Envisioning the Future: A Framework for Strategic Planning (expanded)

JOEL SELIGMAN
REMARKS TO FACULTY SENATE
OCTOBER 3, 2006

REMARKS TO BOARD OF TRUSTEES
OCTOBER 6, 2006

I. INTRODUCTION AND EXECUTIVE SUMMARY

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.

In the broadest sense our world is in the midst of a profound economic transformation as a growing number of manufacturing jobs are relocated abroad and the comparative advantage of the United States increasingly relies on a knowledge based economy. The current configuration of the University of Rochester, with a large proportion of our academic and clinical programs involving the health professions, engineering, computer science, mathematics, and the natural sciences, means that we have long been participating in this transformation. This transformation has implications for our curriculum and our international programs, but it also poses a significant challenge to the liberal arts ideal that has been at the core of education at the University of Rochester. In addressing how to allocate incremental resources, I believe it is essential to enhance strength in the humanities and the arts, as well as other core strengths of the University of Rochester including the social sciences, business and education.

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. Much of this population growth will occur outside of New York, particularly in the southern, southwestern, and western regions of this country, highlighting the importance of appealing to an increasingly broadly based national applicant pool.

Among our peer private universities, one theme was consistent in a review of approximately 20 recent strategic plans: We live in the age of academic interdisciplinarity. Leading peer universities are evolving new academic structures that focus both on strengthening traditional schools and departments and on separately enhancing interschool or interdepartmental interdisciplinarity to address fundamental questions that are not confined to a single field. Formally and informally, the University of Rochester already has a long record of success in interdisciplinary and collaborative efforts. What is striking is how so many of our peers have made interschool or interdepartmental interdisciplinarity an increasingly significant priority.

While the combination of the University of Rochester’s academic strengths, the national projected undergraduate enrollment growth, and the University’s interdisciplinary successes creates the opportunity to draft and execute ambitious strategic plans, there are significant institutional constraints that will limit the scope and pace of implementation.

These begin with resource constraints. Each of our schools and the Medical Center will need additional resources to pursue ambitious strategic plans. Two of our schools, however, today are overdrawing their endowments. A systematic review of potential means of galvanizing new resources gives ground for optimism that significant additional resources will be available. For example, University advancement has long lagged far behind our peers. With appropriate investment and perseverance, expansion of advancement provides an enormous opportunity to materially improve our finances.

The University of Rochester is smaller than virtually all of its peers in both faculty and student body size. During the past 15 years, Rochester has been one of the few universities in the country to decrease its student body size and has had one of the slowest rates of faculty growth among peer universities. These realities constrain our ability to strengthen our faculty and programs and also highlight what I believe is the pivotal question for strategic planning at the University of Rochester today: Is each of our divisions the right size to effectively achieve its academic and clinical missions?

Indeed, partly because of our relatively smaller faculty size, the academic rankings of some of our programs have declined in recent years. This affects student recruitment and enrollment, faculty hiring and retention, and alumni support.

Against this background, I believe there are six themes that should be considered in the University’s strategic planning and are likely to be relevant to each school’s and the Medical Center’s strategic plans.

First, 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, faculty who are inadequately supported in some schools, and earlier financial commitments to faculty hires. Before we commit ourselves to major new initiatives, it is important to be confident that the outstanding existing programs of the University are receiving sufficient support.

Second, many of our schools and the Medical Center are already engaged in or analyzing growth strategies. The key to any growth in faculty size or programs at the University of Rochester must be an improvement 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 designed to improve academic quality and also will improve the education of our students.

Third, given the growing significance of interdisciplinarity, I have requested that the Provost chair an Interdisciplinary Review Committee, composed 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. This Committee, which has been asked to report to me by February 1, 2007, is charged with evaluating how well we are performing in terms of interschool interdisciplinary programs and to recommend what steps should be taken to further strengthen interschool interdisciplinary and collaborative programs. This Committee is not intended to address efforts internal to any school or the Medical Center nor should its deliberations delay any school’s or the Medical Center’s strategic plans.

Fourth, we are one University, but one University with a historic commitment to decentralized academic administration. Our challenge is to achieve the right balance between a decentralized structure of schools and the Medical Center and a necessary enabling centralized infrastructure. I am committed to our highly decentralized model, but one in which specific areas such as development and communications can be effectively administered with an appropriate central University role.

Fifth, our commitment to diversity is a fundamental value of our University. In the recent past, our program on staff diversity and inclusiveness has been strengthened by new hires. The University Task Force on Faculty Diversity and Inclusiveness has completed 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 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.

Sixth, our commitment to the Greater Rochester community also represents a fundamental value of our University. Two aspects of this relationship today require new and more systematic approaches.

