Testimony of William E. Kirwan

Chancellor, University System of Maryland

Wednesday, May 26, 2004


Thank you for this opportunity to give testimony today. As both a member of this Blue Ribbon Panel and as Chancellor of the University System of Maryland, I commend Cal Burnett for putting the Task Force together and for developing such an effective process to create a new statewide plan for higher education. I am pleased to note that the issues on which this group is focusingaccessibility, affordability, quality, efficiency, workforce development, and economic impactare precisely the issues the USM's new strategic plan addresses. That plan, the Executive Summary of which is being submitted with my testimony, underscores the fact that the System is aligned with MHEC in recognizing the challenges we face. I am confident that our combined and collaborative efforts will enable us to overcome these challenges.

I also want to express my gratitude to the MHEC staff for the excellent white papers they have produced on key topics. Just as I take great pride in the work of System staff, I know Governor Ehrlich, Lt. Governor Steele, and Secretary Burnett take pride in the work MHEC staff does.

The work of this Task Force comes at a crucially important time for our state. As we all know, our nation's economy has undergone an amazing transformation over the past few decades. Gone are the days when one could be assured of a good job and high quality of life with only a high school diploma. We have moved from an economy based on muscle power to one dependent upon brainpower. Knowledge, creative, innovation...these are the ingredients that have made our nation the world's economic superpower.

Our state is extremely well positioned to be a leader in this new economy. Thanks in large part to the quality of our universitiespublic and private-and the presence of so many federal labs, Maryland ranks #1 in the nation in per capita R&D expenditures. Amazingly, given our modest size as a state, we rank #2 in total R&D expenditures. We have been ranked as one of the nation's four "hotspots" for the bioscience industry. We have the nation's highest concentration of college graduates and advanced degree graduates. Given the nature of the new economy, you could say we have been dealt a winning hand. Most other states would give anything to have our many higher education and research-related assets. Our challenge as a state is to ensure that we protect and enhance these precious assets. If we do, Maryland's future is very, very bright indeed.

We do face significant issues that threaten our enviable position, however; issues that I hope can be addressed through the work of this Task Force. For the most part, these issues are driven by two parallel developments: The significant reduction in state support for public higher education; and the anticipated dramatic surge in enrollment. I'd like to address several of the issues related to these developments that are most on my mind and indicate what the System is doing to address them.

Addressing State Budget Cuts

In terms of state support, USM funding was reduced by 14% for the current fiscal year and will be flat-funded next year. These actions have erased all 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.

At the same time, mandatory costs such as health coverage and accommodating the growth in student enrollment further complicated our task. What is often overlooked in the funding discussion is that there has been a steady decline in support that goes back many years. For example, in constant dollars, General Fund support per FTE student in the System has declined 10% over the past decade.

The USM has tackled these budget challenges head-on: Like most systems and universities across the U.S., we used a combination of tuition increases and spending cuts to address our budget shortfall, including the elimination of some 800 positions, or 4% of our workforce . . . far more than any other state agency. It is important to stress that in managing last year's budget reductions, we addressed nearly two-thirds of the budget gap through expenditure reduction and cost containment, with the remainder (just over one-third) covered by tuition increases.

But the bottom line is, that if we are going to protect the quality of our higher education institutions and accommodate the enrollment surge, the state must reinvest in higher education. Fortunately, both the Governor and the General Assembly agree on this point. They just don't agree on the revenue source to accommodate this end. I am confident that an agreement will be reached in the not too distant future and we will see new funds coming into higher education. To support our case for additional funds, it is imperative that we in higher education have our act together. We must show a willingness to be accountable for the effective and efficient use of our resources; we must demonstrate meaningful efforts to hold down costs; and we must show creativity in finding new, innovative, lower-cost means for delivery of degree programs.

Responding to Increased Enrollment Demand

The second challenge for higher education, which I have already alluded to, is the sharp surge in enrollment demand. Over the next several years we will see the "baby boom echo" reach college age. We can expect an increase of somewhere between a 20% and 25% in high school graduates between now and the year 2012. Moreover, laudable efforts such as the Thornton Initiative seek to 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.

I want to assure the members of the Task Force that the University System is not simply hunkering down hoping that our fiscal situation is a short-term development, requiring only temporary measurers while we wait for a return to the "good old days." Rather, under the Regents' leadership and direction and with the presidents' active engagement, we are aggressively developing effective, cost-efficient, innovative approaches to provide lower-cost, enhanced access to high-quality, post-secondary education.

Stressing Innovation

In terms of innovative education delivery approaches, the University System of Maryland is fortunate to be home to the University of Maryland University College, the nation's leader in online education. With over 110,000 course registrations, UMUC has the largest number of online enrollments in the world. UMUC has entered into a remarkable agreement with most community colleges in Maryland. This agreement guarantees students enrolling in the community college that if they complete the two-year college 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, at a greatly reduced cost in comparison with having these students transfer to a residential campus. Through this arrangement, students can enroll simultaneously in the community college and UMUC when they begin their post-secondary education.

