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Chancellor's Speeches

Remarks of USM Chancellor William E. "Brit" Kirwan
Higher Education Group of Washington, D.C.
Tuesday, April 13, 2004

Thank you John for the very generous introduction. It is a pleasure to be here with the Higher Education Group of Washington. It's impressive to realize that this organization has been in existence for 50 years, bringing together a broad cross-section of individuals involved in the development and examination of higher education policy. Never have the efforts of groups like HEG been more vital than they are today. I genuinely believe we are at a critical cross-road in higher education policy, both in my state of Maryland and across this nation.

This evening I will speak both about the broader trends and developments affecting higher education and the need to re-examine and rethink the issues of the cost of higher education and the related topics of access, affordability and financial aid. Following Roland's explicit instructions, I will leave significant time at the end of my comments for some discussion and questions.

I think we would all agree that over the past half century, higher education and its role in society have undergone a fundamental change in the United States. The emergence of the international marketplace and the reduction of trade barriers make it clear that the U.S. can no longer compete as a manufacturing economy. Gone are the days when a strong back and a sound work ethic all but guaranteed a decent job and a good life. The path to a high quality of life - both for individuals and for our nationnow requires knowledge, innovation and creativity on the part of our workforce. Our nation has been successful in making the transformation from an economy built on muscle power to one driven by brainpower and our institutions of higher educationboth public and privatehave been largely responsible for this success.

Ironically, just as higher education in the U.S. is at the height of its success and is the envy of every other nation in the world, so too is it at the zenith of adversity. There is a convergence of factors that make it increasingly difficult for our colleges and universities to fulfill their missions and meet their obligations to society.

Obviously, one major challenge we in higher education face is funding. With the economy struggling across the United States, state revenues are down, giving and endowments are down, and -- as a result -- financial support for public and private colleges and universities is not keeping pace with rising costs. But, I fear that the dynamic at work is more than just a sluggish economic cycle. There appears to be a troubling long term trend at work. Forces seem to be moving us away from the very approach that has served higher education and our nation so well. There is a demonstrable shift in the public's attitude away from thinking of higher education as a "common good" to considering it more of a "private benefit". By this I mean, rather than states and the federal government investing in higher education to make college accessible and affordable in recognition of the fact that an educated citizenry benefits the larger society, there is a dramatic shift toward expecting individuals to pay a larger share of the cost since - as the argument goescollege graduates have a significant increase in lifetime earnings power.

Paradoxically, this shift is occurring at precisely the time when higher education institutionsboth as centers of learning and hubs of researchhave never been so vital for economic growth and for advancing the common good. Indeed, in the long run, it will be access to our higher education institutions and their contributions to advancing knowledge that will ensure a sound economic future and a high quality of life.

But in state after state across the U.S., the story repeats itself. Budgets are strained by a struggling national economy, the effects of recent state and federal tax cuts, increasing healthcare costs, and mandated spending for primary and secondary education. Public higher education is generally the largest discretionary item in most state budgets. And higher education is facing a systematicand I'm afraid a long-termwithdrawal of public support.

California is often a "prequel" of what happens nationally and the situation there is disturbing. As a result of that state's budget crisis, the UC's budget was cut $410 million and student fees by 30%. UC was also forced to delay for at least one year the opening of a new campus planned in Merced, Calif. Similar cuts were absorbed by UC's sister-system, CSU. Perhaps most significantly, the UC and CSU are suspending the 50-year old celebrated Master Plan, which guaranteed admission of the top 7% of high school graduates to UC and the top 33% to CSU. This coming fall, UC will turn away over 5,000 Master Plan "eligible " freshmen and CSU will deny admission to as many as 20,000 such students.

Closer to home, we see the same issues in play. In Maryland, for example, state support for higher education was reduced by 14% last year, erasing the budget increases of recent years. In real, not constant dollars, we actually stand at the same state-funding level we did five years ago when we served 8,000 fewer students. A decade ago, state support was the largest part of our total budget. Today state support is less than 25% of our budget and is actually the smallest of our three main funding sources, being surpassed by both tuition revenue and research grants.

