University of Rochester

Office of the President

Office of the President

Envisioning The Future: A Framework for Strategic Planning*

JOEL SELIGMAN
REMARKS TO FACULTY SENATE
OCTOBER 3, 2006
REMARKS TO BOARD OF TRUSTEES
OCTOBER 6, 2006

I. INTRODUCTION

During the past 156 years, faculty, students, alumni, administrators, and staff have built a magnificent University. We are justifiably proud of our schools, our clinical enterprise, our outstanding graduate and undergraduate students, our curriculum. It is an apt recognition that Newsweek has recently lauded Rochester as one of the 25 "New Ivies," particularly noting the success of our undergraduate curriculum. We have experienced extraordinary progress because of adherence to our fundamental values: academic excellence, academic freedom, diversity and inclusiveness, and commitment to the greater Rochester community. We are a small research university that has achieved exceptional results because we have insisted upon high standards and systematically pursued them.

In recent months, there has been an acceleration of our progress. Last spring the School of Nursing dedicated its new Loretta Ford Educational Wing. A few days later ground was broken for the new James P. Wilmot Cancer Center. This academic year the University community will celebrate the dedication of the new Robert B. Goergen Biomedical Engineering and Optics Building and the new Cardiovascular Research Institute.

On October 3rd, the University of Rochester received the grand news that the School of Medicine and Dentistry will be one of the inaugural national programs selected by the National Institutes of Health (NIH) for a major, multi-year Clinical Translational Science Award. This is the largest NIH award ever received by our University.

I, today, am pleased to report that within recent months the University has funded six new faculty professorships. In February, I announced the provision of half the funds to fully endow the existing Susan B. Anthony professorship and a new Frederick Douglass professorship. I am now pleased to announce that these professorships are fully endowed. I am also delighted to report that a new Lionel McKenzie professorship has been fully endowed. All of us are grateful to Dr. Fred S. Jensen '42 whose gift of stock in PanAero Corporation, recently sold, makes possible the completion or creation of these three endowed professorships. Separately, Doris Johns Cherry '43 provided nearly $2.5 million to create a new distinguished professorship. The Susan B. Anthony, Frederick Douglass, Lionel McKenzie, and Doris Johns Cherry professorships will reside in the College of Arts, Sciences, and Engineering. In the School of Medicine and Dentistry, a new Lindsey Distinguished Professorship for Pediatric Research has been made possible by the generosity of Dr. Porter W. Anderson. In the School of Nursing, The Pamela Klainer Professorship in Nursing Entrepreneurship has also been established.

This is a pivotal year for strategic planning. Each school and the Medical Center will present strategic plans to the University Board of Trustees Strategic Planning Advisory Committee. The plans will envision the future of each academic division. Ultimately the Board of Trustees working with the senior leadership will articulate an encompassing vision for the University of Rochester as a whole.

Few processes are more inclusive than strategic planning. The schools and the Medical Center have already begun to work with their faculties and academic and administrative leaders on draft plans. These plans will be part of a broader conversation that also will involve our alumni leaders, our students, and our staff.

My role today is not to announce what these strategic plans should say. Plans will emerge from the efforts of the schools and the Medical Center and their relevant constituencies. But I want to frame for all in our University community general elements in our strategic environment and common challenges that each school, the Medical Center, and the University are likely to face in preparing strategic plans. Most of all, I want to provide a common factual framework that will inform all involved in this highly consequential conversation.

The essence of strategic planning is prioritization. Central to any effective strategic plan is an analysis of which current or new programs should be emphasized. The plans are intended to be comprehensive and address student life, the balance between undergraduate and graduate education, our libraries and other resources that span the University. Inevitably there will be tradeoffs and difficult choices. In this process, first the schools and the Medical Center will identify specific programs to emphasize in their plans. After a little more than one year of listening to our faculty, students, academic and alumni leaders, I sense a commitment to progress at this University that is exhilarating.

II. THE STRATEGIC ENVIRONMENT

A. GLOBAL ECONOMIC TRANSFORMATION

In the broadest sense our world is in the midst of a profound economic transformation. Domestic manufacturing, which involved 31 percent of the workforce in 1960, has declined linearly to approximately 11 percent of the workforce in 2005.

Simultaneously, a new knowledge based economy is rapidly expanding within the United States. The Department of Labor projects that there will be two million new job openings in the fields of engineering, computer science, mathematics, and the physical sciences. The Bureau of Labor Statistics further projects that 16 of the 30 fastest growing jobs in the next decade will be in the health professions.

The University of Rochester already is participating in this economic transformation. (SLIDE 1.) At the present time, a large proportion of our academic and clinical programs involve the health professions; engineering; computer science; mathematics; and the natural sciences. To be precise, in 2006 over 91 percent of our annual budget, and in 2005, 78 percent of our tenured and tenure track faculty and 49 percent of our students, were in the health professions, engineering, computer science, mathematics, and natural sciences.

