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Aiming Higher: Annual Report to the University Community

Address to the Faculty Senate
September 11, 2012

COVER SLIDERockies holding books, labware, medical gear and a cello


  We meet today on the anniversary of a great national tragedy.  To commemorate the horrific events of September 11th, earlier today our Navy ROTC and Air Force ROTC from local battalions held a vigil on Eastman Quadrangle to honor those who were lost eleven years ago, including University of Rochester alumni Brendan Dolan, Jeremy Glick, Aram Iskenderian, Jean Hoadley, Peterson, Jeffrey Smith, and Zhe Zeng.  Let us begin with a moment of silence in their memory.

  We are completing a summer to remember.

   On August 2nd, Senior Vice President for Administration and Finance Ron Paprocki and I signed a Development Agreement with Fairmount Properties and Gilbane Development Company that represents a pivotal step toward the formal launching of College Town later this year.  This is a project on which Ron has exhibited extraordinary leadership. 

We are down to one basic issue before College Town irrevocably is launched.  The developers have addressed most of their financing requirements, but one has not been fully resolved.  It involves a $20 million Housing and Urban Development Section 108 loan, which the City of Rochester City Council unanimously endorsed last April.  This loan also must be approved by the United States Secretary of Housing and Urban Development.  We are optimistic that this will occur by November.  The developers also have an additional $6 million financing gap to address.  Ron and his team are working through a number of permutations with Fairmount and Gilbane to address this gap.

I am confident that College Town will go forward if the HUD 108 loan is approved.     

  On August 3rd, Governor Andrew Cuomo joined us to cut the ribbon for our Health Sciences Center for Computational Innovation (HSCCI).  HSCCI is a proposed $100 million partnership involving the University, IBM, and the State of New York.  An initial IBM Blue Gene/P computer given to us by IBM in 2007 has already helped generate $84 million in external research funding.  A Blue Gene/Q was installed this summer thanks to a New York State grant.  This makes HSCCI one of the five most powerful university-based supercomputing sites in the nation. 

The Blue Gene/Q is 15 times more powerful than the Blue Gene/P and can perform 209 trillion calculations per second.  We anticipate that the HSCCI will be in the vanguard of efforts to enable our research scientists to analyze vast quantities of data and create complex models that will be able to address such health care challenges as vaccine development, cardiac disease, and brain injury.

  Just yesterday, on September 10th, the Medical Center broke ground on the largest capital project in University history, the $145 million, 245,000-square-foot new Golisano Children’s Hospital.   When completed, the Golisano Hospital will provide a world-class facility to provide care for infants, children, and adolescents. 

  Twelve months after we broke ground for a new undergraduate dormitory, O’Brien Hall is now open and completes Jackson Court at the intersection of Wilson Boulevard and Intercampus Drive. 

  Jackson Court already has become a gathering place for students, replete with fireplace, green space, and including Anderson and Wilder residence halls, the Sage Art Center as well as O’Brien Hall.

  A few hundred yards from Jackson Court, across Wilson Boulevard, this summer the University and the City of Rochester celebrated the completion of a new pedestrian bridge across the Genesee River, which will provide access to both sides of the river for joggers, hikers, and bikers.

Our River Campus athletic facilities have been substantially upgraded, including renovations or improvements at:

  The Speegle-Wilbraham Aquatic Center in the Goergen Athletic Center,

  Expansion of the soccer field on Wilson Boulevard,

  Replacement of the lighting at Fauver Stadium, and

  New synthetic turf and lighting on our baseball field.

  The Brooks Landing developers will soon begin construction of The Flats at Brooks Landing.  This project will include housing for 170 of our undergraduate students, a boathouse for the University’s rowing program, and a new restaurant.   

  Momentum in our Advancement program under Jim Thompson’s leadership continues to grow. This is of fundamental significance in galvanizing additional resources to support our students, faculty, programs and facilities.  On October 21, 2011, we launched our Meliora Challenge comprehensive Campaign.  Our goal is to raise $1.2 billion by June 30, 2016.  Last academic year we made substantial progress.  Total cash and future pledges grew by $150.6 million from $683.5 million to $834.1; total cash received grew by $92.9 million from $485 million to $577.8 million; the book of pledges grew by $58.1 million from $198.2 million to $256.3 million.  This is especially impressive since when we started the book of pledges was a modest $8M. 

  Notably, the Annual Fund performance posted another record year at $12.3 million.  This was the seventh straight annual increase—this year, up by 12.5 percent, which is the fastest growing Annual Fund among our peers.  The catalysts of our growth include the 430 new George Eastman Circle members recruited this year, bringing our total as of August 31 to 2,282 members.  We are now on track to triple our Annual Fund by the end of the Campaign, which would represent over $15 million per year for unrestricted purposes. This is analogous to having a $300 million endowment for unrestricted support.
  On June 5, we launched the first in a series of regional Campaigns in San Francisco with $37 million of a $45 million regional goal already raised or committed, and the announcement that key leadership gifts included a pledge from former Provost Chuck Phelps and his wife Dale to fund the Charles E. and Dale L. Phelps Professorship in Public Health and Policy.  In all, four new endowed professorships have been pledged in the San Francisco campaign.