Like most systems and universities across the US, the USM used a combination of tuition increases and spending cuts to address our budget shortfall, including the elimination of some 800 positions, 4% or our workforce. As a result, class sizes grew; course offerings were reduced; support services have diminished; students are paying tuition at a level they could not possibly have planned for when they began their studies; and our ability to accommodate enrollment increases is in doubt. If not reversed, these actions threaten the quality of our campuses - a standard of quality that has taken years to achieve. Just as alarming, higher education opportunities could be denied thousands of young people in the future either because the costs are too high or the capacity is inadequate.

The second challenge for higher education is a sharp surge in enrollment demand. Although the impact is not evenly distributed across the states, over the next several years we will see the "baby boom echo" reach college age. Not only will that population cohort be large and disproportionately minority and low income, but laudable efforts are being undertakenboth at the national level and on the state levelto ensure that a greater percentage of these individuals will be able to move on to college. So, we in higher education face the prospect of a growing percentage of a growing population of youth, which is disproportionately economically disadvantaged, expecting to continue their education at the very time when public investment in higher education is sharply declining. And this does not even factor in the huge growth we anticipate from a growing population of life long learners.

These two realities -- reduced funding and surging enrollment -- threaten our colleges and universities, and are in conflict with the overall heightened expectations placed upon our institutions with regard to workforce preparedness and economic impact. We are, in fact, facing a "perfect storm." But the greatest threat posed by the double whammy of declining public support and rising enrollment demand is to the future well being of our nation. Imagine living in an America where the ladder of opportunity which higher education represents, is not available to thousands of qualified young people from the lower end of the economic spectrum. Imagine living in an America where, because there is an inadequately skilled domestic workforce, industry must export jobs or import workers to sustain our knowledge-based economy.

Besides cursing our fate and wringing our hands, what should we in higher education be doing about this situation? What actions should we be taking to address the enormous challenges facing our institutions and meet our responsibilities to our communities and our nation? What steps can we take to rebuild public support for our mission?

There are, of course, many things we can be and are already doing. My sense is, however, that for the most part these actions are institution or system specific, uneven, erratic and uncoordinated. There is no unifying national agenda to unite higher education - public and private, two-year and four-year institutions. While it would be presumptuous of me to propose such an agenda, I do have several actions that I think should be part of a common agenda for most colleges and universities. I will conclude my talk by describing four of these to you. I make no claim of originality with any of them. For the most past, they are things I've discussed or heard discussed in other forums. Taken together and as part of a comprehensive agenda for higher education, however, I think they could make a huge difference in addressing our twin challenges of protecting and building quality on the one hand, and accommodating expanding demand during this period of declining public support on the other. My first item is a concerted effort on our part to

  1. Contain costs. We in higher education have a reputation - not entirely undeserved if we are honest with ourselves - for being somewhat inefficient in our operations and in the management of our resources. Some of the criticism is undeserved. "Best practices " from the business world are often inappropriate in our world. We could be more "efficient" by increasing class sizes, eliminating low enrollment majors like philosophy, or restricting library hours. But such actions would run counter to core values in academe.
  2. Nonetheless, there are areas were savings can occur without compromising quality and most universities are today engaged in efforts to realize at least some cost reduction. The problem is that we have no benchmarks or "best practice norms" to guide our efforts. What fraction of our budgets should we be spending on administration, academic support, or deferred maintenance? Obviously, the answers to those questions will vary from institution to institution. But, surely, it would useful to have some national standards to serve as benchmarks by category of institution...comprehensive, research extensive, research intensive, etc.

    Fortunately, the University of Illinois is engaged in a project to do just that. Using outside consultants, they are surveying expenses by category for research universities to establish a data base upon which norms or "best practices" might be established. Done well, I believe such measures would be enormously useful, not only as a management and budgeting tool but also as a means of responding to critics about our management practices.

