President’s Report
Board of Trustees, February 4, 2011

Chairman Cioffi, trustees, vice presidents, deans, faculty, students, staff, alumni, and friends: good morning. Thanks very much, Rob, for those telling observations. To paraphrase, you have challenged us to define, foreground, and enhance the distinctive dimensions of the UVM experience that engender deep love of the University in so many of UVM’s sons and daughters. We have been working hard over the last nine years to build the quality, diversity, and distinction of the University. Many of our efforts have been focused on the very issue you have raised of UVM’s distinctive appeal, including the Hartley-Copernicus study of what draws students to UVM and a recent Art & Science Group study of Student Success and Satisfaction. Your exhortation will, I am sure, inspire us to intensify and expand our efforts.

To restate the matter: we must continue to focus and excel—we must focus in order to excel. We must continue to invest in quality, diversity, distinction, and distinctiveness even as we exercise together the fiscal discipline to which the times challenge us.

I will return to those broad themes of investment and discipline shortly. First, I want to join Rob in offering heartfelt thanks for their service to the trustees who are completing terms on this board: Claire, Bill, Frank, Joey, and Adam, we are all grateful for the many contributions each of you have made to our work together and to UVM and we look forward to the next phase of your engagement with Vermont’s University. I also want to offer a few current updates. Applications for admission next fall in the undergraduate class of 2015 look very strong. For the third year running we have exceeded 22,000 applicants, with demonstrable academic quality and diversity. It appears, moreover, that enrollment this spring has brought us 94 students above the fall/spring average on which the budget was based for the current year. Our fund-raising also yields favorable indicators: at mid-year total, voluntary support stood slightly above $17 million, positioning us well to achieve our $30 million goal. A subset of that goal, unrestricted annual giving, was also positive at mid-year, with slightly more than two-thirds of the $3 million target in hand. In contrast, though not unexpected, sponsored program awards year-to-date were down at the end of December by $4 million compared to the same time last year ($75 million compared to $79 million). The decline reflects the funding agencies’ loss of billions of dollars in federal stimulus dollars. Awards at the end of December 2007 stood at just under $61 million and, at the end of December 2008 at $73 million, so that the $75 million in December 2010 is second only to the historic high of stimulus-fueled 2009 and, absent stimulus dollars, seems to be a creditable performance against historic norms. Our success in the face of intensifying competition for shrinking funding pools is a tribute to the hard work and scholarly power of our faculty. The resource shrinkage against which their achievements should be measured is still under way in peer institutions across the country, in states throughout the nation, and in nations around the world.

I am pleased to welcome Governor Shumlin to the Board. Governor Shumlin’s support for higher education is reflected in the budget he has presented to the General Assembly, in which he has recommended that UVM and the Vermont State Colleges be level-funded with respect to the base dollars in last year’s appropriation. For this we are grateful. We also recognize the reality of Vermont’s projected $180 million budget shortfall, which has required the removal in the budget recommendation of $2.5 million in one-time funds that were made available as a result of the State’s receiving substantial federal stimulus funding in each of the past two years.

We began our work on next year’s budget with a presumed 4.5% tuition increase and a budget gap of about $9 million. The budget team has worked for months to reduce that shortfall by identifying all feasible opportunities for savings and revenue enhancements, including reducing the allocation for financial aid, level-funding operating budgets, and trimming back the assumption for salary increases. With all of those measures, the gap was still nearly $5 million. It was then that we adjusted the tuition assumption upward by 1.3% to 5.8%. That notional tuition increase reduced the gap to $1.6 million to which we must now add the loss of $2.5 million in one-time funding from the State. To address the $4.1 million shortfall, we are currently engaged in additional modeling in order to present you with a balanced FY ’12 budget for approval in May. Specifically, the Provost has asked the deans and vice presidents for recommendations for budget reductions and revenue enhancements that combined will provide, alternatively, an additional $3 million or $6 million dollars. On top of the $15 million we took out of the general fund in FY 09 and FY 10, these targets present a substantial challenge, and it is our judgment that anything less than a 5.8% tuition increase will necessitate cuts that will adversely impact the University generally and enrollment specifically in the near and long term. Earlier this week, Provost Knodell and Vice President Cate issued a call to faculty and staff for proposals for revenue enhancements and expense reduction opportunities in the belief that creative thinking and resourcefulness throughout the community can help us attain the goals of the $3 million and $6 million dollar gap-filling scenarios with some resource gains mitigating and at least modestly reducing the need for further unit budget reductions.