  This fall we will launch regional Campaigns in Chicago on September 27th and in Boston on October 29th.   

  On June 21st, the University of Rochester Medical Center and Thompson Health signed an agreement to make Canandaigua’s Thompson Health an affiliate of the Medical Center.  Thompson Health is a leading community hospital in our region with long experience of collaborating with Medical Center doctors and programs.  The relationship became effective on August 31. 

  In July, we opened three new floors of the James P. Wilmot Cancer Center.   Two of these floors will provide 42 new rooms for enhanced care to cancer patients, including a new bone marrow transplant unit and an adult hematology oncology unit.   In early 2013, the Wilmot Cancer Center will be expanded further with a CT and ultrasound suite for imaging sciences, and an outpatient clinic with 10 new exam rooms for bone marrow transplant and malignant hematology patients. 

  Earlier, the Medical Center opened the new Women’s Health Center in its recently acquired clinical facility at 125 Lattimore Road. The new center offers comprehensive outpatient obstetric and gynecologic care to meet the needs of the women of Rochester.  The proximity of the Lattimore Road facility to the Medical Center, with 400 parking spaces, makes the new location particularly well suited for locating off-site Medical Center programs.  
  This semester, the College of Arts, Sciences and Engineering welcomed another record-breaking class with the largest number of applicants, the highest GPAs, the highest SATs, the largest fraction of minority students, and the largest number of international students in our history.  This is the sixth consecutive year of increases in applications, SAT scores, and selectivity.  Our undergraduate College has become a “hot school.”

  The Schools of Arts and Sciences and of Engineering and Applied Sciences also welcomed 14 new professors in 10 departments – Art and Art History, Anthropology, Biology, Biomedical Engineering, Clinical & Social Sciences in Psychology, Economics, Earth and Environmental Sciences, Philosophy, Political Science, and Religion and Classics.

  This summer construction began on Ronald Rettner Hall for Media Arts and Innovation, a new building to house programs in digital media studies and audio and music engineering.  Rettner Hall will be a hub for the study of arts, sciences, and engineering on campus and provide students in the new digital media studies major with a place to gain both practical skills and a theoretical understanding of digital technology.  University Trustee Ronald Rettner provided the pivotal lead gift.  The Hall is scheduled to open in the fall of 2013.

  We are increasingly an international university.  Strong partnerships with major universities in other countries may prove to be of pivotal significance to us in strengthening our research endeavors.  This past summer, the University of Rochester joined the Worldwide Universities Network or WUN, a consortium of 18 leading research universities from around the globe.  I have asked Peter Lennie in his role as Provost to coordinate our international efforts generally and to take the lead with the University’s engagement with WUN.

  On July 4, researchers at CERN announced the discovery of a new particle that is "consistent with the Higgs boson."  University physics professors Arie Bodek and Regina Demina were part of the CMS or Compact Muon Solenoid team that participated in the experiments that led to the first physical indication of such a particle after years of research.  University physics professor Carl Hagen was one of the originators in 1964 of the theory for the Higgs mechanism and Higgs boson.  

  Thanks to the support from the Wayne LeChase family, construction is nearing completion of LeChase Hall, which will be the new home of our School of Education beginning in early 2013.  The four-story, 65,000-square-foot hall will provide a home for the Warner School with 14 classrooms on the first floor that also will be used by the College. 

  This fall, the Memorial Art Gallery will complete the opening phase of Centennial Sculpture Park.  When Centennial Park is finished in October 2013, it will feature several newly commissioned pieces, including work by Wendell Castle, Jackie Ferrara, Tom Otterness, and Albert Paley. 

  The Eastman School of Music soon will partner with the Eastman Community Music School, the Hochstein School of Music & Dance, the Rochester City School District, the City of Rochester, and the Rochester Philharmonic Orchestra for RocMusic.  RocMusic is community-based pilot program that will provide tuition-free music instruction to economically disadvantaged city youth.

  From September 19th to 23rd, Rochester will inaugurate its first Fringe Festival, with key sponsorship from our University.  Fringe festivals have caught on around the world, inspired by the Edinburgh Festival.  Eastman School’s Kodak and Hatch Halls and the Sproull Atrium at Miller Center are among more than 20 venues that the Festival will be using.  Headline acts include Bandaloop, the Harlem Gospel Choir, and comedian Patton Oswalt. 

  The Rochester Fringe Festival is the latest step in fortifying our city’s place on the nation’s cultural map.  A recent survey published in the The Atlantic Cities characterized Rochester as one of this nation’s 10 leading cities for music.  Richard Florida, the article’s author, explained:  “Rochester might seem a surprise in ninth place.  But the city has long had a distinguished symphony and it is home to the Eastman School of Music.”

  The Simon School of Business continues to experience record enrollments, with significant increases this year in master’s students and growth in MBA enrollments. 

