MARYLAND HOUSE APPROPRIATIONS
SUBCOMMITTEE ON EDUCATION AND ECONOMIC DEVELOPMENT
UNIVERSITY SYSTEM OF MARYLAND OFFICE FY 2005 BUDGET
February 19, 2004
Testimony of USM Chancellor William E. Kirwan
Mr. Chairman, members of the subcommittee, it's my pleasure to be here today to support the University System of Maryland Office's budget.
Fundamentally, the USM Office exists to help achieve the goals expressed in the legislation establishing the System and subsequent amendments to that legislation.
The USM Office serves as the staff to the Board of Regents; assists USM institutions in fulfilling their individual missions; coordinates the collaborative efforts of USM institutions; facilitates the interactions of the System with the other segments of higher education in the state and the K-12 community; and performs a number of system-wide functions. Some of the USM office functions are specifically mandated by legislation or the direct result of legislation. Others are the ordinary functions you would expect in the corporate office of a $3 billion enterprise.
It is a time of incredible challenges for the System Office. Our goal is to explore and implement opportunities to help advance USM institutions to benefit the State of Maryland. I have dedicated myself to realigning the work of the USM Office to maximize the use of our staff. I think we have been quite successful in adding value to the System as a whole to the extent that resources allow.
Some Recent Accomplishments
I would like to offer a sampling of recent success stories.
Partnerships with Public Schools and Community Colleges
- Over the past three years, USM Office has established federally funded partnerships with three area school districts: Baltimore City Public Schools, Montgomery County Public Schools, and Prince George's County Public Schools to address teacher shortage, teacher retention, teacher recruitment, and teacher professional development. The most recent is a five-year, $6 million federal grant, in partnership with Baltimore City Public Schools with an emphasis on recruiting highly qualified teachers and creating alternative pathways for certifying teachers in Baltimore City to satisfy the requirements of the No Child Left Behind Act for Highly Qualified Teachers.
- The USM Office also won a federal grant of $7.5 million from the National Science Foundation to work with the Montgomery County Public Schools; the five-year partnership, which also includes Montgomery College, has resulted in new professional development programs for science teachers that will reach more than 400 teachers over five years.
- In 2000, the USMO won a five-year U.S. Department of Education Teacher Quality Enhancement Grant of $4.2 million to partner with Prince George's County; the grant includes Prince George's Community College. Over the past three years, that project has resulted in an increase in teacher retention from 51% (2000) to 80% (2003), the establishment of three new Professional Development Schools, and a new AAT program at PGCC.
Extending USM Resources
- The USM Office oversees the development and management of USM regional centers. The centers represent a commitment to partnerships among the USM institutions, special relationships with Maryland community colleges, and close collaboration with the business and civic leaders at the county and state levels. For instance, the USM Shady Grove Center offers undergraduate and graduate degree programs for both full-time and part-time students during the day, in the evenings, and on weekends. Enrollments are projected to increase substantially over the next several years.
- The System Office was a key facilitator of the creation of the Baltimore Education and Research Network (BERnet). Not only does this network provide advanced research networking facilities and Internet2 access to the greater Baltimore area, but it provides the core of a Maryland Educational Network by interconnecting information transfer from UMATS (public higher education), Sailor (public libraries and some K-12 entities), and Network Maryland (State and County agencies).
Saving Money Through Collaboration
- The USM's Equipment Loan Program was restructured to eliminate select issuing costs. The program is providing access for institutions to meet their equipment needs at remarkably low interest rates (rates of approximately 1% for purchase of equipment and software) in this single instrument. To offer this program on a campus-based approach would drive up interest costs and multiply costs of issuance.
- The USM Office consolidated the financial planning for three public/private student housing projects. This created a broader understanding of these privatization bond offerings in the investor marketplace making for the most efficient bond sales possible and reducing overall issuance costs by eliminating duplication. The total value of the student housing projects is $91 million, providing for 1500 beds. In a larger context, it is the consolidated financial holdings of the System, and its debt management structure, that makes public/private partnerships possible
- In the last refinancing of the USM's Auxiliary Bonds, we restructured our escrow accounts, using the $1.0 million in savings to reduce the planned borrowing level.
- The System Office negotiated a one-year extension of the Microsoft Enterprise Agreement on behalf of all education in the State of Maryland. Maryland education will have the best pricing on Microsoft products in the country next year.
- The USM Office earned a clean opinion on the annual financial statement and federal program audits with no major findings.
- The USM Office was able to protect the System's bond rating through improvement in the financial health ratio of fund balance to outstanding debt
- The USM Office developed a coordinated set of guidelines and policy template for IT security appropriate to higher education, which is also compatible with the State Security Policies.
- The System Office initiated a Data Warehouse to provide improved decision support in the USM Office and to enhance inter-institutional information sharing among the USM institutions.
- The System Office worked with the American Federation of State, County and Municipal Employees to create a coalition approach to collective bargaining on major issues for seven institutions. We are working toward an agreement.
- The USM Office implemented new deferred compensation programs for all employees.
A Sampling of FY 2004 Agenda Tasks
Now I would like to mention some items that will occupy our time and attention during the coming months.
- Provide the support for three major Regents' workgroups regarding Resource Development, the USM as a Public Corporation, and the Effectiveness and Efficiency initiatives.
- Complete a significant update of the USM Strategic Plan one that aligns our vision, mission and values with the specific goals of the Plan, and does so within the fiscal challenges now before us.
- Continue to support implementation of the Office of Civil Rights agreement relating to enhancing our historically black institutions.
- By the Spring of 2005, open the USM Hagerstown Education Center, which ultimately will be able to serve approximately 1200 students in Western Maryland
- Using the MHEC approved enrollment projections; develop a strategic allocation model for distributing growth to our institutions in the most cost efficient manner possible while maintaining academic quality.