This is just one example of our strong partnership with community colleges. People are almost always amazed when they learn that for the overwhelming majority of students attending community college, the fact is if you complete your community college degree, you WILL be accepted into a USM institution. And the transfer students tend to do just as well as "native" students.

We are exploring other innovative, cost effective approaches. A number of 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.

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.

Expanding Workforce Readiness

One of the biggest dividends these new and innovative approaches are yieldingalong with our traditional campusescan be seen in terms of workforce development: Take the crisis in nursing . . . nursing is one of the first programs we have committed to developing at our new Hagerstown Center. Nursing is already one of the most popular programs at the Shady Grove Center. The crisis in teaching . . . we have partnerships with community colleges to educate the next generation of educators through the creation of a new Associate Arts and teaching degree. This program guarantees that community college graduates in this program can transfer seamlessly to a System institution without the need to take any additional lower division courses. The high--tech, bio-tech, and info-tech needs . . .UMUC has just developed a biotechnology degree in partnership with Montgomery College to address workforce shortages in this field.

No where is our commitment to the goals of quality, access and affordability clearer than in the Board of Regents' resolution issued a few months ago. This resolution outlined our commitment to address the anticipated growth in enrollment, be accountable for achieving cost containment targets, continue to review every aspect of our operations to identify further cost savings and efficiencies, and to provide affordable, predictable levels of tuition. The Board underscored this final point as it approved the recommendations of the Tuition Task Force, which will require USM institutions to develop four-year tuition plans based on enrollment projections, resource needs, and projected state funding. This action will mean increased predictability for students and families and a requirement for our institutions to provide a clear rationale for proposed tuition increases.

Refocusing Financial Aid

The System also strongly supports Governor Ehrlich's decision to place greater emphasis on need-based financial aid over merit-based aid. One point often lost in this debate is the fact that 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 I personally think it should. I have just appointed a Financial Aid Task Force, to be chaired by Treasurer Nancy Kopp. This task force will review the System's financial aid policies and practices to ensure that our policies place appropriate emphasis on need-based aid and that these policies reflect "best practices" nationally. I am pleased that MHEC will be represented on this Task Force by either Janice Doyle or Andrea Hunt. This presence will not only add great expertise to the Task Force but it also will ensure that this effort is aligned with MHEC policies and practices on financial aid.

Cutting Costs and Improving Efficiency

Under the leadership of Board of Regents Chairman Cliff Kendall and the Effectiveness and Efficiency Task Force he appointed, we at the University System of Maryland are taking impressive steps to reduce 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 this past year a system-wide agreement with Microsoft saved us more than $15 million in software purchases. In addition, 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.

Providing Economic Impact

The nationally renowned research capabilities that exist within the USM represent an enormous economic asset for the state. The fact is, academic R & D is one of the most dynamic and vital sectors of Maryland's economy, supporting more than an estimated 50,000 jobs state-wide. More importantly, in the knowledge-based economy, jobs and economic growth are drawn to states which put a premium on investments in education, technology, and research-driven innovation. Clearly, the institutions comprising the USM have emerged as leaders in the R & D sector, having seen research funding soar from $200 million in 1990 to $900 million today. And with university-affiliated research centers either in place or under construction at UMBC, UMCP and UMB, this lab space and office space will further strengthen Maryland's position of leadership in the research sector. Further, given that fostering Technology Transfer has been sited as a specific goal by our research university presidents, we are taking steps to streamline these efforts, which will add to Maryland's economic strength and leadership.

Meeting the OCR Commitments

As we put together the new statewide plan, we must make clear our commitment to the OCR Agreement and its goals. This is an area where I believe we need a greater sense of accountability. My personal view is that the higher education community needs to come together with our elected officials to develop a clearer understanding of what our obligations under this agreement are and where we stand today in meeting them.

Continuing the Commitment to Quality

When the System was established in 1988, one of its legislatively mandated goals was to achieve "national eminence." By any measure - national rankings, research grants, public service activities, faculty accomplishments, or student academic achievementswe have clearly made significant progress toward that goal. Today, even as we continue our efforts to ensure the highest quality, we also want to ensure affordability, accountability and access. I hope my testimony has provided some insight as to the steps we are taking to meet those goals. I look forward to working with this panel, the Governor, the General Assembly, the executive branch, our partners in the business community, and others as we work together to strengthen the entire spectrum of education throughout Maryland. Nothing less than the future well being of our state is at stake. Thank you.

Contact: Anne Moultrie

Phone: 301/445-2722