  Let me highlight the heroic actions of several members of our Medical Center.  On August 15, first-year medical students Lindsay Wahl, Sarah Nevarez, and Bridget Hughes helped rescue two children and their father from the Erie Canal.  The efforts of Lindsay, Bridget, and Sarah, as well as Dr. David Lambert, Senior Associate Dean for Medical Student Education, Adrienne Morgan, the Medical School’s Senior Director of the Center for Advocacy, Community Health, Education and Diversity, and Charlie Andrews from our School of Nursing represent the very best of what a caring community is about.  I salute them for their timely response to a life-threatening situation.


  The University’s finances remain strong.  The University completed the 2012 fiscal year with positive operating results.  Our hospitals again exceeded their budgetary targets.  Each academic division ended the fiscal year within their budgets.  Our aggregate endowment payout rate, which was as high as 6.9 percent in FY 00, remains under 6 percent. 

  In a fiscal year in which our endowment benchmark declined approximately 3.5 percent, the University investment performance was up over 3 percent.  Our aggregate endowment last year, after subtracting support for our budget, was essentially flat.  Over the past ten years, our annualized net return is 7.4 percent, approximately two percent above our benchmark.

  While the University’s finances remain strong, there is a key uncertainty.  Congress and the President recently agreed to a six-month extension of spending to avert the threat of a government shutdown at the beginning of the next fiscal year on October 1, 2012.  Under the Budget Control Act’s requirement of sequestration, $109.4 billion in across-the-board cuts in discretionary spending are scheduled to go into effect in January 2013 unless Congress and the President agree to an alternative.  Funding for health care, education, research, and student aid are vulnerable if sequestration occurs.  If implemented, our University could face approximately $32 million in cuts.


  With former Provost Ralph Kuncl's departure to be President of the University of Redlands a few weeks ago, the Board of Trustees approved my recommendation to restructure the Provost’s position.

  On July 23, Peter Lennie became Provost and Dean of the Faculty of Arts, Sciences and Engineering, and Robert Clark became Interim Senior Vice President for Research.  This new structure will more effectively address the Provost's role in our decentralized university governance model as well as the ongoing expansion of the research side of the Office of the Provost.  It will simplify and clarify responsibility, reduce an administrative level, and achieve some synergies by combining the Provost's academic functions with the position of Dean of the Faculty of Arts, Sciences and Engineering.  Notably the new structure creates a Senior Vice President to oversee the expanding responsibilities for research.  Earlier in September, I initiated a search for a permanent Senior Vice President for Research.

  After serving as Interim Dean of the School of Nursing this past year, Kathy Rideout was named Dean a few weeks ago.  Kathy has been a member of the School of Nursing faculty for more than 25 years, and most recently served as the School’s senior associate dean for academic affairs.  During her tenure as associate dean, Kathy has been  integral to the growth, success, and diversity of the School’s educational programs and clinical partnerships.    

  Mary Ann Mavrinac became the Vice Provost and Andrew H. and Janet Dayton Neilly Dean of River Campus Libraries effective June 1.  She joins us after a decade of serving as Chief Librarian at the University of Toronto’s Mississauga campus. 

  William Calnon is now the acting director for the Eastman Institute for Oral Health and the acting chair for the Department of Dentistry.  Former Director Cyril Meyerowitz has returned to the faculty.

  After nine outstanding years, General Counsel Sue Stewart announced her intention to retire at year end. Sue will be missed. She has been a stalwart of our University, not only leading the Office of the Counsel but our risk management efforts as well. I also have begun a search for a new General Counsel.


  In June, University Communications professionals were awarded 10 PRism Awards and 2 Awards of Excellence for their work promoting the research, innovations, services, and initiatives that take place on the River Campus and at the Medical Center.

  Since its launch three years ago, Futurity, the Web site based at Rochester that reports on research, has been visited 4 million times and is on pace for 2 million visits in 2012, a 100 percent annual increase.

  For our May commencement, Communications created a new publication for graduates and their families, Spring Buzz, that featured student and faculty honors as well as all kinds of useful information from maps to a list of Rochester restaurants.
  Rochester Review is now available on an app for the Kindle Fire, which joins the iPad app, e-versions for e-book readers, and mobile-friendly Web version.


  Last year was another year of incremental progress for our diversity initiatives.  In 2011-2012, 32.2 percent of our faculty were women, compared to 28.6 percent in 2006.  This represents an increase from 411 women in 2006 to 613 this past year.  The proportion of faculty who identified themselves as members of an underrepresented racial or ethnic minority group similarly grew to 3.5 percent in fall 2011 from 2.6 percent in 2006. 

  We also witnessed further progress with those in Staff Grade 50 and above.  Between 2006 and 2011, the percentage of underrepresented minority employees increased from 181 to 315, that is, from 5.1 percent to 7.2 percent.

  Each school is responsible for its own admission programs.  In aggregate, underrepresented minority enrollment has grown at the University from 7.6 to 8.6 percent between 2006 and 2011, simultaneous with improvement in relevant quality metrics.

