State of the University, 2008-09

May 1, 2009

I am pleased to report on the State of the University as we conclude the 2008-09 academic year.

I. The Economy and Our Budget

The impact of the severe downturn in the global economy has not impacted American colleges and universities uniformly.

Highly leveraged institutions with very large endowments and large exposures to illiquid private equity markets have been especially hard hit. Public universities, already forced to make current year budget reductions, face significant budget deficits in the years ahead, as state governments respond to drastic reductions in projected revenues. Very small tuition-dependent colleges with very small endowments face severe pressures on their operating budgets.

No doubt, a few colleges and universities will not survive the recession. However, it would be a mistake to expect that the current economic conditions, even as unprecedented as they are, will result in a substantive restructuring of higher education or significant closings of its institution. History suggests otherwise:  just as American colleges and universities are remarkably resilient, they are also remarkably slow to change, even in the face of adverse market conditions.

At Willamette, where endowment income is modest relative to other operating revenue sources, the most significant pressures on next year’s budget center on uncertain demand for enrollment and sufficient financial aid. Willamette’s endowment spending ($7.33 million) for FY 2009-10 accounts for less than 10% of our FY 2009-10 operating budget ($80 million).

However, as the recent decline in the market value of Willamette’s endowment is realized in FY 2010-11 and beyond, the University will face budget deficits that must be balanced through cuts in operations, elimination of programs or positions, adjustments in our endowment spending formula, other creative uses of our endowment or, more likely, a combination of some or all of these.

The FY 2009-10 budget is based on four priorities:

• Maintain core academic programs and activities
• Sustain competitive salaries for faculty and staff
• Manage financial aid in order to maintain a diverse and academically talented student population
• Ensure that academic facilities support the educational mission.

These disciplined priorities protect our revenue drivers (admissions, marketing and fund-raising) and strengthen, as resources permit, programs that are most likely to increase student demand  (financial aid).

Most important, the FY 2009-10 budget recognizes that while the recession may be of uncertain duration, it is not permanent.  Our goal has been to design a budget that has the best chance of making Willamette more resilient and competitive when the economy recovers.  As such, the budget reflects our continuing commitment to significant investments in our core competencies and programs, such as expanding the CLA faculty to enhance teaching excellence, research, and student advising. Our operations are more efficient and cost-effective because we streamlined programs and services in an effort to identify further savings. A modest increase in faculty and staff salaries will help the University to maintain (or even enhance) our competitive position in national and peer labor markets. Moreover, it appears that our creative undergraduate loan forgiveness program may be both attracting new students, and bolstering retention of our current students.

We balanced the FY 2009-10 budget through permanent cuts in operations (some of which were put in place in the current year and therefore will carry forward) and reductions in College of Liberal Arts (CLA) part-time faculty. An additional challenge was holding our tuition increase to less than 5% in each academic unit, the smallest tuition increase in five years. FY 2009-10 tuition will increase 4.9% for CLA and the School of Education and 4.8% for the College of Law and Atkinson.

The FY 2009-10 budget is conservative: it includes very modest enrollment targets, especially for the CLA.  (The CLA FY 2009-10 annualized enrollment budget – 1700 students – is based on the worst-case enrollment scenario of the last decade). Given declining consumer confidence and spending, it would be imprudent to seek to balance the budget on the promise of projected increases in enrollment.

The FY 2009-10 budget includes a 2.0% salary pool increase for faculty and staff. The budget also adds $50,000 to the salary pool for our lowest paid employees. This represents the first step in a multi-year effort to increase the base salaries for these employees.

A substantial increase in the operating budget contingency as well as a very conservative projection of returning students provides a healthy hedge against anticipated lower consumer spending and demand.  The tuition discount rate for entering CLA students was increased by 1.0% and we set aside an additional 1.3% of one-time unrestricted funds to support our novel loan forgiveness scholarship program, whose purpose is to provide additional financial aid to students whose families have been particularly hard hit by the economic downturn. The budget holds in reserve $555,000 of contingency expenditures that will be released to various budget units for specific purposes on a rolling basis, provided that the University meets projected tuition revenue targets in June, October and November, respectively.