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 help develop a Master Facilities Plan that can be coordinated with ongoing strategic planning. The initial drafts of the Master Facilities Plan will provide facilities planning choices.

No issue is of greater moment to the Rochester political and community leadership than job creation and economic development. While the University cannot be an “economic savior,” there will be many instances where the best interests of the University and those of the greater Rochester community coincide. The University 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 academic mission.

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 assets 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 a year of listening to our faculty, students, academic and alumni leaders, I sense a commitment to progress at this University that is exhilarating. We are a proud and successful University, collectively convinced that our best days are in our future.

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 2005.¹ This has created particularly painful challenges for many geographic areas in the United States, including Monroe County, where manufacturing employment declined precipitously from 113,800 in 1995 to 76,400 in 2005, or approximately 33 percent.²

Simultaneously, a new knowledge based economy is rapidly expanding within the United States. The Secretary of Education’s Commission on the Future of Higher Education³ has predicted that 90 percent of the jobs in the new knowledge based economy will require some postsecondary education. 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.⁴ 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, including dentistry, pharmacy, registered nursing, and medicine, all of which will address the health problems of an aging population.⁵

This economic transformation has occurred coincident with a growing sense of national urgency concerning shortages and potential shortages of graduates in critical areas, including STEM fields (science, technology, engineering, and mathematics), nursing, and medicine. ⁶

The University of Rochester already is participating in this economic transformation. At the present time, a large proportion of our academic and clinical programs involve the health professions (including medicine, nursing, and dentistry); engineering; computer science; mathematics; and the natural sciences (including our Laboratory for Laser Energetics). To be precise, in 2006 over 91 percent of our annual budget,⁷ and in 2005 78 percent of our tenured and tenure track faculty⁸ and 49 percent of our students,⁹ 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 body¹⁰ 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. The University’s participation in the globalization of knowledge helps prepare our faculty and students to excel in an increasingly competitive multicultural world.

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. 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 19.8 million in 2015.¹¹ 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.

Table 4 further documents that student enrollment in private degree granting postsecondary institutions increased by 20 percent between 1990 and 2000 and is projected to increase by 38 percent between 2000 and 2015. These growth patterns parallel growth trends in the underlying United States population.

At the University of Rochester, Table 5 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.

Table 6 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.¹²

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.

The case for moving beyond the earlier model was eloquently articulated by The Preliminary Report from the University Planning Committee for Science and Engineering, Enhancing Science and Engineering at Harvard (July 2006), which explained:¹³

The “each tub on its own bottom” philosophy has precluded a coordinated approach to managing science and engineering across the Harvard complex, leading to parallel (and occasionally competing) efforts in different parts of the University. Collaboration is inhibited by a diversity of cultures, as well as independent administrative and accounting structures among the many organizational units in which Harvard faculty teach and research.¹⁴

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 (such as Duke’s John Hope Franklin Center for Interdisciplinary and International Studies which involves 23 separate programs);¹⁵ degree programs in interdisciplinary fields (“Some of the most common are international studies, film and media studies, Latin American studies, African-American studies, Asian studies, Arabic studies, women’s studies, religious studies, and environmental studies”¹⁶ ); and joint appointments.¹⁷

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.¹⁸ The Harvard Report recommended formalizing the process of creating interdepartmental committees and cross-school departments.¹⁹The interdepartmental committees were recommended to have faculty appointment power.²⁰

Second, the importance of continuing to invest in traditional schools and departments cannot be overstated.²¹ 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.

Each of the other university strategic plans I reviewed articulated the need for a greater emphasis on interdisciplinary programs. For example, the Carnegie Mellon Strategic Plan²² recommended a strategy to “aggressively develop and implement selected areas of focus that capitalize on strengths across the university and for which resources are obtainable,” specifically citing information and communication technology; environmental science, engineering and policy; biotechnology and health policy; and fine arts and humanities. Emory University²³ characterized four areas as providing distinctive opportunities: neurobiology of well-being and disease, evolution and human uniqueness, interdisciplinary study of human nature, and neuroscience and public policy. Northwestern²⁴ described ongoing programs, including the Institute for Nanotechnology, the program in African Studies, and the Center for International and Comparative Studies; noted the substantial commitment made to the Institute for BioNanotechnology in Medicine and to a Chemistry of Life Processes Institute; along with startup funding for an Institute on Complex Systems; and described proposals for humanities initiatives, including an Interdisciplinary Initiative in Music Cognition, an Art and Technology Center, and a Center for American Music Theatre. Duke’s Strategic Plan explained, “The most exciting opportunities for Duke lie in the areas of genomics, neuroscience and neuroengineering, global change, materials, and photonics.”²⁵