  It is also noteworthy that between 2004 and 2011 international enrollment at the College of Arts, Sciences and Engineering increased from 2.7 percent to 16.1 percent.

  There have been some striking successes at the University in our diversity programs.  The David Kearns Center for Leadership and Diversity this year celebrates its 10th anniversary of supporting underrepresented minorities in programs from kindergarten to doctoral degrees.  Of its 391 University alumni, 91.5 percent have enrolled in graduate programs.  This summer the Kearns Center received approximately $4 million in new funding from the United States Department of Education for its Upward Bound and Ronald E. McNair Post Baccalaureate Achievement Program and $170,000 in funding from JP Morgan Chase and the Farash Foundation to support its College Prep Centers at two Rochester City School District schools. 
  In August, Catherine Cerulli was chosen to be the new Director of the Susan B. Anthony Center for Women’s Leadership.  Kate currently is an Associate Professor and the Director of the Laboratory of Interpersonal Violence and Victimization within the Department of Psychiatry.  She has 30 years of experience working with domestic violence survivors and is a well published field researcher. Kate will report to Vivian Lewis, Vice Provost for Faculty Development and Diversity.

  The United States Supreme Court later this academic year will hear arguments in the case of Fisher v. University of Texas at Austin.  This is a major case that potentially could overrule the Court’s current standard in student admissions, which allows colleges and universities to take diversity into account as long as admission decisions are made on a holistic, individualized basis that considers race as one, non-determinative factor in assessing an applicant.  In August, the University of Rochester joined several other leading research universities in signing an amicus brief to the United States Supreme Court.  Our brief stated in part:

Each amicus believes that diversity within its student
body and across all academic programs is essential to fulfilling its
academic mission to provide the best education to its
students, who are future leaders in their communities and in the
nation.  Diversity of perspectives, backgrounds, socioeconomic
status, race, and ethnicity, among other characteristics, creates
a dynamic campus life that benefits all students and the university
as an institution. 

This position is consistent with the University’s long-standing commitment to diversity.  We will learn later this academic year whether the Supreme Court continues the Grutter standard for admissions or adopts a different approach.


Let me frame the University impact within our community and our region. 

  The Finger Lakes Region has undergone a fundamental transformation during the past decades.  For much of the 20th century, our region was dominated by four large manufacturers:  Eastman Kodak, Xerox, Bausch and Lomb, and General Motors.  These firms employed nearly one fifth of the local workforce and indirectly had an impact on half of the region’s economy. 
  We are changing from an economy based on a small number of manufacturers to an increasingly successful and diverse knowledge-based economy with a growing number of small- and medium-sized businesses.  In the past three decades simultaneous with the loss of more than 55,000 jobs at Kodak, we have seen substantial net job growth in the nine-county Finger Lakes region – from 556,200 jobs in 1980 to 703,000 in July 2012.

  As a region we have great challenges, including high rates of poverty and an inner city that cries out for revitalization.  But we are beginning to make progress.  In 2011 our region added 8,000 jobs and we have added 12,000 jobs in our region so far in 2012.  Our job growth between July 1, 2011 and June 30, 2012 was 2.1 percent, faster than the nation, New York State, or upstate New York.

  As of June 30, 2012, with 20,611 full time equivalent employees, the University is the largest employer in our region and seventh largest private employer in the State.

  In its 2012 Report on the Economic Impact of the University of Rochester, the Center for Governmental Research (CGR) characterized our University as “a vital cornerstone in our region’s economic health.  Bucking the trends observed by most firms and institutions during the recent national recession, the University has continued to add jobs and research capacity that position it for present and future impact locally, regionally and nationally.”  

  In all, our University was responsible for 47,000 direct and indirect jobs, approximately 9 percent of total employment in the Rochester Metropolitan Statistical Area, $716 million in purchased goods and services, $2.4 billion in wages, and $143 million in sales, personal income, and local property taxes.

  The role of the University is not limited to job creation.  Our hospitals serve as the ultimate safety net for our community, providing a total of $69 million in uncompensated care in calendar year 2011.  Annually our undergraduate College provides approximately $2 million in scholarships to Rochester City School District students.

  From 1996 to the present, 53 companies have been created using University-licensed technologies, of which 38 are still active and 29 located in New York State.

  Since July 2011 University Trustee Danny Wegman and I have served as co-chairs of the Finger Lakes Regional Economic Development Council, which comprises Genesee, Livingston, Monroe, Ontario, Orleans, Seneca, Wayne, Wyoming, and Yates counties.

  Last year, the Council identified 10 priority projects that it recommended for immediate state support and received support for seven of them, including the University’s Health Sciences Center for Computational Innovation, our partnership with IBM and the State.  In all, our region received $68.8 million for projects in our strategic plan or supported by the Council as part of a related consolidated funding application process.

  Significantly, Governor Cuomo later also endorsed the University and Regional Economic Development Council recommendations for the $100 million Interstate 390 Interchange Project, which will include a new exit at Kendrick Road.  The Governor worked with the New York legislature to secure the first $26 million of these funds during the last legislative session.  By addressing this critical limit on University growth, the State will now enable the University and its health care system to continue to grow over the next 20 to 30 years consistent with our Campus Master Plan.