II. Admissions

a. College of Liberal Arts

As the CLA admission season draws to a close, Willamette has achieved several benchmarks.  We have received almost 6,000 applications for admission, a 42% increase over 2008. CLA applications have doubled since 2007 and quadrupled during the last decade. Our applicants come from 49 states and 22 countries.  We admitted 57% of our applicants this year, vs. 66% in 2008 and 77% in 2007.  Willamette now approaches an important admission benchmark: our goal is to join the small group of colleges and universities nationwide who admit fewer than 50% of their applicants.  According to US News & World Report, of its 1,321 nationally ranked colleges and universities, 214 institutions admit fewer than 50% of applicants and 392 admit fewer than 60%.

The source of growth in applications is primarily in the Western states, with the biggest increases in the Tacoma-Vancouver WA (180%), Puget Sound (84%), Willamette Valley (81%), Eastern Oregon (54%), Idaho (30%) and the San Francisco Bay (23%) areas. In the aggregate, Oregon applications climbed 75%; Washington applications increased 103%; and California applications grew 17%.

We have made progress in the multicultural diversity of our undergraduate applicants, as these students constitute 20% of our admitted pool.  This compares to 18% in 2008.

The academic credentials of admitted undergraduate students remain high.  The combined SAT score for admits this year (Critical Reading + Math + Writing) equals 1870, the same as 2008 and 50 points higher than 2007.  The ACT Composite score for admits is 28 this year, as compared to 28 and 26, in 2008 and 2007, respectively.  The average rank in class is static at the 86th percentile and the average GPA increased slightly to 3.79.

The effects of the nation’s economic downturn are evident in this year’s CLA applicant pool.  51% of our admitted students have financial need, a 2% increase over 2008: the average demonstrated financial need of these students increased from $26,450 in 2008 to $28,800 this year.  This is particularly challenging for Willamette, given our dependence on tuition income and the modest endowment resources that support financial aid. Additionally, because one in five of Willamette’s undergraduates is eligible for the federally funded Pell Grant - a major source of support for students of low-income families – the pressure on our financial budget is considerable.

b. Graduate programs

Though economic downturns have tended to benefit professional schools as students delay entering a constricted labor market for the safe harbor of graduate study, law school applications nationwide have increased by a modest 5.8%

Nevertheless, College of Law year-to-date applications are up by almost 40%, which compares favorably with both national and regional (3.2%) increases. Also notable, is a significant increase in applications from students of color, which reached its highest levels in the College's history.

Applications to the Atkinson Graduate School of Management (AGSM) MBA are at a year-over-year historic high (179), a 10% increase over last year's record number. Professional MBA (PMBA) applications have met budget projections.

AGSM domestic applications are strong, showing a 22% increase over 2008, while international applications are also trending ahead of 2008 year-to-date figures.

The recent Princeton Review ranking that placed Willamette MBA in the top 15 marketing programs in the U.S. seems to have attracted very good applicants this year.

Applications and deposits are up in the School of Education.

III. The Campaign for Willamette

The $125 million Campaign for Willamette set new milestones for the University. It engaged a wide group of alumni, parents, and friends in making significant gifts to the University.  And as our first fully comprehensive campaign, it strengthened every dimension of our educational enterprise:  all of our academic units as well as support for endowment, facilities, and annual unrestricted funds. 

To date, the Campaign has raised nearly $129 million.  Almost half of the campaign support is represented in gifts to our endowment - investments that ensure Willamette's long-term future.  The success of the Campaign advanced several dimensions of the University, including scholarships ($30 million), academic excellence ($51 million), facilities ($34 million), and annual funds ($14 million).

I would like to highlight a few stories, the "touch stone" gifts that illustrate the impact of the Campaign for Willamette on our campus.

College of Liberal Arts

The Campaign for Willamette has raised more than $84 million in support of scholarships, academic excellence and facilities for the College of Liberal Arts.

• Ford Hall:  Intersection of Technology, Arts, and Sustainability

  Hallie Ford’s $8 million commitment and the Board of Trustees $2 million matching gift launched the construction of Ford Hall, a 42,800 square foot, $20.0 million, LEED Gold-certified academic building. In addition to furthering Willamette’s commitment to sustainability, Ford Hall is dedicated to a philosophy – the creative integration of technology – rather than to a discipline.  When it opens in August 2009, the facility will welcome a mix of disciplines not routinely found under one roof, including rhetoric and media studies, computer science, mathematics, digital art, film studies and music technology – and, in the evenings, the MBA program for working professionals.  In its architecture and technology, Ford Hall will reflect all that we have come to understand about how people use space – and how that space enhances creativity and collaboration. It will become the epicenter for arts and technology on the Willamette campus and a catalyst for interdisciplinary collaboration.