The strategic plans I reviewed also proposed a variety of other mechanisms to achieve or augment successful interdisciplinary programs including: (1) Multi-university partnerships such as the Broad Institute of Harvard and MIT to create new tools for applying genomics to medicine²⁶ or the Duke University programs in the Research Triangle Park;²⁷ (2) startup and/or seed funds for specific programs or specific faculty hires;²⁸ (3) shared core facilities;²⁹ and (4) removing institutional barriers to interschool collaboration.³⁰

A particularly well developed recent interdisciplinary initiative is at Duke University, which has appointed a Vice Provost for Interdisciplinary Studies to work with Duke’s nine schools to facilitate research, collaboration, and teaching. The Vice Provost charters new centers, each with a five year sunset clause, requiring periodic reevaluation. Today Duke has 60 such centers. The Vice Provost administers an annual Common Fund competition for interdisciplinary research and an infrastructure fund. Separately the Provost has $10 million over five years in Provost’s Lines to accelerate strategic faculty appointments.³¹

The University of Rochester has a distinguished history of interdisciplinary and multidisciplinary programs, notably including the Institute of Optics, founded in 1929 and combining research from Physics and Engineering; the Center for Visual Science, established in 1963, linking scholars then from Optics, Psychology, Electrical Engineering, Brain Research, and Ophthalmology; the Center for Language Sciences, which includes faculty from the Departments of Linguistics, Brain and Cognitive Sciences, and Computer Science; and more recently the Department of Biomedical Engineering, a collaboration of the Schools of Engineering and Medicine and Dentistry. 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, which draws from Art and Art History, Film Studies, Modern Languages and Cultures, and Anthropology. Health and Society is a multidisciplinary program, primarily involving the social sciences, including Economics, Political Science, Anthropology, and History, but also including the humanities (Philosophy) and medicine. 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. Physical proximity, while never alone sufficient, tends to facilitate collaborative work. 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. During my faculty listening tour, this was often reflected in comments that contrasted the culture of the University of Rochester with peer institutions that were described as more bureaucratic, less nimble, or less willing to experiment. The argument was often made that we already have created interdisciplinary programs within or between schools with greater effectiveness than many of our peers in part because our small size and compactness foster collegiality. Data collected for the 2004 Self-Study, Decentralization and Curricula at the University of Rochester, 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. The dominant challenge ultimately will be one of achieving the right balance. There have been two traditional models of university organization. One stresses central control, typically through the Provost and central coordination of the budget; the other stresses decentralization through an “every tub on its own bottom approach.” Throughout the 20th century, both models generally were administered through schools and departments. The Harvard Report recommends retention of schools and departments with a parallel infrastructure based on new science and engineering initiatives, largely administered through new school interdepartmental centers. It is not fully certain how well this approach will work. What is clear is that a substantial number of our peers are addressing how to be more effective in interdisciplinary research and teaching, with particular emphasis on interschool interdisciplinary programs.

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

For the purposes of strategic planning, two resource questions are fundamental: (1) Do schools and programs currently generate sufficient resources to cover expenses and, if not, what additional resources (or reduction in expenses) will be necessary to make current budgets sustainable? And (2) assuming sustainable budgets, what additional resources are or are likely to become available for new projects during the strategic planning period?

1. CURRENT STATE

The University of Rochester is highly decentralized, as Table 7 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. Table 8 summarizes University and divisional revenues and expenditures between fiscal years (“FY”) 2004 and 2007.

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.³² Table 9 describes the major Medical Center programs. Strong and Highland Hospitals combined in FY 2006 generated revenue of approximately $1 billion or 58.6 percent of all Medical Center revenues. The School of Medicine and Dentistry provided $347 million in revenues (20 percent) and the Medical Faculty Group, $262 million (or 15.1 percent). The School of Nursing was responsible for $15.1 million (0.8 percent) and the Eastman Dental Center, $12.5 million (0.7 percent). Among the Health Care Affiliates, two assisted care facilities (Highlands of Brighton and Highlands of Pittsford) and the Visiting Nursing Service provided $78 million or 4.5 percent of Medical Center revenues.