  The 2012-2013 New York State budget provides $220 million for a second competitive round of regional economic development and an additional $530 million in State agency funds which will be addressed by Regional Economic Council review of consolidated funding applications.  Our Regional Council this year will compete for $25 million in state funding in addition to the state’s review of consolidated funding applications.

  Late in August of this year, the Council circulated a public draft of its proposed 2012 Strategic Plan Progress Report to New York State, which focused on how most effectively to continue to implement our 2011 Strategic Plan.  This draft proposed, among its 12 priority projects:

  •  Efforts to preserve and strengthen Eastman Business Park as the region’s top priority.  This Park is one of the nation’s leading industrial development sites and possesses a unique set of assets that make it highly attractive to high tech and manufacturing companies. 
  • SLIDE 66
      The University of Rochester Health Sciences Center for Computational Innovation.  The Draft Report described this partnership between the University of Rochester and IBM as one that “will make the region a leading center for high performance computing, strengthen R&D, and accelerate job growth in the region’s life sciences sector.” 
  • SLIDE 67
      And College Town – “a comprehensive plan to redevelop 16 acres in the City of Rochester into a vibrant neighborhood consisting of mixed-use development that will serve as a gateway to the City and the University of Rochester.” 


Let me also place our University in the context of higher education generally.  Since we last met, there have been several developments in higher education that have received considerable public attention. 

  In December 2011,  after news of the indictment and arrest of Penn State assistant football coach Jerry Sandusky and more recently after the publication on July 12th of the Report of the Special Investigative Counsel Regarding the Actions of The Pennsylvania State University Related to the Child Sexual Abuse Committed by Gerald A. Sandusky, I worked with our General Counsel, Sue Stewart, to review our University’s internal compliance procedures and standards with respect both to this type of misconduct and more generally. 

It is clear that our University is different from Penn State as described in the Special Investigative Report.

  We are not a University in which the football program – or any program – is exempted from the same standards of legal compliance that operate elsewhere throughout the University.  We are one University.  The same rules apply to all.

The Special Investigative Counsel’s Report characterized several key weaknesses in risk management and legal compliance operations at Penn State.  Legal work long was outsourced; “[t]he University ha[d] no centralized office, officer or committee to oversee institutional compliance with laws, regulations, policies, and procedures; certain departments monitored their own compliance with very limited resources.”  There was general lack of awareness or compliance with the Clery Act, which was enacted in 1990 to require universities to compile and publicly report statistics concerning specified crimes.  There was a breakdown in communication between the Penn State President and the University’s Board.

  Our culture is different.  All of our divisions and programs are subject to the same standards of compliance.  We have a University Compliance Committee, now chaired by Senior Vice President for Administration and Finance Ron Paprocki and General Counsel Sue Stewart, to catalogue and address compliance issues.  Our University Audit Committee regularly receives reports from the University Compliance Committee.  We have an active Office of Counsel, with 14 attorneys and policies against retaliation, harassment, and abuse.  We have complied with the Clery Act since its enactment and annually report to all students and employees.  We have a system of intercessors to facilitate complaints and a hotline to which anonymous reports may be made.  I have stressed the need to promptly and fully inform our Board about material events.  This means “warts and all” reporting.  I strongly believe that the Board needs a system of full disclosure of material information to function effectively.

But we cannot be too vigilant in these areas, particularly when they involve the safety and health of our students, faculty, staff, patients, and visitors.  We are subject to the same challenges in creating and maintaining an effective compliance system in a large, decentralized institution with over 20,000 employees as are faced by our peer universities and similarly sized and decentralized institutions.

I have asked General Counsel Sue Stewart to lead a discussion of the President’s Cabinet to review our systems of compliance.

We will focus, among other topics, on University policies and practices to protect minors when they are on our campus or in University-sponsored programs.  While neither I nor the Office of General Counsel is aware of any misconduct in this area, the Penn State Report provides a powerful inspiration to ensure that we are providing as safe an environment as is possible for our youngest visitors to our campus.

  Approximately the same time as the Special Investigative Counsel Report on Penn State, the governance debacle at the University of Virginia reached a conclusion with the reinstatement of President Teresa Sullivan a few weeks after her forced resignation.  This resignation came just two years into her presidency and caused consternation among UVA senior academic leaders, faculty, and students that in part prompted the rapid reversal of the earlier, regrettable decision.

  In one sense, the situation at the University of Virginia can be viewed as an extreme example of the pressures of leading public universities during a period of intense budget pressures.  There are 34 public and 25 private United States universities in the Association of American Universities. It is striking that 22 of the 29 AAU presidents who have resigned or been dismissed since 2008 have been from public institutions.  Currently AAU private university presidents have served an average of 8.3 years while AAU public university presidents have served an average of 4.8 years, the largest differential between private and public service since 1985 when relevant data were first assembled.