• Peter C. and Bonnie S. Kremer Endowed Chair in Economics

  The University's 14^th endowed chair was funded by $1.5 million of a total $2.5 million campaign investment by Willamette alumni Peter, ‘62 and Bonnie Kremer, ‘62.  Endowed chairs are evidence of our capacity to attract and retain gifted faculty. The Kremer Chair provides a senior faculty member in economics with resources to bring guest lecturers to campus as well as support conference travel and research assistance. 

College of Law

The College of Law has achieved nearly $19 million in campaign contributions for academic excellence and facilities.

• Alex L. Parks Distinguished Chair for the Dean of the College of Law

  Penelope “Penny” Parks Knight and Nike Inc. founder Philip H. Knight committed a $5 million gift to Willamette University College of Law in honor of Mrs. Knight’s late father Alex L. Parks LLB’49, who returned to Willamette after a notable legal career to serve as a law professor from 1980 until his death in 1988.  With this new gift, Penny and Phil Knight added Willamette University College of Law’s name to a select list of higher education beneficiaries to receive generous donations from the Knight family, including Stanford University, Oregon Health & Science University and the University of Oregon.  The Alex L. Parks Distinguished Chair is held by the Dean of the College of Law.

• Oregon Civic Justice Center 

  Private donations and grants funded the $5 million transformation of the historic Carnegie Building - Salem's first public library - to the Oregon Civic Justice Center.  Thanks to Melvin Henderson-Rubio ‘74, The Collins Foundation, Meyer Memorial Trust, Wollenberg Foundation, Cherida Collins Smith '72, James F. and Marion L. Miller Foundation, Maribeth Collins, and the Ben B. Cheney Foundation, the Center was dedicated in September 2008 and handsomely houses several law programs: the Clinical Law Program, the Oregon Law Commission, the Center for Law and Government, the Center for Dispute Resolution, the Center for Democracy, Law and Religion and the Willamette Law Review, as well as other student publications.

  As Salem's first public library, the Carnegie Building was a place of considerable cultural significance in Oregon and for the citizens of Salem.  This 1912 beaux-arts building once again possess architectural grandeur, with two-story windows, crown molding, hardwood floors and period detail preserved, and airy modern offices sharing the stunning central space.  Willamette is proud to restore this historic structure to once again serve as a prominent center of public service and education in Salem.

Atkinson Graduate School of Management

The Campaign for Willamette marked the Atkinson School's first major gift fundraising effort - an effort that raised nearly $7 million for scholarships, academic excellence and facilities.

• JELD-WEN Chair in Free Enterprise

  The JELD-WEN Foundation of Klamath Falls pledged $2.5 million to create an endowed Chair in Free Enterprise. The donation is the largest in the Atkinson Graduate School's history. Debra Ringold, Professor of Marketing and Dean of the Atkinson Graduate School of Management at Willamette University, was named the first recipient of the Chair.

• O'Neill Student Investment Fund

  Through a generous donation from Robert and Doris O'Neill, class of 1950, the Atkinson School established the O'Neill Student Investment Fund.  The investment process begins with a design of a global benchmark for the following year.  Students analyze economic, financial, and political developments and trends, and, then, design an asset allocation model that combines U.S. industry sector view, a global regional view, and a risk model that represents the risk tolerance of the University and the students.  The Fund is managed by Willamette MBA students, providing an opportunity for real world experience under the guidance of a faculty member and advisory board made up of outside investment professionals. 

Campus Life:  Kaneko Commons and the Commons System

The largest gift in the University's history supported an important Campus Life initiative:  an $11 million gift from Tokyo International University of America (TIUA) made possible the conversion of Kaneko Hall, located on the TIUA campus adjacent to Willamette University, to Kaneko Commons.  This gift is not only historic in size, it is historic in its intent, which is to change forever how this University integrates the living and learning experience of our undergraduate students.  The creation of the Kaneko Commons is the first step in the University's plan to redesign the teaching-learning experience for Willamette undergraduates through the creation of a University-wide residential commons program. 