We remain deeply committed to helping students and families meet financial aid needs. The biggest single driver of cost increases in next year’s budget is financial aid, which increases by nearly $10.8 million dollars even after the reductions we made in the course of our budget work. In our judgment, further aid reductions would materially reduce access to the University for lower income families and would negatively affect the quality and diversity of the student body. We will be hearing from Chris Lucier shortly about the work we have been doing to enhance the effectiveness of our financial aid programs, so I will only say that we expect the rate of increase in aid budgets to flatten out after FY 13. UVM’s average tuition increase over the past decade has been lower than the vast majority of our public peers. For example, the university systems in New York, Illinois and California have all, within the past eighteen months, implemented one-year tuition increases ranging from 20% to 32% compared to our 4% last year and to what would be, if we settle on 5.8% for next year, a 4.9% average for fiscal years ’11 and ’12. Because we have restrained tuition growth while others have shot up, it is simply no longer correct that UVM has the highest student costs among peer institutions.  In fact, the gap between student costs at UVM and our more expensive private peers is widening, and there is a growing group of public institutions with higher combined tuition and fees than UVM for  in-state and out-of-state students both in their “list” prices and even more so in net cost to students after financial aid. For Vermont students, net costs after financial aid remain in the lower half among public universities, and we will exert every effort to making sure that that remains the case. Today one in three Vermont students at UVM attends free of any charges for tuition and mandatory fees other than room and board, and slightly under one in five pays the full fare. With our distinguished faculty, high academic quality, and superb student outcomes, including the record 80.4%  graduation rate for Vermonters in 2010, UVM remains an accessible, affordable, high-value opportunity for the people of the State.

I also want to touch on three salient items about which you will not hear a great deal at this week’s Board meeting. First, discussions between the Board and administration on post-retirement medical benefits (or PRMB) are continuing, though we do not expect to implement any changes in our program before the beginning of the 2013 fiscal year. On this very important topic, I can only reiterate what I said in October: some program modifications will be required to ensure UVM’s long-term viability. Our recommendations for addressing the challenge will be mindful of the expectations of current retirees and those eligible to retire and, whatever modifications we recommend, we will seek to maintain a PRMB program in which covered individuals will not exhaust the benefit by outliving it. Second, on another subject, we continue active planning for UVM’s next comprehensive fund-raising campaign and for creating a fundraising foundation for UVM. We plan to bring a resolution to you in May that would authorize the administration to proceed to the silent phase of a campaign to accelerate UVM’s accrual of philanthropic resources for the pursuit of the University’s vision and mission. We expect to brief the Board on our foundation work at our special meeting in March. By May we hope to have incorporated the UVM Foundation, to have fully established its Board of Directors, and to have developed a Memorandum of Understanding governing the relationship between the Foundation and the University that would be brought to this Board for approval. You will be hearing from our new Vice President for Development and Alumni Relations and soon-to-be Foundation CEO Rich Bundy shortly, so I will only say how thrilled we are to have him on the UVM team. Welcome, Rich! Third, I want to call your attention to the opening of an Administrative Services Business Center next month: by consolidating staff from many units in a single integrated unit we are aiming to improve consistency and the quality of service, to improve our management of strategic business risks, and, ultimately, to be more effective and productive.