We also have been the beneficiaries of an increased internationalization of our student body and faculty. For those who seek the finest possible education and research, the world today has no boundaries, and the comparative strengths of our University and peer institutions in this country provide an important national resource.

But this global economic transformation and our alignment of programs pose a significant challenge for us. Throughout our history, the University of Rochester has articulated a great ideal for higher education: All students, regardless of major or graduate specialty, will be best prepared in the context of a liberal arts education, rather than by focusing exclusively on mastery of a specific area. In addressing how to allocate incremental resources in our strategic planning, I believe it is essential to enhance the humanities and arts, as well as other core strengths of the University including the social sciences, business, and education. For many of our students, it is programs such as the biopsychosocial model in the School of Medicine and Dentistry, our Eastman School of Music, our undergraduate Rochester Curriculum and our Take Five program that have made the University of Rochester distinctive. Each of these is an articulation of the University's liberal arts ideal that we should seek to strengthen.

B. GROWTH IN NUMBER OF STUDENTS

Concomitant with this global economic transformation, the period from 2000 to 2015 is predicted to see the largest enrollment growth in postsecondary education in our nation's history. (SLIDE 2.) According to the United States Department of Education, aggregate enrollment in all postsecondary institutions increased from 13.8 million in 1990 to 15.3 million in 2000 and is projected to increase to 19.5 million in 2015. This means that the number of full time students in all degree granting postsecondary institutions increased by approximately 11 percent between 1990 and 2000 and is predicted to increase by an additional 30 percent between 2000 and 2015.

At the University of Rochester, SLIDE 3 illustrates that between 1990 and 2006 we witnessed a 56 percent increase in applications from 7,267 in 1990 to 11,332 in 2006.

The percentage of undergraduate matriculants from out of state remained essentially unchanged between 1990 and 2006. This suggests a significant opportunity to increase our potential applicants by appealing to a more national applicant pool. The United States population, including the student population, is growing faster outside of New York, particularly in the southern, southwestern, and western regions of the country, than it is in New York and contiguous states.

SLIDE 4 suggests there are other opportunities to explore for potential growth in our undergraduate student population. The College's Enrollment Working Group currently is engaged in a broad review of how the College might strengthen its attractiveness to future undergraduates.

C. INTERDISCIPLINARITY

In preparing this statement I reviewed recent strategic plans from several other leading private universities, most of which own or are affiliated with academic medical centers.

Above all else, one theme was consistent in these documents: We live in the age of academic interdisciplinarity. Interdisciplinarity is not a substitute for established academic structures based on schools and departments or budgeting based on a decentralized "every tub on its own bottom" approach. But a systematic review of a decade's worth of outstanding strategic plans from private universities inevitably leads one to the conclusion that our peers are rapidly shifting to a model that simultaneously strengthens existing schools and departments and enhances new interdisciplinary schools, centers, and programs.

Increased interdisciplinarity is not limited to science, engineering, and medicine. The American Association of Universities (AAU) Report, Reinvigorating the Humanities (2004), described a growing number of interdisciplinary collaborations involving the humanities, most significantly through humanities or part-humanities centers or institutes, degree programs in interdisciplinary fields and joint appointments.

Two other broad themes are worth highlighting in any review of interdisciplinary programs. First, the need for continued support of interdepartmental interdisciplinary efforts within each school should be stressed.

Second, the importance of continuing to invest in traditional schools and departments, cannot be overstated. Even the most optimistic advocates of interdisciplinary teaching and research recognize that the core of our universities will continue to be our schools and departments.

The University of Rochester has a distinguished history of interdisciplinary and multidisciplinary programs, notably including the Institute of Optics, the Center for Visual Science, the Center for Language Sciences, and more recently the Department of Biomedical Engineering. There are also significant University of Rochester interdisciplinary programs in the humanities and social sciences, including the Frederick Douglass Institute, the Susan B. Anthony Institute, and the Graduate Program in Visual and Cultural Studies. In all today, there are 32 interdisciplinary programs and centers in the College of Arts, Sciences, and Engineering alone.

Faculty at the University of Rochester often have praised a culture of collaboration. Several factors have helped to facilitate interdisciplinarity. Unlike some more geographically dispersed peer institutions, most academic research is clustered around the River and Medical Center campuses. Paradoxically, challenges at the University of Rochester involving resources and faculty size have tended also to inspire interdisciplinarity. Our faculty often have shown prowess in "making a virtue out of necessity" in joint appointments, core facilities, research and curricular design. Over time, these mechanisms have been fortified by personal relationships among faculty in different departments and schools. The argument has often been made that we already have created interdisciplinary programs with greater effectiveness than many of our peers in part because our small size and compactness foster collegiality. Data collected for our 2004 Self-Study, for example, found that 56 percent of a survey of faculty engaged in research outside their department or school within the prior five years.

Any initiative to enhance interdisciplinarity at the University of Rochester, whether within or between schools, will have to address significant questions concerning tenure home, financing, and space, among others.