In summary, the Campaign for Willamette engaged nearly 300 donors at the $25,000 level and above - and a total of more than 17,000 donors at all levels.  Gifts range from $11 million to as little as a few dollars, and every one of those gifts has had an impact on Willamette University.

More than one-third of the campaign - $49 million - came from Trustees and alumni.  Parents and friends contributed $56 million, and foundations and corporations funded an additional $20 million. I am especially happy to report that faculty and staff contributed almost $2 million to the campaign, a marvelous and unprecedented achievement.

Although we have surpassed the goal established at the outset of the campaign, we remain focused on raising funds to support our strategic goals and to meet our most pressing needs.

IV. Strategic Choices and Faculty Resources

Willamette is an ambitious university moving forward with several exciting new initiatives as well as enhancing our core strengths.

None of this would be possible, of course, without the extraordinary faculty who shape the curriculum and develop new modes of inquiry through their research and scholarship as well as the committed staff who encourage student engagement, manage programs and maintain our campus with diligence and care.

During the last five years, beginning with a $3.0 million academic reinvestment fund, our highest priority has been to continue our budgetary support for academic excellence - investments primarily in our faculty to ensure that they have the necessary resources to develop research and scholarship, to teach well and to inspire our students to achieve at the highest possible levels.

We are moving forward with common purpose, even though there may and will be reasonable disagreements about the specific twists and turns that guide our strategic course. Most important, however, we must resist the urge to confuse common purpose with holding all things in common, as if all things have common merit.

This year we put into place a strategic planning process under the leadership of Professor Don Negri that seeks to chart a course for our future.  The strategic plan seeks to build upon our motto, "Not unto ourselves are we born," understanding that it might provide a valuable and authentic organizing principle for our strategic goals, an opportunity to enhance our distinctiveness and visibility, and serve as a vehicle for greater interaction and coordination among the CLA and our professional schools of education, law, and management.  The process has been thoughtful and inclusive, open to all in the community who have an interest or a stake in its outcome.

However, there is no strategic plan, no marketing scheme - however cleverly or artfully conceived or executed- that will compensate for inattention to strengthening academic excellence and expanding institutional capacity. There is no substitute for investing in the core academic and intellectual activities that give shape and life to our educational purposes.

The choices that we have made in the last five years were informed by a variety of processes that engaged Trustees, senior academic leadership, faculty, staff and students. These choices have been strategic. As such, while they have pleased many, they may have disappointed others, especially those whose good ideas, hard work and noble aspirations seem not to have been the direct beneficiaries of the choices we made together as a community. Investments in specific areas of the University have and will, of course, perforce limit our ability to fund other meritorious ideas.

Strategy requires making choices - most often requiring us to make choices from among a group of competing ideas that may seem equally compelling. Put another way, strategy involves the informed choice of doing something, while choosing not to do something else. For, as Harvard Business School Professor Michael Porter tells us, "the essence of strategy is choosing what not to do... it is about making choices, trade-offs; it's about deliberately choosing to be different..."

And while incrementalism may have many virtues - it avoids making difficult choices and it appeals to our democratic inclinations - it is not strategic. Incrementalism is more likely to preserve "what is" rather than imagine "what might be." It will always bend towards replication than towards what is truly transformative and, therefore, distinctive.

The good news, of course, is that our commonwealth of learning is not static, but is ever evolving. Investments that we are unable to make today will be made tomorrow, for as the proverb reminds us, even the longest journey begins with a single step.

I highlight below some of the strategic choices we have made in the last five years:

College of Liberal Arts

The past five years have been a period of great focus on faculty resources broadly conceived in the CLA.  Additions in resources have been made most aggressively in the expansion of tenure track lines across the disciplines; other additions have been primarily in new areas of support and activity rather than in existing resource lines and have, therefore, created stress in some continuing categories, while expanding capacity in other strategic ways.

Since Fall 2004, we have hired 20 expansion positions in support of the planned shift in CLA teaching load from 6 to 5 courses a year.  (An additional 5 positions will be added over the next 3 years.)  This expansion, which will enhance research and scholarship opportunities for faculty and students, has added approximately $400,000 per year to the budget.   Of course, the faculty expansion, when implemented fully, will impart value and important resources in non-monetary ways, including the addition of new areas of research and expertise, new approaches to pedagogy, and new interests and ideas in service and participation.