  In another sense, the situation at Virginia can be viewed as a philosophical difference between some on a university board committed to rapid fundamental change in a university and a university president who sought to address change more incrementally.  News accounts focused on internal e-mails in which the University of Virginia Rector had explained about a Wall Street Journal article on online education that discussed “higher education’s online revolution” that Virginia “can’t afford to wait.”  Among other examples of this “revolution” were Stanford President John Hennessey’s assertion that “there is a tsunami coming [in online education]”; the open courseware partnership between Harvard and MIT known as edX with a $60 million budget; and new Massive Open Online Courses or MOOCs, most notably at Stanford, where a free online artificial intelligence course had attracted 160,000 students from 190 countries.  The popularity of Stanford’s online courses in part inspired nine universities to join Stanford and three earlier university partners in Coursera and make a $22 million investment in MOOC. Indeed, a few days after President Sullivan was reinstated, the University of Virginia joined Coursera. 

  I am skeptical that the MOOC “tsunami” will transform research universities as fundamentally as some in the public media have speculated.  Free online education by definition is not a sustainable business model for higher education. 

Massive open online computer courses to date have not effectively addressed the question of how to provide academic quality on a par with the classroom experience.  Clearly this will not likely be feasible for courses that require laboratories, performance or clinical care. The MOOCs often have minimal quality standards.  They are more the equivalent of allowing a reader to check out a book from a library than providing the type of education that features contact with faculty, teaching assistants, or fellow students. 

  But putting the heavily publicized MOOCs to one side,  online education has had  success in professional schools such as nursing, business, engineering, or education that have offered courses online, often at the master’s level for credit.  In many instances successful online courses employ a hybrid approach combining in-class and online components.  These are courses of study that do have an effective business model.  They contribute resources that provide scholarship support for students and resources for faculty.

  In 2012, U.S. News & World Report reported that at least 87 percent of the 231 nursing programs that responded to its survey offered online degree programs; 177 business schools offered online master’s degrees in business; 171 education schools offered online education degrees; and 62 engineering schools offered online engineering degrees.

  USC, for example, which began distance learning 40 years ago through television, now enrolls 4,800 students in online master’s degree programs that span nine different schools.  USC has made a policy decision not to offer online degrees at the undergraduate level.  As USC president Max Nikias wrote in August:  “The years between 17 and 22, which coincide with the traditional undergraduate experience, represent a corridor of transformation, one in which much of a student’s identity and many of her lifelong affiliations are formed.  Face-to-face intellectual and creative endeavors, inside and outside the classroom, create the greatest impact.”

  Our School of Nursing has been the leader at our University in developing a significant online curriculum.  The School now has two hybrid online degree programs, its Family Psychiatric Mental Health Nurse Practitioner Program and the Registered Nurse to Bachelor of Science completion program, five prerequisite Bachelor of Science courses offered solely online, and 44 other hybrid courses with required in-class and online components.  The School of Nursing’s hybrid online courses began in 2000.  A 2012 government rule change will make it possible for students to participate in School of Nursing courses elsewhere in the country.  In the Nurse Practitioner Program, core courses for each specialty program are offered both in class and hybrid online.  Today approximately 41 percent of all course credits at the School of Nursing are offered online.  Twenty-six percent of the School of Nursing tuition revenue, or $3.9 million, is received from online education.  The School intends to expand online offerings as part of its next strategic plan.

Critical to the expansion of the School of Nursing’s online course curriculum has been the role of Andrew Wolf as Coordinator for Online Learning and a recognition that online teaching creates different challenges for faculty than in-class instruction.  Faculty are given course release to develop online courses.  This fall a new Subcommittee for Online Courses will begin at the School of Nursing.

  How generalizable is the School of Nursing approach to online education at our University?  This is uncertain.  Many of the nursing students who participate in the School’s online programs have full-time jobs and do not rely on the classroom experience for networking with fellow students.  The School has had considerable success developing practica for their students locally who participate in online courses throughout the state.  The emphasis is on educational quality.  When the class size for hybrid online courses exceeds 30 students, additional faculty are hired to support the course offering. 

  I have asked Interim Senior Vice President for Research Rob Clark to lead efforts to broadly review online education.  I have emphasized three core principles for Rob’s review:

  • Any new online education endeavor must be developed in coordination with relevant faculty and schools.
  • Online education should have quality on a par with in-class courses. 
  • Online education must be financially sustainable.

  We are not alone in this type of review.  In aggregate, a 2011 Babson Survey Research Group study reported that 6.1 of 19.4 million or 31 percent of total students took at least one online course during the fall 2010 term.  Many of these courses, however, were controversial.  “Less than one-third of chief academic officers believe[d] that their faculty accept the value and legitimacy of online education.”

  Online education will be a topic we will discuss further throughout this year. But I do wish to stress that to date online education has had an augmentative, not disruptive, role, in leading research universities. Even Harvard Business School Professor Clay Christensen, who has popularized the idea of disruptive technology, recognized in his work, The Innovative University:  “[T]he ideal of the traditional university, with its mix of intellectual breadth and depth, its diverse campus social milieu, and its potentially life-changing professors is needed more than ever.”