III. FUNDAMENTAL CHALLENGES

While the combination of the University of Rochester's academic strengths, the national projected undergraduate enrollment growth, and the University's interdisciplinary faculty and programs create the opportunity to draft and execute an ambitious strategic plan, significant institutional constraints will limit the scope and pace of implementation.

A. RESOURCES

First, let me address resources.

1. CURRENT STATE

The University of Rochester is highly decentralized, as SLIDE 5 illustrates, with approximately 3 percent of its endowment centrally held. Virtually all of the current endowment is held by the Medical Center and schools (for budgetary purposes, termed "divisions"). Under our decentralized budget model, each division generally is supported by its own resources, with central infrastructure supported by institutional support cost allocations. The University of Rochester budget model further distinguishes between core operating budget and non-core activities, which are generally self-sustaining and include sponsored program activity such as government sponsored research, auxiliary operations such as student housing, and cost centers, including parking.

The largest and most complex part of the University is the Medical Center, which in FY 2006 equaled 84 percent of overall University operating revenues of $2.1 billion. (SLIDE 6.)

Strong Memorial and Highland Hospital in 2005 were responsible for 53 percent of the hospital market share in Rochester. This represents an extraordinary success for our hospitals. The combined Strong and Highland market position makes possible further development of our regional strategy, which involves becoming the medical center of choice in a broader geographic area, with an increased number of medical specialties and/or with an increased market share in specific specialties. With expanded bed capacity and more private rooms, Strong Memorial, in particular, could be more effective in accepting referrals from regional hospitals. Today approximately 10 to 15 percent of regional referrals to Strong must be declined because of lack of capacity.

At the same time it is worth underlining that most of the University's material risks are located within the Medical Center. These include challenges associated with our current high levels of occupancy at Strong, with particularly acute challenges in the Emergency Department; uncertainty as to future Medicare and Medicaid support and NIH funding levels; challenges in working with third party payors; the possibility of abrupt changes in state or federal policy; and clinical and health care risks, such as the possibility of a preclinical trials causing injury to a participant, among others.

Strong Memorial and Highland hospitals provide a "clinical engine" that generated $48.7 million in operating margin in FY 2006. This operating margin provided $31.2 million in fund transfers, primarily to support the clinical and research programs of the faculty in the School of Medicine and Dentistry.

The School of Medicine and Dentistry is distinctly different in its finances from the University of Rochester's non-medical schools for several reasons. (SLIDE 7). Total non-core revenue of $211.6 million in FY 2006 significantly exceeded core revenues and transfers of $131.4 million.

Overall, the School of Medicine and Dentistry endowment was $574.9 million at year end FY 2006. This allowed the School in that and prior years to achieve the 5.5 percent target endowment payout rate. (SLIDE 8.)

The School of Nursing, unlike the School of Medicine and Dentistry, is heavily tuition reliant (in FY 2006, 73.7 percent of total operating revenue came from net tuition and fees). The School of Nursing is also quite striking in the size of its FY 2006 noncore revenue ($6.6 million), which was almost as large as its core budget. (SLIDE 9.) As with the School of Medicine and Dentistry, the School of Nursing has consistently achieved the University target endowment payout rate of 5.6 percent with its endowment, which at year end FY 2006 was equal to $19.1 million. (SLIDE 10.) In FY 2006, the School of Nursing completed a $20.3 million capital campaign that led to a significant expansion in its facilities with the addition of the new Loretta Ford Education Wing and will permit a 60 percent expansion in enrollment in the accelerated undergraduate program for nurses in FY 2007.

As SLIDE 11 highlights, the College core budget of $138.8 million in FY 2006 was generated primarily by net tuition and fees ($73.5 million or 52.9 percent), indirect cost recovery from sponsored research ($25.9 million or 18.7 percent), and endowment use ($27.7 million or 20 percent).

There has been much attention paid in recent years at the University of Rochester to tuition discounting, which in FY 2006 at the College equaled 40 percent of gross undergraduate tuition. President Jackson and the Board of Trustees deserve considerable credit for reducing the undergraduate College tuition discount rate from a peak of 56 percent in FY 1996. SLIDE 12 lists FY 2006 freshman tuition discount rates of COFHE universities. The mean tuition discount of the COFHE mean private universities is 37 percent, with several private universities ranked higher inU.S. News and World Report using notably lower discount rates (25 to 35 percent).

There is a more significant tuition issue. The net tuition for the University of Rochester is smaller than most of our peers. As SLIDE 13 suggests, this appears to be largely the consequence of the relatively smaller size of our student body, rather than tuition levels or tuition discounts.

SLIDE 14 describes the College endowment funds, noting that the endowment at the end of FY 2006 was $369.1 million. In that year the College budget received an endowment payout of $27.7 million or 8.5 percent. The difference between this payout and the target endowment payout rate of 5.5 percent in FY 2006 was $9.8 million, which is the equivalent of a deficit under our budget model.