While the expansion has put pressure on non-expanded lines, such as departmental operating budgets and faculty travel, it has also provided additional resources in student advising, course development, departmental and college service and leadership that will bring great and meaningful rewards over the coming years.

Just as the global recession has slowed the full implementation of the CLA faculty expansion, so, too, has it delayed important capital projects and constrained our capacity to move forward as quickly as we would wish with budget support for much needed increases in faculty travel and departmental budgets. Recent discussions about faculty travel and development have been very helpful and will encourage the thoughtful planning of a multi-year program to add substantially to these important faculty support resources, beginning in FY 2010-11. Arnie Yasinski, the newly appointed vice president for financial affairs, and I will meet with the CLA budget and priorities advisory committee in the fall to begin discussions to identify what is needed in this area so that we can develop an operating budget time table to meet these needs.

While we have been expanding the faculty, we have also sustained our attention to faculty salaries relative to our peer market.  Increases to the faculty base salary in CLA have ranged from 3.7% to 5.6% in each of the past five years, except, of course, for the 2% in the current year (2.8% when steps and promotions are included).  The regular steps and promotions included in the faculty review system are given in addition to the base salary increases cited above.

Of the total CLA faculty hires during the past five academic years (58, including replacement positions), 16% represent domestic racial or ethnic diversity, 27% represent international diversity, and 51% are women. Over the past 10 years, of the total of 92 faculty hired into the tenure track, 12 (13%) have left Willamette for a variety of reasons, ranging from personal or family issues to negative tenure decisions.

Additional resources have been necessary throughout the hiring process during these expansion years to accommodate the increased number of searches, improve advertising and recruitment, strengthen search support, and improve start-up funding, including support for new computers and technology.

Other important additions to faculty resources during this five-year period include:

• Establishment of the Office for Faculty Research and Resources (OFRR) with a staff of 2.5 FTE. Individual research and equipment grants, start-up for the sciences, fellowships and awards, undergraduate research grants, and programmatic grants have all increased during this period. In the current year, OFRR has assisted with nearly 50 successful faculty proposals that received a total of $709,000 in grant funding. Another $1 million in grant proposals are pending.
• Establishment of the Centers of Excellence, with their addition of faculty and student research and programming resources and additional faculty release time. The Centers represent an addition of a baseline of $300,000 in resources and, as their visibility increases regionally and nationally, so, too, will external funding and gifts to the Centers increase.
• Expansion of the junior leave program to meet the needs of the CLA expanded faculty hiring. The initial budget to fund three junior leaves has been expanded to nine leaves in the current year, an addition of $95,000 in adjunct hiring. The program will continue to be flexible in size depending on our hiring. Sabbatical support has also begun to increase as faculty size has grown.
• Membership in the Consortium for Faculty Diversity. This investment has helped to expand the Lausanne Fellow program from one Fellow each year to a high of six Fellows in 2007-08; next year we will have two Lausanne Fellows. An annual budget of approximately $100,000 is allocated to this program in salaries, programming, and support.
• Endowed chairs in Economics and Environmental Policy and Politics (with several others in the planning stage) have increased institutional capacity.
• Additional funding for programs such as the Sustainability Council, the Council on Diversity and Social Justice, the Native American Advisory Council, and the Zena Forest project. These programs have targeted areas of value and interest for faculty, students, and the community and have supported and inspired faculty in areas of research, pedagogy, and community engagement, also raising the University's visibility regionally and nationally as dynamic and innovative.
• Additional resources for CLA professional travel and development have come from this year's $60,000 bridge funding from the President's discretionary budget; modest increases in the Dean's budget (approximately $20,000) to cover items such as memberships (e.g. the NITLE consortium for technology, the Western Africa Research Association), publication costs for faculty, faculty participation in Department Chair workshops, participation and presentation at meetings of national educational organizations, student travel to conferences etc.

Several continuing grants have added external funding to CLA faculty resources during this period, including the Lilly Foundation program focused on vocation, and the Keck Foundation Grant for digital arts, both of which support faculty and student research.   Investment in international education has also supported small increases in opportunities for faculty exchange, post-session coordination, and international student and faculty presence on campus. 