  While Massive Open Online Courses and online education have received a great deal of attention during the last several months, there is a far more important development for our University that in recent years has received considerably less public attention.   This is a pronounced “flight to quality” now occurring in post-secondary education.

Moody’s Investor Service’s U.S. Higher Education Outlook for 2012 describes some of the key environmental realities of higher education today.  Moody’s distinguishes “diversified market-leading colleges and universities which have the strongest market positions and balance sheets and operate multiple revenue-generating business lines” from “the remainder of the [higher education] sector which covers the large majority of rated colleges and universities which are far more dependent on state appropriations and/or student tuition.”  “We anticipate an ongoing bifurcation of student demand favoring the highest quality and most affordable higher education options.”

  A 2012 study by the Georgetown University Public Policy Institute, The College Advantage:  Weathering the Economic Storm, similarly found that since the economic recovery began in 2010, 2 million jobs have been added for those with a bachelor’s degree or better simultaneous with a loss of 230,000 jobs for those with high school diplomas or less.  We live at a time when a college or graduate education is valued as never before. 

  We are unequivocally a University committed to academic excellence.  The ongoing national flight to quality is coordinate with our approach.  Since 2000 there has been a consistent and in some cases widening gulf between the return on investment as measured by higher average annual earnings for graduates with advanced degrees and bachelor’s degrees and those students who solely graduate from high school or do not graduate from high school. 

  Based on its own survey of data, Moody’s does not view the higher education business model as broken, but “generally sound and long-lasting.”  Nonetheless, there are fundamental challenges to higher education that that cannot be gainsaid:

  • There likely will be continued pressure to limit tuition growth.
  • Federal research funding in real dollar terms likely will decline for the foreseeable future.
  • Teaching hospitals will face uncertain support for Graduate Medical Education and a likely reduction at the least in the rate of increase of Medicare and Medicaid funding.

  Among other examples of approaches likely to be pursued by some higher education institutions in response to these types of challenges will be:

  • Improved and more efficient use of facilities, including winter, summer and weekend course offerings.
  • Enrollment growth to reach a critical mass through multi-site operations, increased use of online course delivery, and outreach to non-traditional age students, including continuing education and degree completion programs.
  • Increased cost-sharing with employees of existing retirement and health benefits.
  • Innovation in the growth of research-related revenue streams, including technology commercialization.


It is clear that the external environment of our University has significantly changed since 2006 to 2008 when we developed our last set of five-year strategic plans.

The 2012-2013 academic year will be a year of resetting University and school strategic goals.  

We all can take pride in the progress we have made since our 2008 strategic plans were adopted in such areas as:

  • SLIDE 88
      We are among the top 15 universities in federal research funding when these data are normalized for faculty size, last year with over $400 million in sponsored research.
  • SLIDE 89
      Faculty and instructional staff has grown from 2,009 in 2004 to 2,557 in 2011.
  • SLIDE 90
      Since 2005 we have received commitments for and created a total of 51 endowed professorships and deanships.
  • SLIDE 91
      We have seen corresponding growth in our student body from 8,300 total students in 2004 to 10,300 this past year, effectively achieving our 2016 strategic plan goal.
  • SLIDE 92
      Since 2005, we have received $143.5 million in commitments to scholarships, fellowships, and other aid for students at the University of Rochester.  Some $105.3 million or 73 percent of this support is for endowment.
  • SLIDE 93
      Twenty new major facility projects have been completed or initiated since 2005 with an aggregate budget of $662 million.
  • SLIDE 94
      New programs have been developed such as Simon’s Master in Finance for working professionals in New York City and the School of Medicine and Dentistry’s Institute for Innovative Education.
  • It is significant that each of these achievements has occurred while reducing our endowment payout rate from 6.9 percent in 2000 to 5.9 percent in this year’s budget.
  • SLIDE 95
      Our reduced endowment payout rate is the consequence of budget discipline. The University’s administrative costs allocable to research is a little over 21 percent – the lowest in major research universities, according to the independent consulting firm that assists our University with its official submissions to the federal government for review of sponsored research indirect costs.

This year a paramount University priority will be to begin the process of revising or rewriting the 2008 strategic plans that have served us well.

The essence of the 2008 University, Medical Center, and school strategic plans was on building facilities, expanding the size of the faculty and student body, adding new programs, and galvanizing the resources necessary to make these goals possible.

The key to our new set of strategic plans likely will be human capital – how do we best support, attract, and retain our most precious resource, our faculty, staff, and students? 

In August, my Cabinet met to address the process of developing strategic plans.  We all recognized that strategic planning requires significant involvement of faculty and other key constituencies led by our Board of Trustees and our National Councils.  The process of working with these constituencies will continue throughout much of this year.