The College currently has other significant financial challenges, most notably including deferred maintenance, which will require approximately $3 million per year above the current budget of $4.1 million to prevent a further increase in the estimated $57 million buildup of deferred maintenance and faculty salaries, which the College estimated in FY 2006 would require $3.6 million per annum to be fully competitive.

As with the College, the William E. Simon School of Business Administration is also heavily dependent on tuition (in FY 2006, 65 percent of total revenues and transfers) and endowment use (28 percent). (SLIDE 15.) The FY 2006 endowment draw of 9.7 percent of an $80.1 million endowment is approximately $2.9 million above the target endowment payout rate of 5.5 percent. (SLIDE 16.) Reducing the Simon School's endowment payout rate and increasing the faculty size are two strategic challenges for the Simon School.

In terms of its endowment, the Eastman School of Music is the most financially secure of our academic divisions at this time. In FY 2006 endowment payout provided 48.7 percent of total revenues and transfers, with net tuition and fees providing 41.1 percent. (SLIDE 17.) The FY 2006 endowment payout rate of 6.1 percent was only somewhat above the University's target 5.5 percent payout rate. (SLIDE 18.) Three particularly significant financial challenges have been identified in the Eastman School strategic planning process: (1) Facilities, notably the need for more rehearsal and recital space and the challenge of a conspicuously aging Eastman Theatre; (2) instrument replacement; and (3) graduate scholarships.

The Margaret Warner Graduate School of Education and Human Development is the University's smallest school, with core total operating revenue of $6.8 million in FY 2006, of which 72 percent was provided by net tuition and fees. (SLIDE 19.) At year end FY 2006, the endowment was $24.4 million, with the Warner School in recent years consistently being at or below the target endowment payout rate of 5.5 percent. (SLIDE 20.) The major significant strategic challenge on the horizon for Warner appears to be space. Between FY 2001 and FY 2006, student enrollment has grown by more than 50 percent without any negative impact on student quality or tuition discounting. This facilitated a faculty increase from 24 full time equivalents (FTEs) in FY 2001 to 34 in FY 2006.

2. ADDITIONAL RESOURCES

Each academic division of the University of Rochester, as with most of our peers, has a breakeven budget model, employing the University target endowment spending rate of 5.5 percent. Incremental resources for new programs or faculty growth must come largely from one or more of the following sources of funds. (SLIDE 21.)

  1. (1) Sponsored Program Support. SLIDE 22 depicts external funding from government and private sources. In FY 2005, sponsored program funding totaled $341 million, of which $258 million was provided by the federal government. NIH funded $161 million of the federal total to the entire University. The flattening of NIH peer reviewed support nationwide (which between FY 1998 and FY 2003 increased by approximately 100 percent, but between FY 2004 and FY 2005 increased by only 1 percent) represents a major challenge for the Medical Center.
  2. The College, in contrast, is subject to different sponsored program budget dynamics. The majority of its sponsored research is directed to the Laboratory for Laser Energetics, which is funded by the Department of Energy. With respect to the non-Laser Lab portion of the College budget, growth is currently projected in the budget of the National Science Foundation.
  3. (2) Government Directed Appropriations. As with virtually all members of the AAU, the University of Rochester does not seek non-peer reviewed appropriations in competition with peer reviewed funds. In areas not addressed by the AAU policy, SLIDE 23 illustrates that the University has had considerable success in recent years in securing both federal and state directed appropriations.
  4. (3) Debt Capacity. SLIDE 24 is a University consolidated balance sheet for FY 2003-FY 2006, which reflects long term university debt of $541.3 million at year end FY 2006, using preliminary data.
  5. In its February 2006 report upholding the University's current bond rating of A1 with a stable outlook, Moody's analysts stated: "Moody's believes the University has additional debt capacity at the current rating level to undertake a reasonable amount of future borrowing beyond the planned $175 million borrowing in 2006." (SLIDE 25.)
  6. The amount of additional debt capacity available to the University in the future cannot be determined precisely, but it can be approximated. With the University projected to retire principal at the rate of $27 to $30 million per year, it is reasonable to expect that the University will be able to issue bonds in the range of $100 to $150 million within our current credit ratings at two year intervals. Over six years, the University reasonably can anticipate $300 to $450 million of debt issuance. (SLIDE 26.) Each of these projects is similar to other projects that have been approved by the University Board of Trustees in the past.
  7. This analysis should be viewed as tentative and assumes continued favorable performance by the University's Medical Center and by the University's endowment. This analysis also does not take into consideration the likelihood of significant additional assets coming to the University from advancement activities or growth in the endowment through investment performance. Most significantly, none of the possible projects that the schools or Medical Center will consider in their strategic planning processes has yet been added to the list.
  8. (4) Development. SLIDE 27 reports annual gift revenues in FY 2005, distinguishing total giving and funds added to the endowment. It also highlights that the University of Rochester underperforms virtually all AAU universities both in terms of total giving and in annual additions to the endowment.
  9. Development is among the most promising areas for new resources at the University. We have begun a major initiative to build the infrastructure and create a qualified prospect pool that will make it possible to achieve development results comparable to our peers within a reasonable period of time. Among other ambitions, we anticipate a doubling of annual giving within five years and undertaking the largest capital campaign in our history.
  10. (5) Endowment Growth. There is a direct link between successful development activity, when it adds resources to endowment, and the overall size of the endowment. As SLIDE 28 illustrates, in recent years the University of Rochester's investment performance has frequently been at the mean or better compared to the University of Rochester's Board of Trustee's Investment Committee benchmarks and peer groups. Nonetheless, as SLIDE 29 documents, principally because of the relatively low new value of gifts added to our endowment and the relatively higher level of endowment payout, the growth in our endowment has systematically lagged behind relevant benchmarks and peers.
  11. (6) Tech Transfer and Commercialization. Since the Bayh-Dole Amendment of 1980, universities have received royalty revenues from patent licensing. SLIDE 30 describes the University's patent royalty and license income between FY 2002 and FY 2006. In recent years the University of Rochester has consistently been ranked in the top ten among United States universities in terms of patent royalty and licensing income. Much of this income was the result of two patent arrangements, a license to Wyeth for the technology that was incorporated into the pneumococcal vaccine (Prevnar), and a license to Research Corporation Technologies (RCT) for the technology called Blue Noise Mask. The patent for Prevnar expires in 2007 and certain of the patents for the Blue Noise Mask technology have already expired, with others scheduled to expire over the next several years. Beginning in FY 2007, the University will receive a new significant source of licensing income from the vaccine for human papilloma virus, a discovery that will dramatically decrease the incidence of cervical cancer.
  12. Tech transfer and commercialization provide a potential, but uncertain, source of revenue. The Task Force on Tech Transfer and Commercialization will soon report on its review of current practices and make recommendations as to how these can be improved consistent with our core academic mission.
  13. (7) Growth in Student Enrollment. For tuition dependent schools, carefully managed growth in the number of students may prove to be the most significant option to provide new resources to increase the size of the faculty and add or augment programs, particularly in the short term. These schools include the College (52.9 percent of whose core budget came from net tuition and fees in FY 2006), the Simon School of Business Administration (65 percent of whose budget came from net tuition and fees in FY 2006), the Warner School of Education and Human Development (72 percent of whose core budget came from net tuition and fees in FY 2006), and the School of Nursing (73.7 percent of whose core budget in FY 2006 came from net tuition and fees).