Three years ago, we forecast that if we made the right moves UVM would be positioned to emerge from the recession earlier and stronger than competitors. With focus on priorities and with fiscal discipline—with two years of balanced budgets—and with rising quality indicators in so many areas, from philanthropic receipts that have gone up while the national trends have been down to student outcomes registered in record graduation rates—I believe we have put ourselves in that strong position. I do not doubt that the continuing work we have to do on the budget will be challenging and at times painful, notwithstanding that what we are contemplating pales beside the draconian cuts that institutions nationwide have been forced to make. We continue  to pursue the vision of UVM as one of the nation’s premier small research universities—as a superb place to study, to teach, to conduct research and scholarship, to pursue creative activity, and to work—and we continue to focus effort and resources on the priorities that flow from our mission: to create, evaluate, share, and apply knowledge and to prepare students to be accountable leaders who will bring to their work dedication to the global community, a grasp of complexity, effective problem-solving and communication skills, and an enduring commitment to learning and ethical conduct.

To succeed we must be prepared to focus resources on our highest priorities, not just in FY ’12 but beyond. We must develop and deliver a rigorous, high quality general education curriculum that is built around a clear and cogent vision of how a UVM undergraduate education prepares our students to be “accountable leaders.” We must create clusters of excellence in transdisciplinary research, undergirded by strong disciplines, competitive graduate programs, and undergraduate programs that engage and challenge our students. And we must build a community of faculty, students, and staff that is genuinely reflective of our nation and our world.

Let me give you a capsule account of where we are on each of these great challenges. This year, the faculty has been having a vibrant dialogue about general education, asking itself a fundamental question: What capabilities, skills, and knowledge do we believe a UVM graduate must have when she leaves UVM, whether she graduates from the Rubenstein School or from the School of Business Administration? Creative and feasible ideas are emerging from this dialogue, which is very exciting, and we expect a proposal to come before the Faculty Senate by the end of the current semester.

The faculty steering groups for each of the three “Spires of Excellence” are “breaking down the silos” and bringing faculty together around common research interests. They are at work organizing research symposia for faculty, students, and community and state partners and identifying faculty groups to apply for large competitive grants. Our development of these exciting cross-campus collaboratives is drawing interest from powerful partners such as IBM, the MITRE Corporation, and Sandia National Labs. A burgeoning relationship under the auspices of Senator Bernie Sanders between Sandia and a group of Vermont partners (including UVM, Vermont’s thirteen utility companies, the Vermont Energy Investment Corporation and VELCO) has already brought this year a million dollar U. S. Department of Energy grant to the partnership, which aspires to make Vermont the national model for an optimized, state-wide smart grid. Sandia has been drawn to Vermont in large part because of UVM’s strength in complex systems and in neuroscience, behavior, and health: in complex systems because of our ability to do things like modeling cascading failures on the grid, and in  neuroscience, behavior, and health because understanding of what motivates behavioral change—remember from our last meeting Dr. Higgins and the motivation of smoking cessation during pregnancy—may be essential if Vermonters are to change behaviors to turn feedback from the smart grid into personal and societal savings.

As for our commitment to diversity, founded on the linkage this Board has affirmed between diversity and academic excellence, we have had sustained gains in recruiting and retaining ALANA students. For the first time ever, U.S. students of color this fall constituted more than 10% of the UVM student body. Last semester we appointed Wanda Heading-Grant as Chief Diversity Officer; she is a recognized campus leader on diversity issues and initiatives and she is also strongly grounded in the local community. We have a committed group of faculty and staff working to advance internationalization in the International Advisory Council. And we have seen rapid growth in enrollment in one of our newest majors, Global and Regional Studies. We must prepare our students to be successful in the increasingly diverse national and global communities in which they will live and work, and I hasten to add that we must not pursue internationalization of the University at the expense of multi-ethnic U.S. diversity. Both dimensions of diversity, domestic and international, require investment and care if we are to realize the promise I made to a high school senior at a school assembly in Stowe who asked why she should want to attend UVM with students who would be just like the ones sitting around her on the gymnasium bleachers. It was a great question, to which I replied, “Oh no, you’ll find lots of great Vermont kids at UVM, but you will also encounter the world at Vermont’s University.” We must make that so to achieve the vision of academic excellence we have set for UVM.