    We at the University System of Maryland have taken several steps aimed at reducing costs. For example, we use the buying power of the entire system to create deep discounts on purchases of computer equipment, software and other goods and services. We estimate that that this past year a system-wide agreement with Microsoft saved us more than $15 million in software purchases. We are also re-engineering our administrative operations to make them more cost effective. In addition to individual actions on each of the campuses, we are exploring ways to create consolidated, system-wide service centers-for facilities and construction management, auditing and accounting, purchasing and other service areaswhere a single center can serve the needs of all the system institutions, as opposed to maintaining 13 separate offices on each campus.

    My basic point is that we do need to rigorously and systematically look for cost saving measures that do not impact the quality of our institutions both as a means of holding down the rates of tuition increases and strengthening our case for better public and donor funding. The public needs to be assured that we recognize the new realities of our nation's economic circumstances and that we are systematically and aggressively taking steps to optimize the use of available resources. This is essential if we are to have any hope of regaining former levels of public confidence and support.

  3. Find lower cost alternatives for course and program delivery. For most universities, course and programs are delivered today pretty much as they were decades, even centuries ago. While we have enriched the learning experience through investments in information technology and while IT has become a powerful learning and research tool, I think it is fair to say that we have only scratched the surface in the use of IT for the delivery of course modules, entire course or even degree programs. Surely, this is a fertile area for development.
  4. The University System of Maryland is fortunate to be home to the University of Maryland University College, arguably the leader in the development of online education. With over 85,000 course registrations, UMUC has the largest number of online enrollments in the world. When UMUC thinks about expansion, it is does so without the burden of planning and building new facilities. Rather, it invests in IT infrastructure and capacity. One of UMUC's great strengths is its ability to respond quickly to the needs of the students online, anytime, anywhere. It will soon be the largest university in our system not just by head count but in FTE students.

    UMUC has entered into a remarkable agreement with every community college in Maryland. Under this agreement, a community college and UMUC can guarantee students enrolling in the community college that if they complete the two-year college prep curriculum, they can complete a four-year degree from UMUC right there at the community college drawing upon UMUC's online and on-site course delivery capabilities.

    We are exploring other innovative, cost effective approaches. A few years ago, the USM developed an education center in Montgomery County at Shady Grove. Eight separate USM institutions have come together in this locationunder one roofto deliver low cost access to a range of different USM programs selected to meet high student demand in areas such as biosciences, information sciences, business, nursing, and education. A local community college provides the lower division course work and each of the participating institutions provides regular faculty and academic support services to the center. Students earn their degrees from the institution offering their particular programs. This model has been so successful and well-received, that we are developing a second such center in Hagerstown and will be exploring additional centers in other regions of the state as well.

    Between UMUC, its partnerships with the community colleges, and our educational centers, we anticipate that we can accommodate between one-half and two-thirds of the projected enrollment growth...and at a considerably lower cost to the state than it would take to educate these students at a traditional campus. This will be a huge boost in our efforts to both serve the needs of the state and protect the quality of our existing campuses.

  5. Redirect financial aid programs to merit aid based on need. Financial aid is obviously the most important tool we have to address access and affordability. My concern is that we are not using this tool properly today. From the time financial aid programs began to become common fifty years ago, and through the 1960s and 1970s, they were almost exclusively aimed at students who would otherwise not be able to afford college. Even in the 1980s, when merit scholarship began to grow, both need-based and merit based aid grew in parallel. All that changed in the early 1990s. With the introduction and subsequent expansion of Georgia's HOPE Scholarship Program and its counterpart in other states, there was a turning point. Since 1993, need-based aid has seen a very modest increase while merit-based aid has virtually exploded. In 1993, merit-based aid represented less than 10% of state financial aid; today it stands at over 25%. That is an enormous shift in less than 10 years. Unfortunately it has occurred at the expense of, not parallel to, growth in need-based aid.
  6. The reasons behind this shift were all laudable: to attract outstanding students; to keep bright students from leaving the state; to reward academic achievement; and to ease the financial burden on middle-class families. As president of the University of Maryland, College Park back in the early 1990's, I was leading the charge in promoting merit aid as a means of recruiting the best students coming out of Maryland's high schools. But, collectively, we have gone too far in this direction. Aid based only on merit is now crowding out funding for meritorious students who have real need for scholarships. The fact is, for the most part, merit aid has the effect of subsidizing students who are already college bound. Indeed, I have read where one of the primary beneficiaries of Georgia's HOPE Scholarship Program has been the state's automobile dealers. Parents offer their HOPE-eligible children a car if they opt to accept the scholarship and stay in-state; a far less expensive proposition for most parents.