B. FACULTY AND STUDENT BODY SIZE

In contrast to private AAU universities with academic medical centers, AAU universities in general, the COFHE institutions, and the Top 50 National Universities ranked by U.S. News & World Report, the University of Rochester is smaller than virtually all of its peers in both faculty and student body size, has fewer schools and programs, over the past 15 years has been one of the few universities to decrease its student size, and has been one of the slowest growing universities in terms of faculty size.

The most relevant peer set is the AAU private universities with medical centers. (SLIDE 31.) This peer set involves 19 universities, whose average enrollment in fall 2004 was 17,282. The University of Rochester has the second smallest enrollment of this peer group with 8,329 students.

What is most striking about the enrollment data is that the average growth in enrollment between 1990 and 2004 was 17.5 percent for these 19 universities. All 18 other universities experienced enrollment increases while the University of Rochester declined in enrollment by 10.4 percent. (SLIDE 32.) These student enrollment trends are consistent with the broader AAU United States membership, which also includes public universities and private universities without medical centers, where 50 of the other 59 universities reported enrollment increases and the average change in enrollment between 1990 and 2004 was a gain of 11.2 percent. When one solely examines AAU private universities for the same period, 23 of the other 24 reporting universities had enrollment gains and the average change in enrollment between 1990 and 2004 was a gain of 16.9 percent. The average student enrollment in these private universities was 15,153 students in fall 2004.

COFHE data are available for a different set of leading colleges and universities. Between 1990 and 2004, 26 of the 30 other reporting COHFE institutions had an increase in student enrollment, which averaged 10.6 percent.

The U.S. News & World Report Top 50 National Universities reported an average increase of 14.5 percent in student enrollment between 1990 and 2005, with only four of the other 49 universities reporting enrollment declines. Notably, all but one of the top 30 universities in U.S. Newsreported enrollment gains.

A review of faculty size between 1989 and 2004 shows a similar pattern. (SLIDE 33.) In 2004, the total University of Rochester non-medical faculty was 556, in contrast to an average of 1089 non-medical faculty for the 19 AAU private universities with medical centers, and an average of 977 non-medical faculty for all AAU private universities.

Between 1989 and 2004, the University of Rochester non-medical faculty grew from 519 to 556 (7.1 percent growth over 15 years). (SLIDE 34.) The average non-medical faculty growth among AAU private schools with medical schools between 1989 and 2004 was 57.4 percent.