Each school and the Medical Center presented initial thoughts about key challenges and potential key initiatives.  Among other themes that were discussed:

  At the Medical Center, the focus was on responding to the challenges of significantly reduced potential increases in health care finance from such programs as Medicaid, Medicare, and third party payers, while simultaneously addressing legal or marketplace imperatives to improve cost efficiency and the quality of care.  Among other initiatives that the Medical Center currently is analyzing is how best to align physician and hospital incentives during a time when medical centers, like that at the University of Rochester, operate as systems with multiple hospitals and ambulatory care sites, rather than as stand-alone hospitals. 

  For the School of Medicine and Dentistry, there is a coordinate challenge to align the clinical faculty with changes in health care delivery.  For the academic faculty, likely decreased support in real dollar terms from such outside funding agencies as the National Institutes of Health and rapid changes in information, simulation, and related technologies are fundamental challenges.  The School of Medicine and Dentistry anticipates developing an Institute for Innovative Education and Center for Experiential Learning, among other new initiatives.

  The School of Nursing will focus on responding to the recommendations of the Institute of Medicine’s Future of Nursing Report, which forecasts an 80 percent growth in Bachelor of Science prepared nurses by 2020 and doubling the number of doctorally prepared nurses within that period, simultaneous with an increased scope of practice for advanced practice nurses.

  The College of Arts, Sciences and Engineering, including the undergraduate College, the School of Arts and Sciences and the Hajim School of Engineering and Applied Sciences, will build on its past five years of enrollment, program, retention, and faculty growth to address such topics as how our undergraduate program can become even more distinctive in its undergraduate research and residential experience. New programs in Digital Media and in Audio and Music Engineering reflect the breadth of interests in rapidly evolving fields and new multi-disciplinary approaches to teaching and research. The Barry Florescue Undergraduate Business degree was the most heavily enrolled major ever in its first year.  A program in East Asian Studies is currently in development, and future plans include development of a program in Big Data, a burgeoning alliance with George Eastman House, and degrees in Medical Technology and in Technical Entrepreneurship.  Key challenges include balancing the provision of liberal arts during a period of growing demand for known career paths, and balancing commitments to excellence and innovation in research with excellence and innovation in teaching.

  The Eastman School of Music will build on its momentum in advancement to pursue such new opportunities as development of “Block F” immediately adjacent to the School, its Center for Music Innovation, and international partnerships.
    The Simon School of Business has been materially strengthened by diversifying its curriculum beyond its strong MBA program to include a number of robust new programs such as its Master of Finance degree.  With the magnitude of future MBA applications  uncertain, Simon is likely to consider further diversification of its curriculum through new masters programs, leadership in developing Simon and potentially University programs in New York City, and enhancing student employment.

  The Warner School of Education likely will respond to a nation-wide crisis in K-12 education by expanding beyond K-12 schools as its primary focus to embrace new programs for emerging professions such as health care education and by taking the lead in research on online education.

In October, the University Board will hear initial presentations from the Medical Center and our seven schools about their key current challenges and strategic priorities for the next five years.  This process will build on the success of the 2008 strategic plans, but simultaneously address the much changed economic, political, and technological environment. 

Early next year, a Board Strategic Planning Committee will review draft strategic plans.  The full Board will receive proposed strategic plans in March, with an objective of adopting the new set of University, Medical Center, and school strategic plans in October 2013.

Our objectives are two-fold:  First, for each of the schools and the Medical Center to revise its current strategic plan or create a new strategic plan to provide guidance for the next five years.  Second, for the University as a whole to adopt a strategic plan that describes university-wide objectives. 


  I look forward this academic year to working with faculty, senior academic leaders, students, staff, the University Board and volunteer leadership on five overarching University priorities:

First, to successfully complete the launch of College Town.

Second, to further significantly advance our The Meliora Challenge, our capital campaign.

Third, to continue to see progress in our efforts to achieve a more welcoming and diverse campus for all of our faculty, students, and staff.

Fourth, to work with leaders throughout our University in preparing a new generation of strategic plans, that, among other things, will address such topics as the University’s appropriate role in online education; the University’s future role in international and New York City initiatives; and the increasing need to focus on our most precious resource – our faculty, students and staff. 

Fifth, the new generation of strategic plans also will address completing the reduction in our endowment payout rate to 5.5 percent on our five-year rolling average formula by the end of this strategic planning cycle, June 30, 2017.

  We have come a long way together these past seven years.  To the extent that we have succeeded, I am convinced more than anything else, this has been the result of working together.  We do not always agree with each other – but robust debate strengthens a university community.  And there have been unexpected challenges.  No one really predicted the full impact of the 2008-2009 recession. 
But we work together in the greatest social organization generated during the past several centuries – the modern research university.  We have repeatedly demonstrated an ability to evolve and grow as circumstances change.  Our aspiration – to discover and disseminate knowledge – is among the most worthy in human history.  We are the hopeful future of humankind – the institutions at which disease will be conquered, new technologies invented, better means of providing health care developed, more effective means of leading business, the creative arts, education established.  We cherish the past.  We are the gateway to the future. 

We are the Rochester family.  I look forward to working with you to build an ever better tomorrow.  I am proud to be a member of this University’s faculty.