    We are also responsible for creating a false dichotomy with our aid programs. Need-based aid already takes "merit" into account. By gaining acceptance to an institution, the student has to meet certain requirements...has to demonstrate merit. We are talking only about college-qualified, college-capable students. Most merit aid does not incorporate a similar requirement to demonstrate need. And so we find ourselves in an indefensible place where the highest achieving poor students attend college at essentially the same rate as the lowest achieving wealthy students; about 78%.

    I am not so naïve as to think that universities across the country are going to abandon need-blind merit aid. I do urge two things, however. First, as tuition rises, universities should commit to holding need-based aid recipients harmless. We did this at Ohio State and I am urging a similar practice within the University System of Maryland. Second, future growth in all financial aid programs should target merit aid based on need. From past experience, I can say that such programs have enormous appeal with donors and legislators. This is the direction I intend to move the University System of Maryland.

  7. Develop a new and united approach on federal financial aid. The Pell Grant has been our nation's primary "work horse" for need-based aid. At one point in time, it served our nation's neediest students and our universities extremely well. In the 1970's, it provided about 70% of the average cost of attending a public university in the U.S. No more. I believe that figure is down to about 30% today. Although our nation's higher education institutions, through their various DC based associations, recently made a concerted effort to get a substantial increase in the Pell Grant, these efforts produced negligible results. Unfortunately, I'm not optimistic that support on the Hill or in the White House for the traditional Pell Grant will change soon. While we must continue to press the case for the Pell Grant, I believe a new approached is needed.

Quite frankly, this is an area where we must look to the College Board for leadership. Through some quirk of circumstances, I will be chair of the Board of both NASULGC and ACE this year. I pledge my efforts to get these two organizations to work with the College Board on the development of some new federal financial aid strategies.

One idea I have is to create a matching, need-sensitive aid program with the states. In my view, many states have shirked there responsibilities with need-based aid. Perhaps Congress would be willing to increase its investment in financial aid if it knew that such dollars would leverage increased state financial aid investments. And this brings me to my final point. It really is the national and state governments who must take the primary role in fixing this financial aid problem. It is unrealistic to think that universities can ever be the primary source for financial aid to needy students. Through some of the steps I have suggested, we can be a ready and willing partner with government but it is in the nation's and our states' vital interests to see that every qualified student has a chance to earn a college degree. For although a college degree is a personal benefit, there is no question that in the knowledge-based economy of the future, a highly educated citizenry is -- most definitely -- a common good.

Fifty years ago, when the Higher Education Group first came into existence, the nation faced higher education challenges that are surprisingly similar to those we face today: surging enrollment; inadequate capacity; and enormous financial barriers restricting access for the less affluent. Through a spirit of collaboration at the federal, state and institutional levels, we addressed the challenges and provided affordable access to a remarkable system of higher education. It is time for a renewed effort of collaboration. We must work cooperatively with leaders in Washington and in our state capitols once again and find the means to insure access to high quality collegiate experiences for a bulging new generation of qualified students. Nothing less than the future well being of our nation is at stake. The Federal Government must expand its commitment to aid for the economically disadvantaged. State governments must place a greater focus on providing aid to meritorious, needy students. And campuses must recognize their obligation to holding down costs without compromising quality and to protecting need-based aid from erosion due to tuition increases. The ability to overcome these challenges is within our reach if we just have the will and the spirit of cooperation to do so.