Support for Atkinson grants, Hewlett grants, the Carson undergraduate research program, the Presidential Scholars program, the Science Collaborative Research Program, and conference and research travel funds have remained steady during these years.  A $30,000 addition was made to the CLA faculty travel budget five years ago, while the President and the Dean have both provided temporary influxes to this line when possible.  As mentioned earlier, this is clearly an area in need of additional support as the CLA faculty expansion goes forward.

Though there have been small additions to staffing in support of CLA faculty in these years - e.g. one additional administrative assistant, an archivist in the library- additional support staff needs are pressed in a variety of areas, including laboratory sciences and studio arts. 

Most notably, we have not been able to increase CLA faculty departmental and Hatfield Library operating budgets systematically.  The carry forward budget policy has given flexibility to some departments, while others have suffered from the rising costs of equipment and supplies.  Clearly these areas will need attention, and one of the three "triggers" in the 2009- 2010 budget targets the most crucial of these needs, provided that enrollments are strong in the fall. 

The School of Education (SOE), currently organized as part of the CLA, benefits from some of these investments in faculty resources, including the junior leave program and creation of OFFRR.  In the SOE, however, expansion of faculty resources has come largely in the area of additional infrastructure.  An Associate Director of Admissions has been added to the staff, the leadership role in the Center for Excellence in Teaching has been expanded, and an Associate Dean has been hired for the School.

College of Law

During the last five years, the College of Law School's instructional salary budget grew at an annual rate of 8.6 % for a cumulative growth of 43% (from $2.7 million to $3.86 million), while the tenure-track faculty has grown by two positions. As a result, the student-faculty ratio has improved from 18:1 to 16:1.

The College of Law used a portion of the $3 million academic excellence fund to increase support for faculty research by almost 60% as well as double the per capita professional travel allowance.

In addition to the Alex L. Parks Distinguished Chair and the Oregon Civic Justice Center, The Campaign for Willamette established the Roderick & Carol Wendt Chair in Business Law, while raising $3 million to endow the Clinical Law Program and $2 million to support the endowment for the a new Center for Law and Government.

The Clinical Law Program was reorganized and a new director and a new assistant professor of clinical law were appointed; the Center for Dispute Resolution added an associate director.

Atkinson Graduate School of Management

Since Fall 2004, the Atkinson School has hired seven tenure track faculty members.  Four of these positions were replacement hires, while the remaining three represented expansion appointments. Atkinson has grown to a sixteen-member tenured/tenure track faculty - with plans to hire a 17^th tenure-track position during the next academic year.

Atkinson faculty salaries continue to lag behind those of other Association to Advance Collegiate Schools of Business (AACSB) accredited private schools, despite the fact that tenured/tenure track salaries at the Atkinson School have improved an average of 4.6% annually in the past five years.  Despite these annual increases, the difference in Atkinson salaries and median AACSB salaries remains approximately 16%. 

Each faculty member receives 200 hours of graduate assistant support and $3,500 in instructional, research, and travel support annually.  This level of support is not uncommon for an academic year, but does not provide summer research support common to most high quality graduate management programs.  However, Atkinson's sabbatical policy puts it in a strong competitive position vis a vis a number of state university systems and represents an important part of our commitment to research.

Since AY 04-05, research support has remained fairly constant on a per faculty member basis.  On average, the Atkinson School spends about $7,000 per faculty member on research support per year.  AACSB has recommended that Atkinson increase its financial commitment to research.  As the AGSM revenue picture improves, faculty research support will become a candidate for greater investment. 

V. The Future

The strategic allocation of our resources in FY 2009-10 and beyond will make us more competitive, focused and efficient. During these difficult economic times we did not retreat from our investments in our core business: the education, by talented faculty committed to research and teaching, of women and men who will solve the problems and change the world.

The next few years may be viewed as a beginning of a new and important phase in Willamette's history, as we adopt a new strategic plan, begin the process of substantively transforming the campus footprint and deepening our connections to Salem's downtown core, conclude and prepare for a new fund-raising campaign, oversee thoughtfully the expansion and development of our faculty and academic program, especially in CLA, and measurably increase the University's visibility through a robust marketing program.

I look forward to working with you during these exciting years ahead.

M. Lee Pelton
President
Willamette University

May 1, 2009