In each of these areas—general education, the transdisciplinary “Spires of Excellence,” and the creation of a diverse campus community—there are numerous faculty members who are taking on additional service loads to advance the University and to think creatively about our academic programs. They know we cannot stand still—that even as we come together to meet next year’s budget challenge, we must have our eyes open, looking out to the future horizon.

The continuing success of the University of Vermont matters not just for our students, faculty, staff, and alumni, but also for the citizens of Vermont. A recent “Pulse of Vermont” poll shows that far more Vermonters have “great confidence” in higher education in their state than in any other major institution: 58%--up 15 points since 2005—expressed “great confidence” in colleges and universities. The poll also reported that “no single issue stood out so prominently...as the state of the economy. In higher proportions than previously, Vermonters expressed a greater desire for job creation and were more persuaded than ever that economic growth contributes to an improved the quality of life.”

These results sound a clear note of hope for Vermont. Vermonters increasingly see that economic growth and quality of life go hand in hand, and place their greatest confidence in higher education, widely cited by authorities as a key to regional economic vitality. That link between economic development and higher education centers upon research universities, and thus reflects well on—and creates special obligations for—Vermont’s only research university. Whether measured in enrollment, degree production, employment of faculty and staff, or total expenditures, UVM makes up between 30% and 40% of the higher education sector in the state. Confidence must be earned, and UVM’s performance since the last “Pulse of Vermont” poll in 2005 has been remarkable: for example, the records set last year with the 80.4% Vermont graduation rate and the $146 million in grant and contract awards. Maintaining Vermont’s leadership among the top five states in the percentage of residents with college degrees is key to the state’s well-being. We embrace our role in building Vermont’s human resources through education and training and in building Vermont’s capacity in research, development and innovation.

Educating students is the heart of what we do. But  research universities also contribute to society through creating new ideas, processes, and technologies that meet human needs and through innovation that leads to technology commercialization—from the laboratory to the marketplace—and thus to job creation. In an era of belt-tightening, we must invest in education, research, and innovation as essentials of societal well-being, economic competitiveness, and national security.

UVM has invested. We have forged a robust, job-creating alliance with the Vermont Center for Emerging Technologies, a high-tech business incubator headquartered on campus. We have created a program, UVM Ventures, providing seed funding and expertise to faculty and student inventors prototyping new products, developing business plans, and forming companies. And we have engaged faculty, staff, and students in problem-solving for businesses and industries throughout Vermont. Last summer the National Science Foundation’s online magazine Science360 featured a video about how UVM engineering students, as part of their senior design clinic, solved a problem in the cheese-aging caves of Jasper Hill Farms in Vermont’s Northeast Kingdom —a compelling example of how research and engagement with problem-solving in the real world enrich the educational experience of UVM undergraduates while supporting Vermont enterprises. Moreover, that project was a clear expression of Food Systems, one of UVM’s “Spires of Excellence,” demonstrating our strong commitment to the continuing vitality of Vermont’s agricultural economy through interdisciplinary research, including the School of Engineering and the Department of Food Science and Nutrition (whose Vermont Institute for Artisan Cheese provides certification for every employee at Jasper Hill).

In the decades since UVM professor Dr. Norman Alpert launched BioTek, Vermont has seen an array of companies spring up started by faculty and based in part on their work at UVM, among others Haemotologic Technologies, Apollo Biosciences, and Vtrim. And Vermont has seen a variety of firms launched by UVM graduates, both those based on UVM intellectual property, like Vermont Natural Coatings, and many others whose founders drew substantially on their UVM education and training, including Microstrain, NRG, and AllEarth Renewables. We are committed to educating students, to building Vermont’s economy, and to creating jobs through research and innovation. Those jobs will employ our graduates and other Vermonters, often in firms founded by our faculty and students. Vermont’s University is in the forefront of building a bright future for the Green Mountain State, and at the same time contributing to the economic vitality of the nation. Rob, I will be happy to take questions if we have time. Thank you.