much lower than our peer institutions, especially those, like us, with considerable academic history and prestige.
To put it another way, the FY04 balanced budget supports the present operation's size and complexity. What we now raise in tuition, grant dollars, alumni giving, and so forth, gives us what we presently have and offer. Expansion of any kind can only come with new dollars and new resources. Thus, we are in a position only to replace staff and faculty who leave or retire. Short of the expected annual rate of retirement, we will not be gaining new numbers of colleagues. I would agree with you if you said you are concerned that this pace for renewal of staff, after years of diminishment, is too slow and too potentially dangerous for comfort and for health.
We should note that our academic programs came through these stringent years relatively unscathed, except for the loss of some very talented colleagues. Nearly all programs that were offered ten years ago are still offered today. Outside of the moratorium on admitting students to the classics department's graduate program, I know of no other program closure. This is remarkable when one considers that annual deficits in the last five years ranged from $25-50 million each year. I cannot tell you how fortunate we have been that faculty preserved these programs, that they remain attractive to students, and that our academic reputation has not slipped. While we are all aware of this talent drain and how many programs can use new blood, the reputations of those who are here, who built these programs, has sustained us in the years of dwindling resources and negligible growth.
How, then, will we advance? How will we regain our sense of momentum and purpose in our academic programs and reputation? I believe that the sense of urgency that characterized the past two years while dealing with budget deficits must characterize our sense of urgency for the next agenda, that of rebuilding and re-invigorating our academic mission and purpose. It is time for us to begin work on this new project. However, I would like to further emphasize that this new project, building a new Loyola, and forging ahead with new plans and ideas must be carefully imagined and managed. I have mentioned in the past that one important task of leadership is the management of expectations.
The one clear caveat in the tasks before us is this: we must not allow ourselves to expect to look like we did in the past. We must not be deluded by an expectation that money will be available for whatever we want and will be available for us to return to what we were.
Let me be a bit more specific about the myth of the past, at least in this area of economic vitality and stability of the institution. In 1993, the year of the last balanced budget before the one we are currently in, the infusion of money from investment and from the hospital approximated $30 million. The average annual deficit over the years following the separate incorporation of the hospital continued to average $30 million. The Loyola that some imagine or remember ten years ago was built on budget infusions of that size. More importantly, the sources of that kind of extra income are now gone. These infusions distorted our institutional sense of security. Whether we knew it or not, the past was not possible to sustain. So, short of $30 million dollars of new revenues, we cannot be the Loyola of the past. We were 500 more staff and faculty then. We were relatively the same size in student population. The point is, if we creep back toward our former size in faculty and staff, without significantly larger enrollments, and new resources, we will be on the same slippery slope that got us into our recent troubles.
It would be fair to ask, however, if the enrollments continue to rise, especially as classes with higher numbers replace classes with lower enrollments, won't we have some extra resources? Yes, we will, for the next two or three years, only if enrollments in the professional schools other than law, medicine and nursing, stabilize. (By the way, I call this "the peace dividend." It is the money available now that the war of budget balancing appears to be over.)
Provost Facione and Interim Dean Crawford have lobbied strongly that the first use of any available resources should go to faculty salaries. The Faculty Council has likewise urged that we seriously examine our competitive position and even a cursory look at the comparisons with peer institutions shows we have fallen dangerously behind. We would be irresponsible if the first investment of revenues is not spent on addressing faculty salaries. Thus, if budget projections remain stable and if there are no unforeseen challenges that require this revenue, the bulk of additional dollars from the larger undergraduate enrollments will be going to compensation, especially of faculty.
The new Loyola, then, cannot replicate the programs of the past if it wants to compete with institutions that have not suffered our losses and have not been stuck for seven to ten years. If we want to experience a rebirth of interest and enthusiasm, then we must look at new models. In short, the recent past is not a guide for what we should now become. I am not saying that we should turn our backs on the past for it would be foolish to walk away from our legacy and reputation. I am saying, however, that we cannot reinvent ourselves by doing what we did ten, and twenty and thirty years ago. Academia has changed. Students have changed. The world in nearly every profession has changed.