- Complete negotiation of a Memorandum of Understanding (a labor contract) for institutions involved in the coalition bargaining process.
- Manage the first ever comprehensive Internal Revenue Service (IRS - Federal) audit of the University System of Maryland.
- Create greater procurement efficiencies by enhancing availability of shared contracting, reengineering policies and procedures, and improving information exchange between the procurement offices of the institutions.
- In cooperation with DBM and MHEC, improve the existing accountability mechanisms and reporting and refining a set of high level indicators System institutions' performance.
- Strengthen the systemwide auditing capability of the System Office.
A Brief Review of the System Office Organization
Office of the Chancellor
The Chancellor is the Chief Executive Officer of the System and the Chief Administrative Officer for the Board of Regents. The Chancellor leads system-wide planning efforts:
- Develops system-wide policy in consultation with the presidents.
- Establishes goals and accountability standards for each institution in consultation with the presidents and evaluates institutional and presidential performance.
- Manages the presidential search process and recommends presidential candidates to the Board.
- Oversees the legal and financial services provided to USM institutions.
- Serves as the principal point of contact with other governmental agencies, both state and federal; and manages governmental relations with the office of the Governor, the General Assembly and the Congress.
Let me briefly describe the most significant work of the office, which is performed in three functional areas - Academic Affairs, Administration and Finance, and Advancement.
Office of Academic Affairs
The office of the Vice Chancellor for Academic Affairs (VCAA) is responsible for defining and articulating USM academic issues to the System institutions in a way that enables them to achieve excellence and accomplish their own missions within the vision and mission of the System. These responsibilities include:
- Academic planning and accountability.
- New program proposals, program review and assessment.
- Student outcomes assessment.
- Articulation agreements.
- Information technology.
- Research planning and collaboration.
- Faculty and student affairs.
The office takes a leadership role in efforts such as continuing the System's role in the successful K-16 initiative, and ensuring effective communications with the community colleges and other universities and colleges in the region. The VCAA works with faculty and student groups throughout the USM and the State.
Office of Administration and Finance
The office of the Vice Chancellor for Administration and Finance (VCAF) provides leadership, planning and counsel throughout the System in the areas of finance and administration. The major areas of responsibility include:
- Financial reporting, debt management and investments.
- Operating budget.
- Capital planning, procurement, and real property.
- Human resources (including collective bargaining).
- Information technology.
- Internal audit.
- Institutional research, enrollment management.
- Strategic planning & accountability.
Office of Advancement
The office of the Vice Chancellor for Advancement (VCA) provides leadership, planning, guidance and direct support in advancement responsibilities. These include:
- Fund-raising campaign management.
- USM marketing.
- Soliciting private gifts to support System institutions and System-wide initiatives.
- Assist institutions in the planning, development and implementation of their fund-raising efforts.
The office also manages The University of Maryland Foundation, Inc. (UMF) and provides investment management. The System expects to launch a new fund-raising initiative within one year to raise more than $1 billion in new gift support. The VCA position is supported entirely by non-state funds.
System Office Commitment to Accountability
Permeating the activity of the various units within the System Office is a data driven accountability process. We have worked with DBM and MHEC on accountability reporting. The Legislature receives these reports annually. Accountability takes two forms: the State's Managing for Results Program (MFR), and a Peer Comparison System. Accountability indicators include: graduation and retention rates; student satisfaction; departmental rankings; fundraising; and employer satisfaction with our graduates. We have consolidated performance measures for MFR and the peer system. Under MFR, we have met our benchmark in 34% of the indicators, and made progress in another 45% of cases. In 3% we have not gained or lost ground. In 18% of cases we have lost ground versus our starting point.
Regarding comparison with institutional peers across the nation, we are at or above the performance of our competitors in 63% of cases, behind in 37% of the cases. Our commitment to continuous improvement for all of our institutions is grounded in the accurate measurement of success or failure in the context of rigorous performance benchmarks. We take the performance results, highlight areas of need, engage the institutions on areas of concern, and incorporate finding in our planning processes. Overall, we have made great progress, we are growing in eminence. But, there is room for improvement, and we will continue to pursue it.
Also, the Regents' Effectiveness and Efficiency initiative is slated to develop a set of indicators to create an easy to understand set of measures for the overall state of the University System.
The System Office Budget Story
I would like to take a few moments to describe the staffing changes for the System Office operations. Many of you will recall the provision in the 1999 governance bill that prohibited the creation of any new positions or the reallocation of any existing positions from an institution to the System Office to implement or administer the new law. The Office is legislatively designed to be small.
In FY 2002, approximately 98 positions were filled. Since that time, 18 positions were eliminated, a reduction of 19% (Table 1). The overall cut in positions for the State government and the USM for state-supported jobs equals approximately 5%.
New responsibilities have emerged. They include support for the Office of Civil Rights Settlement Agreement; the addition of a new educational center in Hagerstown; coordination of collective bargaining system-wide as well as direct negotiation for "coalition" institutions; the Regents' major reengineering initiative mentioned earlier; and the implementation of new accounting standards are major workload additions. Like the USM institutions, we have implemented cost containment measures and will continue to seek cost savings.
The position level at the System Office is the lowest in the history of the USM, yet enrollment is at an all-time high. Based on enrollment, the USM is the thirteenth largest system in the nation. In terms of the System Office operating budget as a percent of the USM total budget, we rank 35th of 47 systems nationally. I find the gap between the relative size of the System and the relative size of the System office to be illuminating and positive (Table 2).
I would like to thank you for your time and attention this afternoon.