What this means from a different perspective is that the University of Rochester non-medical faculty in 1989 was approximately 77 percent of the size of the average AAU private university with a medical center or approximately 81 percent of all AAU private universities. By 2004 the University of Rochester non-medical faculty was approximately 51 percent of the average AAU private university with a medical center and 57 percent of all AAU private universities.

Although some of the difference in faculty size between the University of Rochester and relevant peer sets can be explained in terms of the smaller number of schools within the University of Rochester, the differences are still striking. (SLIDE 35.)

Student and faculty size data are particularly notable when one focuses solely on undergraduate enrollment, particularly in the College of Arts, Sciences, and Engineering. (SLIDE 36.) Between 1990 and 2005, the undergraduate enrollment at the University of Rochester decreased by 10.7 percent from 5257 to 4696. For the 18 universities in COFHE, in contrast, the average undergraduate enrollment increased by 16.5 percent. The University of Rochester had the largest decrease in undergraduate enrollment.

In 1991, there were a total of 283 Arts and Sciences faculty at the University of Rochester, which was approximately 66 percent of the average of 429 for the Arts and Sciences faculty at the 15 COFHE universities for which data are available. (SLIDE 37.) In 2004, the Arts and Sciences faculty at the University of Rochester had been reduced by 10.6 percent to 253, while the average of the COFHE institutions had grown by 6.7 percent to 453. This meant that in 2004, the University of Rochester Arts and Sciences faculty was approximately 56 percent of the average of the counterpart Arts and Sciences faculties at the 15 COFHE universities for which data are available.

At the University of Rochester there were substantial benefits from the Renaissance Plan reduction in faculty and student size in terms of student quality and subsequent reductions in tuition discounting and concomitant increases in net tuition receipts. The Renaissance Plan deserves credit for reversing an undergraduate quality decline, for reducing disproportionately high tuition discount rates (over 50 percent between 1994 and 1997), and for increasing retention and graduation rates. On the re-centered SAT, average SAT scores increased from just over 1200 in 1994 to consistent levels above 1300 during the last several years. Net College tuition grew from less than $40 million in 1998 to $73.5 million in FY 2006, during a period when we decreased the number of our undergraduate students. The University of Rochester was not alone in this strategy. Both Syracuse and Pittsburgh also reduced the size of their student bodies during this time period. The Renaissance Plan was essential when it was implemented to address the serious challenges that then existed at the University of Rochester.

Today the Renaissance Plan provides a strong foundation on which the College can address the quite different challenges that it now faces. In my view the biggest challenge involves strengthening our faculty. Relative to our peers, our faculty has not grown as fast as nearly all of them have grown nor have we been able to develop or strengthen academic programs as much as we today should because of our faculty size. Any plan to address the size of the faculty or program for the College will be originated by the College. But I am confident about one key point. Even if the College seeks to grow its faculty, its student enrollment, and programs, it will remain relatively smaller than most of its peers. The intimacy and strong bonds between faculty members and faculty and students will not be changed in a fundamental way.

C. RANKINGS

Rankings, particularly those in U.S. News and World Report, often have been questioned in terms of their methodologies. Rankings nonetheless affect student recruitment and enrollment, faculty hiring and retention, and alumni support. The perception that the rankings in some of our programs have declined creates a challenge that we should address in this strategic planning cycle.

For research and clinical departments in the School of Medicine and Dentistry, NIH aggregate and department rankings are often used. In 1988 and 1990 our aggregate NIH ranking reached a high water mark of 14th before experiencing a precipitous decline to 29th in 1995. The University of Rochester Medical Center 1996 Basic Research Plan deserves significant credit for stabilizing our relative position in NIH rankings at approximately 30th in ensuing years. (SLIDE 38.)

SLIDE 39 disaggregates NIH ranking data from 1997 to 2005 by department. Specific departments such as Orthopaedics, Neurology, Dentistry, Biostatistics, and Neurosurgery ranked among the top ten in NIH funding.

Between 1995 and 2005, SLIDE 40 documents that the School of Nursing steadily improved its ranking in NIH funding from 37th to 12th.

SLIDE 41 presents U.S. News' Top 50 National University data between 1991 and 2005. The University of Rochester ranking declined from 25th in 1991 to 34th in 2005. Two other data are noteworthy in SLIDE 41: (1) Peer assessment, statistically the most important factor in these rankings, was ranked between 53rd and 60th in each year between 1997 and 2005; and (2) annual giving rate was ranked 69th overall.

The College has had better results in selected departments, including Atomic and Molecular Physics (ranked 10th by U.S. News in 2005), Political Science (ranked 13th by U.S. News in 2005 with Political Methodology ranked 4th), and Economics (ranked 19th).

SLIDE 42 summarizes a broader array of data available for the Simon Business School. With the exception of being ranked 37th and 36th in 2003 and 2004, the Simon School has been consistently ranked between 23rd and 26th in most years since 1990 by U.S. News.

