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Responses to DLS FY 13 Operating Budget Analysis

Dr. Wallace D. Loh, President
University of Maryland, College Park
March 2012

Responses to FY13 Operating Budget Analysis

Mr. Chairman and members of the Subcommittee, for the past several years, universities across our country have had to cope with massive cuts in their budgets. This has forced them to raise tuition, reduce courses, and resort to other cost cutting measures.

Fortunately, we have been spared such trauma in the state of Maryland, and we know who to thank. Because of the commitment to higher education by this subcommittee, Governor Martin O'Malley, and the entire Maryland General Assembly, we have been able to keep tuition low, improve the quality of education, expand our research, and increase our service to the state of Maryland. As a result, the upward trajectory of your flagship university has continued. Kiplinger's rates us as one of the top ten value universities in the United States, while the Wall Street Journal places us in the top ten universities from which to recruit. And nearly every ranking places us among the top research universities not only in the United States but around the world.

However, the proposed budget cuts threaten our progress. Our ability to educate the highest achieving Maryland students, especially in STEM areas, is at risk. Cuts in financial aid programs would restrict access to a college education for too many Marylanders. These cuts may also cause a delay in time to degree and a subsequent drop in graduation rates. In fact, if fully adopted, these cuts will affect our ability to serve the people of Maryland. Therefore, the University of Maryland joins the other institutions in the University System of Maryland in urging you to reject the proposed budget cuts.

The President should comment on steps being taken to reduce the debt burden of students and on efforts to help make college more affordable for middle class students.

The University of Maryland is concerned with making college affordable for all of our students and is working hard to ensure that our students find ways to finance their education without carrying a tremendous amount of debt. Nationally, in 2010 two-thirds of undergraduate students graduating with a Bachelor's degree had accumulated some loan debt, with an average loan debt of $25,250 (source: Project on Student Debt). During the same time period, only 43% of Maryland's graduating class had accumulated debt, which is more than 20% below the national average. The average loan debt for our students was $22,696, or more than $2,500 below the national average. In addition, our default rate is 2.3%, well below the national average of 11%, indicating that students can pay back their loans.

Grants, scholarships, work-study and other forms of gift aid do not cover the full cost of a college education for all of our students. Many students find that they must supplement their savings with government and private loans. Therefore, the federal loan programs are essential tools for many students, and offer a viable way to finance an education. The University continues to make every effort to assist our students in keeping loan debt to a minimum, including:

1. Maryland Pathways Program: Protecting our most financially at-risk students continues to be our top financial aid priority. The Opportunity Adrift study from The Education Trust organization listed the University of Maryland as one of nine institutions, among flagship universities, that "have made financial aid pledges to low-income and moderate-income students" to "reduce or eliminate the need for student loans." The Maryland Pathways program allows students who have no resources to pay for college and graduate from UMCP debt-free. In addition, the Debt Cap program allows in-state students who are on track to graduate in four years to graduate with no more than $15,900 in debt. Last year the Pathways Program assisted more than 680 students.

2. Fundraising Efforts: The University continues to build working relationships with community partners to leverage outside funds and raise scholarship funds for our students. The University's Great Expectations campaign has raised $308 million to date for student support. In response to rising financial aid appeals, the Campaign initiated an emergency fund called "Keep Me Maryland" to raise additional financial aid dollars to meet the urgent needs of students facing the possibility of not being able to stay in school. In addition, colleges and departments diligently work to increase funding for endowed scholarships within their academic disciplines.

3. Modest Tuition Rate Increases: Through the combined efforts of the Governor and the General Assembly, the University has had very modest to no tuition rate increases over the past few years. The University has worked hard to keep administrative costs down through efficiency and effectiveness, and ensuring that additional costs were not passed on to the students through tuition rate increases. Modest tuition rates also allow Maryland to remain a competitive institution, attracting the best students from around the country from all socio-economic backgrounds, and enabling those students to graduate with modest debt loads.

4. Budget Increases to Need-based Aid: Although Maryland continues to look for ways to assist our students in lowering average student debt levels, we cannot solve this problem alone. Our campus is dependent on leveraging sources of funding from state, federal, and private dollars to put together multi-source financial aid packages to meet our students' needs. By leveraging other sources first, our institutional dollars (from state appropriation and tuition revenue) go further to provide larger financial aid packages to needy students, and to offer aid to more students, including the middle class. However, the current economic conditions have negatively impacted federal and state financial aid funding. Recent increases in the maximum federal Pell Grant award have been beneficial, but these changes lag behind the rapidly changing student need. Maryland State Scholarship programs have also significantly decreased recently due to budget reductions. Therefore, we have requested an additional $5.5 million in the FY2013 budget for financial aid. More than half of these funds are to specifically address the affordability issues of our students. If the proposed cuts are accepted, these funds are at risk.

5. Financial Literacy Programs and On-Line Financial Management Curriculum: Using these programs, students and parents can make educated decisions about what works best for their individual financial circumstances, especially in the area of budgeting. Last year, the Office of Student Financial Aid conducted over 80 outreach programs to thousands of parents and students. The Office also identifies students who exceed a specified threshold of debt per grade level, and they receive one-on-one counseling.