Our programs--undergraduate, graduate and professional--need to be re-examined and re-imagined. Pedagogical innovations like the incorporation of out-of-class learning experiences, and the use of new technologies for transmitting information necessitate a different way of building a degree program. If that is to happen, new faculty reward systems, re-thinking the way we use our time as professors, focusing on the learner as opposed to the subject matter, and a host of other educational challenges, are important. Interdisciplinary collaborations and new interdisciplinary majors and fields of study are important. We need to ask: What habits of mind and skill sets are needed by school principals, government administrators, doctors, chemists, journalists, communications experts, organizational managers, et cetera, and are these really incorporated into our present program goals and requirements? In some cases, both our curriculum and our program design can be easily improved, and we can demonstrate our commitment to constant renewal and re-evaluation. But, regardless of how we perceive our programs, we have data that make it clear that we are not perceived by many potential students as having innovative, attractive or accessible programs in certain instances.
The new Loyola, or the one we create from here going forward, will need to be the product of re-imagining and re-visiting what we have been doing and what we ought to be doing. Our academic programs ought to convey our relevancy and ability to appropriate the best of the past. In essence, they must be more in line with our historic mission to serve a hungry and eager public that prizes our Jesuit and Catholic character, understands the relevance and importance of a scholarly faculty with active research agendas, and dedicated to building the city and making full use of its advantages.
To prepare for the way we will grow and invest in the future as resources become available and as we hire new faculty, we are now embarking on a strategic planning process that will require a great deal of discussion and decision-making over the next seven to eight months. Several task forces are being put in place to create this plan. One is already in operation, the task force on renewal of the undergraduate curriculum and core learning experiences, headed by Dr. John Pelissero.
We have also asked Dean Yost to begin forming a task force on the renewal of graduate programs and the creation of centers of excellence. By centers of excellence we mean the promotion and building of collaborations where we already have considerable strength and faculty interest. These centers of excellence should serve as a vehicle for promotion of research and development as well as encourage collaborations across the university and with institutions outside it. It is important that members of this task force know the University and its faculty, that they think critically and imaginatively, and that they chart out the best use of funds that could become available and multiply if we plan wisely and judiciously. Overarching vision and concrete suggestions are up to the task force. Will they call for thematic coordination of doctoral programs? For limiting numbers of programs? For building new alternatives? It is impossible to say at this moment what they will come up with. What is being handed to them is not a blueprint or a plan, but a series of challenges and questions which they will deliberate, within the confines of our estimates of resources.
A third task force will look at utilizing our Chicago institutions and collaborating with resources beyond the University. A fourth will develop the master plan for both Water Tower and Lake Shore Campuses, based on academic programming needs. A fifth will work on continuous quality improvement in financial and auxiliary services that support our academic departments, and a final task force will be assessing our needs in development and advancement in order that we might find more resources beyond tuition dollars for support of what we plan to accomplish in the next five years. The University's five-year strategic plan will be presented to the Board of Trustees for its first review in March, as we complete the goals set out in the present strategic agenda. The agenda is now nearly accomplished and will certainly be completed with the development of this new plan. There will be opportunities for input and for comment.
So, in closing, all this activity is a challenge and certainly not a drain on our energy and time. It is no drain because it has been and will continue to be realistic and built on solid data and level-headed assessments of our opportunities and challenges. It is exciting because of the talent pool here at Loyola, the talent of our deans and academic program directors, our vice presidents and department heads, and the talent of so many gifted students we are blessed to work with and for, and mostly the talent and energy of our faculty and staff. It is also exciting because of the reputation and good will that surrounds Loyola and lives in its alumni and the good wishes of our friends and collaborators. This reputation and reservoir of good will has sustained us, garnered us record classes and an increasingly talented student body, a first-rate faculty and staff.
Thank you, once again, for your time and your dedication, for your support and your encouragement, for your investment in Loyola.