There are no regular rankings of music schools, but in 1997 and 2000, the Eastman School graduate programs were ranked number one by U.S. News & World Report.

The Warner School of Education and Human Development to date has not participated in a ranking process.

IV. STRATEGIC PLANNING PARAMETERS

Given our current opportunities and challenges, six fundamental themes, in my opinion, should be considered in the University's strategic plan and may be relevant to each school's and the Medical Center's strategic plans. (SLIDE 43.)

A. STRENGTHEN EXISTING PROGRAMS

We begin this strategic planning cycle with a series of resource challenges that must be addressed. Certain of these challenges are particularly significant, such as facilities that are outdated or have substantial underbudgeted deferred maintenance, inadequate budgets for instrument replacement in the Eastman School, faculty support in some schools, and earlier financial commitments, for example, in the Medical Center. The need to devote substantial resources to strengthen existing programs is of paramount significance. We have fewer potential resources available for new programs than many of our peers do at this time. Except under unusual circumstances such as a huge restricted gift, we should be wary of undertaking large new projects until we are confident that the outstanding existing programs of the University have been effectively strengthened.

B. QUALITY GROWTH STRATEGY

The objective of any growth in faculty size or programs at the University of Rochester must be an improvement in academic quality.

There is no correct size for an outstanding private university with a medical center, but the data earlier exhibited suggest that the decline in student enrollment and faculty size during the past 15 years, particularly in the College of Arts, Sciences, and Engineering, may have had a negative impact on our faculty reputation and our ability to generate sufficient new resources for faculty growth, strengthen existing programs, and to add new programs. As we begin this strategic planning cycle, our College of Arts, Sciences, and Engineering is smaller than virtually all of its peers, particularly in terms of faculty size.

As part of the strategic planning process, each school and the Medical Center is analyzing what its appropriate size should be. As they do so, I want to highlight three fundamental considerations. First, let me again emphasize that no proposal for growth in faculty size or programs should proceed unless it can be linked to improvements in academic quality. An increase in the number of students can provide resources to facilitate a growth in faculty or programs. This is what virtually all of our peers have done in the past 15 years. But an increase in the size of the student body should not be considered unless it is part of a plan to improve academic quality at the University of Rochester. Second, new resources, whether from an increase in enrollment or from other sources, must also provide a plan to reduce and eventually eliminate endowment overdraws as well as address improvements in academic quality. Third, any growth strategy must internalize all relevant costs, including those for new facilities and infrastructure.

At the current time, the Simon School, the Warner School, and the School of Nursing are pursuing growth strategies and the School of Medicine and Dentistry is contemplating a growth strategy.

The most significant faculty and student growth during this strategic planning period may prove to be in the College of Arts, Sciences, and Engineering, but even here growth will be bounded, given our physical facilities and infrastructure needs. The College has taken the lead in analyzing potential growth strategies through its Enrollment Working Group. Analysis of growth strategies in the College and elsewhere will require coordination with the University administration and with the Board of Trustees to focus on the facilities, budget, and infrastructure implications of growth.

C. INTERDISCIPLINARITY

I have requested the Provost to chair an Interdisciplinary Review Committee comprised of the Senior Vice President for Health Sciences, each dean, and one representative from each school jointly chosen by the Faculty Senate Executive Committee and the Provost. I have asked that this Committee provide a report to me by February 1, 2007 to evaluate how well we now are performing in terms of interschool interdisciplinary programs and to recommend what steps should be taken to strengthen interschool interdisciplinary and collaborative programs. I will ask the Provost to report the findings of the Interdisciplinary Review Committee to the Strategic Planning Advisory Committee when it meets on March 6, 2007.

I anticipate that the schools and the Medical Center will also address interdisciplinary programs as part of their strategic planning initiatives. The Interdisciplinary Review Committee is not intended to address efforts internal to any school or the Medical Center, nor should the deliberations of the Committee delay any School or the Medical Center's strategic plan.

D. STRENGTHEN THE CENTRAL INFRASTRUCTURE IN SPECIFIC AREAS AND REAFFIRM OUR COMMITMENT TO DECENTRALIZATION

We are one University, but one University with a historic commitment to decentralized academic administration. As with my predecessors, I believe that academic programs and some nonacademic programs are often best administered locally.

There have always been specific programs at the University that were administered centrally, including central approval of school budgets and facility projects by the University president and the Board of Trustees.

Over time, there has been a growth in the central University infrastructure in areas such government relations, legal counsel, and information technology as well as specific programs, such as those related to the Kauffman Entrepreneurship grant.

During my period here, I have worked to strengthen the central University aspects of two areas that previously had both centralized and decentralized aspects: Advancement and communications. During the presidential selection process and subsequently, the University Board of Trustees and academic leaders emphasized their belief that the earlier programs were inadequate to our needs. The major expense of these two initiatives will be in advancement, which over time will yield significant net benefits to the schools and the Medical Center after an initial period of investment.