6. Student Employment: Outside traditional financial aid assistance, the university provides over 6,500 undergraduate students with opportunities to work on campus each year. This is in addition to the almost 700 students who participate in federal work study programs. Students employed on campus earn over $15 million each year in hourly student positions, and an additional $1 million from federal work study positions. Not only do these jobs help our students reduce their need for student loans, particularly those from the middle class, but they provide our students with at least one tie into a university department, and connections to more faculty, staff, and other students. Most importantly, studies show that students who work on campus are more likely to persist in their studies.

The President should comment on the status of implementing the commission's recommendations, the likelihood that the teams slated for elimination will be able to raise the required funds, and if the ICA (Intercollegiate Athletic) has identified efficiencies that could lead to cost saving or other possible revenue sources. The President should also address what changes have been or will be made to ensure more transparency and accountability of the ICA finances.

ICA has made progress in responding to each of the commission's recommendations. Eight teams have been recommended for elimination (more below), several administrative positions have not been filled with those responsibilities assumed by existing staff, and ICA has implemented a zero based budgeting process for FY2013 which will allow ICA to identify administrative areas where expenses might be reduced without a negative impact on the student athlete experience. Outreach and fundraising activities have been restructured into four functional areas (major gifts, annual fund, M-Club and development support), collaboration with the Division of University Relations and the Alumni Association has been increased, and an infrastructure is being created to increase revenues through greater rental of current facilities.

ICA launched the "Save our Sports" campaign in an effort to raise the funds to cover eight years of program costs for each of the eight programs recommended for elimination by the President's Commission. ICA dedicated high-level development staff to this campaign; created a Steering Committee for each sport that includes alumni, parents and donors; created a "Text to Donate" campaign for each sport; contacted national and affiliated organizations for each sport to solicit publicity and donations; and met with prospective supporters for each sport to request donations. By June 30, we will know whether any of the teams have met the required fundraising benchmarks.

ICA is committed to operating with unambiguous fiscal integrity and transparency. This commitment is underscored through new operational initiatives that address accurate financial accounting and forecasts, expense allocations, and accounting and auditing practices. These new infrastructure policies are currently being applied in daily financial decisions and throughout the year. ICA has developed a streamlined as well as more comprehensive reporting format for a statement of revenues and expenses from all fund sources. Additionally, ICA is developing new reports which will list the budget, actual year-to-date expenses, and projected year end expenses for each area of ICA. A written variance analysis will accompany these reports to explain any significant projected variances. The reformatting and creating of additional reports will be completed no later than June 30, 2012. All budgetary decisions will be fully vetted with coaches and administrators within ICA and made in consultation with the Athletic Council. Beginning in March 2012, and quarterly thereafter, the Director of Athletics and Deputy Director (CFO) will meet with the University's Vice President for Administrative Affairs to review revenues and expenditures against benchmarks. The Director of Athletics and the Vice President will keep the President fully informed.

The President should comment on the adequacy of funding for its technology transfer activities and how UMCP compares to other comparable research institutions in terms of its funding, staffing and services offered to faculty. The President should also address if UMCP is collaborating or partnering with other USM technology transfer offices to enhance and strengthen USM's overall technology transfer and commercialization efforts.

The Office of Technology Commercialization (OTC) is under-resourced compared to its peers. Our peer institutions average one staff employee per 10 patent disclosures, whereas UMCP has about one staff employee per 17 disclosures. Our peer institutions expend $15,000 in legal fees per patent disclosure, whereas UM expends $5,000 per disclosure. A consequence of OTC's under-funding is that UMCP's licensing revenue per research dollar expended is only one tenth that of our peers. If the proposed cuts are accepted, we will fall even further behind our peers.

OTC currently handles technology transfer activities, including disclosures, licensing, and patenting for Salisbury University, and for the University of Maryland, Eastern Shore. In addition, the USM now jointly reports its technology transfer activities as a system to the Association of University Technology Managers (AUTM).

The USM BOR called for a strategic alliance between UMCP and UMB in terms of technology commercialization. Together we will establish a new jointly managed office called University of Maryland Ventures to spur collaboration of technology transfer between the two institutions to ensure partnerships and synergies are developed.

To create a stronger technology commercialization effort at UMCP, we have launched an effort to increase collaboration among the entrepreneurship and technology commercialization efforts in the Smith School of Business, A. James Clark School of Engineering, OTC, and other resources on campus. This new campus-wide organization will be announced shortly and should help OTC and other parts of the campus attract greater resources and achieve a stronger record of technology commercialization and entrepreneurship.

The President should comment on the status of steps to address the repeat (audit) findings.

The University takes the audits conducted by the Office of Legislative Audits very seriously. We are working diligently to ensure that there are no repeat findings in the next audit cycle. We have already taken a number of steps to address both repeat findings cited in the DLS analysis.

Regarding the monitoring of our faculty to ensure compliance with workload and personnel policies, we: 1) have instituted new policies to eliminate clerical errors; 2) are piloting a new electronic reporting system for sabbatical leaves; and 3) have modified our leave reporting system to accommodate a revised approval policy for collegially supported sick leave. Regarding our non-capital equipment policy, we remain in full compliance for all assets valued at over $1,000 while we continue to work with the USM Office to develop a more practical policy with respect to lesser-valued non-capital equipment.