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Weathering Michigan's Financial Crisis

PowerPoint Presentation / Faculty and Staff Suggestion Form


All of us are aware of the dire economic straights that face our state, one of the hardest hit in the nation, and our region. In spite of Oakland's current position of strength and last eight years of significant growth and expansion, we are not immune to marketplace threats, which if not counteracted, could have devastating effects on our enrollment and revenue growth.

In recent days, I have met with deans, department heads, managers and directors to point out the many successes we have achieved as an institution over the last eight years in spite of the state's economic challenges during this same time period. The significant stress experienced by state government and the Michigan economy has led in part to a disinvestment in higher education. I shared some sobering statistics: Michigan has been last in increases in higher education appropriations over the last five years combined as compared to other states in the nation with state  budget cuts reducing per student spending by $2,852/student since FY2001. And, from FY 2002 through FY 2009, state funding is $2.373 billion below inflation. I encourage you to view my complete presentation on the financial crisis.

Yet, in spite of these hardships, Oakland has prospered and grown into a major university whose reputation is secure in the region. We have seen a 27 percent increase in enrollment from 1998–2008, 112 new faculty added in the last nine years, 55 new degree programs launched since 1995 and dozens of new buildings, laboratories and building renovations completed in the last decade.

In 2007, OU faculty collectively earned a record $12.8 million in grants and contracts to fund important research and discovery. Additionally, through partnerships and regional collaboration we are bringing highly needed medical education to southeast Michigan through a transforming partnership with Beaumont Health System to open the Oakland University William Beaumont School of Medicine. We are well into the accreditation process with the LCME, and with NCA re-accreditation to be completed in 2009, we will seek to open the medical school in 2010.

We are also expanding access to an Oakland education to Macomb residents through our recently announced intent to develop a satellite campus in Macomb County. Legal education is now available to OU students and others through a partnership with Cooley Law School who has brought a campus to Auburn Hills.

And, our comprehensive campaign has raised more than $100 million to date with an early conclusion to the campaign expected next year. This is a tremendous tribute to the confidence placed in the institution by our alumni, donors and friends.

I attribute all of these and other impressive successes to careful strategic planning, purposeful action, strong leadership, and faculty and staff commitment and dedication.

Now, as we face the future we must turn to one another to share solutions and commit ourselves to weathering this storm. Environmental scan data and a look at economic and population projections for Michigan's economy through 2017 show a grim outlook.

State general fund spending pressures are projected to grow from $10.1 billion in FY09 to $17.1 billion in FY17, an annual growth rate of 6.8 percent. And, if higher education maintains its current share of general fund revenues (19.8%), a gap of approximately $700 million will open up by FY 2017.

Michigan population estimates fare no better. The decline in Michigan's share of the United States population will accelerate from 0.7 percent per year (1997–2007) to 1.1 percent per year (2007–2017), dropping the share from 3.3 percent to 3.0 percent. Michigan's school age population (5–17) is expected to decline by 1.5 percent per year. And, over the next ten years, the size of Michigan's high school graduating classes will drop significantly – one of the biggest declines in the country – as the last wave of baby boomers' children
head to college.

On the employment front, the realities of the fall of the automotive industry are nowhere more telling. Since 2000, Michigan employment has declined by 494,900 jobs or 10.5 percent with a 36.9 percent loss of manufacturing jobs and a 50 percent loss of vehicle manufacturing jobs.

The state will again reduce higher education appropriations with a minimum 1.5 percent cut expected in FY 2008-09 with a possible additional reduction applied later in the year.

All of these negative statistics, combined with consumer stresses of credit debt, rising rates of foreclosures and a loss of consumer confidence will impact Michigan universities, including Oakland.

Going forward, we must act quickly to counteract revenue losses to keep Oakland strong and on track to our institutional priorities and goals. We need to seek out new avenues for revenue growth, improve our processes, aggressively attract new market segments, assist students who are in danger of leaving the university because they or their parents have lost jobs, and enhance our academic offerings to meet market demands, including retraining workers who have lost jobs.

I am asking for your ideas on how to respond to this crisis. Please review my presentation and respond by sending me your ideas and suggestions by December 12. You may download a suggestion form here. We must turn to inventive thinking and innovative entrepreneurial approaches that we can quickly apply in the marketplace.

I welcome your ideas and ask you to re-commit yourselves to the future of our great institution in the face of significant challenges.

Gary D. Russi
Oakland University