Our challenge is to achieve the right balance between a decentralized structure of schools and a Medical Center and a necessary centralized enabling infrastructure. I am committed to our highly decentralized university model, but one in which specific areas, largely identified to date, can be effectively administered with an appropriate central University role.

E. DIVERSITY AND INCLUSIVENESS

The University of Rochester's commitment to diversity is a fundamental value of our institution, with implications for staff and faculty recruitment and retention and for student admissions, retention, and graduation. Our commitment is not a unique one, but is also reflected in the values and plans of all or virtually all of our peers.

The diversity of the University faculty deserves special attention. We have made some progress over the last three decades. In 1980, 8 percent of the tenured and tenure-track faculty in Arts and Sciences and Engineering were female. In 2005, that percentage had increased to 21 percent.

In other respects, however, the data are less inspiring. While 29 percent of the University's tenured and tenure-track faculty are female, most are clustered in the lower ranks. Only 15 percent of our full professors are women. Approximately 2.6 percent of our tenured and tenure track faculty in 2005 self-reported as underrepresented minorities, a small improvement over the 2.3 percent in 2001. Excluding the School of Medicine and Dentistry, 3.7 percent of our faculty self-reported as underrepresented minorities in 2005. The median of our COFHE peer group was 5.9 percent.

Many praiseworthy efforts today are being made to address the diversity and inclusiveness of our faculty throughout the University; however, these efforts are uneven. It is my belief that a more coordinated effort will allow us to create a more diverse and inclusive faculty, one that excels in academic excellence.

In February of this year, I announced that I would be the University's Chief Diversity Officer to signal my commitment to this initiative. I also appointed a Task Force on Faculty Diversity and Inclusiveness, chaired by my deputy, Lynne Davidson. That Task Force will soon complete its work with a Report that will include 31 specific recommendations, notably including a recommendation that the University employ a Faculty Diversity Officer who will report to the President and the Provost and that the University significantly expand resources available to a Special Opportunities Fund to be used in hiring outstanding candidates who may increase the diversity of our faculty, among other purposes. I look forward to responding to the Task Force Report shortly after it is officially presented to me in the near future.

At least for the present time, the schools will continue to be responsible for the success of student diversity and inclusiveness.

F. THE UNIVERSITY OF ROCHESTER AS PART OF THE GREATER ROCHESTER COMMUNITY

As with a growing number of urban universities, the University of Rochester has emerged as the largest employer in its community with an increasingly complex pattern of relationships to its neighbors, to community social programs, and to community economic development.

I have been deeply impressed by the success of the schools and Medical Center in community social engagement. University leaders have estimated that there are several hundred College, Medical Center, Simon, Warner, Eastman, and Memorial Art Gallery projects in Rochester. The major challenge here is to encourage these and similar projects to continue to thrive.

Two other aspects of our relationship to Greater Rochester require new and more systematic approaches.

First, the University does not have an up to date master facilities plan or a contiguous college town. An increasing number of our peers have both. Earlier this year, I requested that the Board of Trustees Facilities Committee appoint a subcommittee to work with Ron Paprocki, the University Senior Vice President for Administration and Finance, on a Master Facilities Plan that will be coordinated with ongoing strategic planning. The initial drafts of the Master Facilities Plan will provide the equivalent to facilities planning choices.

Second, no issue is of greater moment to the Rochester political and community leadership than job creation and economic development. As a practical matter, the University of Rochester cannot be an "economic savior," but there will be many instances where the best interests of the University and those of the greater Rochester community coincide. Ongoing University initiatives involving building construction, state and Federal support, tech transfer and commercialization, and startup companies are examples of instances where specific University academic goals are consistent with the community's interest in job growth and economic development.

In the broadest sense, one point deserves particular emphasis. The University of Rochester will serve the greater Rochester community best by being the most successful University it can be. Great universities last centuries. They are magnets for faculty, students, administrators and staff, and in recent decades have frequently proven to be the hub of economic development. In an increasingly knowledge based economy, a successful University of Rochester will be a key foundation on which the greater Rochester community can grow.

V. CONCLUSION

These remarks are an exercise in full disclosure. I have laid out in some detail the material facts that I believe will prove relevant to strategic planning throughout our University.

Every effective strategic plan must be grounded in a realistic assessment of financial expense and risks.

But there is a fundamental point I must also stress in closing. "Make no little plans; they have no magic" to paraphrase Daniel Burnham, Director of Works for the 1893 Chicago World's Fair. Or, as I have stated before, "Aim High." We are a great university with great opportunities. We must balance ambition with realism, but we must not limit our future by proceeding with too little ambition.


*In a few days I will post on the University Web an amplified version of these remarks with footnotes and tables. Let me reflect my particular gratitude to Maggie Cassie for her work on data gathering and analysis and to the members of the University Senior Leadership Team, Board of Trustees, and Faculty Senate Executive Committee who read drafts of these remarks and offered their comments.