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. Between 1995 and 1999, Strong’s patient discharge market share was on a par with that of ViaHealth (which owns Rochester General and owned the Genesee Hospital until its closure in 1999). Each held approximately 40 percent of the Rochester market. By 2004, the University health system had achieved over 50 percent of the market and ViaHealth had declined to approximately 30 percent. This success is a tribute to the quality of management at Strong and Highland and the advantages of a teaching hospital linked to a strong academic program. The combined Strong and Highland market position makes possible further development of our regional strategy, which involves becoming the tertiary and quaternary 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 (in FY 2006, an average of 94.5 percent), with particularly acute challenges in the Emergency Department (which provides about one half of all hospital admissions and which has seen a growth from 60,000 to 98,000 visits per year in the last three years); 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, such as the 1990s cost containment legislation or the impact of the current transition to pay for performance in Medicare reimbursements based on patient safety and quality measures; the importance placed by Medicare on the importance of consumer decisions based on quality and cost; and clinical and health care risks, such as the possibility of a preclinical trial causing serious or mortal injury to a participant, among others.

More generally, a significant challenge for the Medical Center involves the need to address significant space constraints in some fields such as Imaging Sciences (previously called Radiology).

Strong Memorial and Highland hospitals provide a “clinical engine” that generated $48.7 million in operating margin in FY 2006.³³ 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. This approach to internal finance is typical of many leading peer medical centers and is contingent upon our hospitals’ generating sufficient operating margins (Strong’s target in recent years has been 5 percent).

The School of Medicine and Dentistry is distinctly different in its finances from the University of Rochester’s non-medical schools for several reasons. Total non-core revenue of $211.6 million in FY 2006 significantly exceeded core revenues and transfers of $131.4 million. ³⁴ Non-core revenues of the School of Medicine and Dentistry are also exclusive of the clinical revenues of its Medical Faculty Group, which is reported separately. The largest portion of non-core revenues consisted of the direct portion of grants and contracts, which accounted for $163.1 million (or 77 percent of non-core revenues). Direct grant revenues plus the related indirect cost recovery shown in core budget revenues equaled $215.6 million in FY 2006, of which $147 million was derived from the NIH.³⁵

The Medical Center also received $45.8 million (22 percent) of its non-core income from “organized activities,” which principally means royalty income to departments. The non-core activities of the Medical School generated a $7.8 million surplus in FY 2006. At the same time, the School of Medicine and Dentistry had outstanding approximately $39 million in commitments to research facilities that are scheduled to be funded over the next four years.

In contrast to the other University schools, the core budget of the School of Medicine and Dentistry is notable for how small a proportion of its non-clinical revenue is provided by net tuition and fees ($13.8 million in FY 2006 or 10.5 percent). This amount was smaller than revenue from indirect recovery from grants and contracts ($52.4 million or 39.8 percent); endowment payout ($26.5 million or 20.2 percent); and non-operating transfers ($17.8 million or 13.5 percent). In FY 2006, the School of Medicine and Dentistry received $9.3 million from gifts (7 percent) and $11.3 million (8.6 percent) from “other sources” (primarily royalty revenue). Overall, the School of Medicine and Dentistry endowment was $575 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.³⁶

The School of Nursing, unlike the School of Medicine and Dentistry, is heavily tuition reliant (in FY 2006, $6.4 million of its $8.7 million core operating revenues, or 73.7 percent, came from net tuition and fees). The School of Nursing is also quite striking in the size of its FY 2006 non-core revenue ($6.6 million), which was almost as large as its core budget.³⁷ As with the School of Medicine and Dentistry, the School of Nursing has consistently achieved the University target endowment payout rate of 5.5 percent with its endowment, which at year end FY 2006 was equal to $19.1 million.³⁸ 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 with each academic division at the University of Rochester, the current financial objective of the College of Arts, Sciences, and Engineering is to achieve breakeven financial results employing the University target endowment spending rate of 5.5 percent. As Table 16 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). In the College’s accounting system, “gifts” means gift revenues used to support operations rather than gift receipts. In FY 2006 gifts generated $7.2 million or 5.2 percent of the core budget. The core budget received $3.1 million in non-operating transfers (2.3 percent) from net revenues in non-core activities.

Net tuition revenue is the product of the number of undergraduate students and average tuition received after discounting. Tuition in FY 2007 is $32,650 and is similar to tuition levels at virtually all of our peers. Table 17 describes recent tuition increases at AAU private universities with medical centers. Given competitive realities and the rate of academic cost inflation, changes in tuition have been and are likely to continue to be similar to those of our peers.

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. Table 18 lists FY 2006 freshman tuition discount rates of COFHE (Consortium of Financing Higher Education) universities. The mean tuition discount of the COFHE private universities is 37 percent, with several private universities ranked higher in U.S. News and World Report Top 50 National Universities 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 Table 19 suggests, this appears to be largely the consequence of the relatively smaller size of our student body, rather than tuition levels or tuition discounts. Given the reliance on tuition for the College of Arts, Sciences, and Engineering, this has immediate consequences for the size of the College’s faculty and the College’s ability to enhance or add programs.

Table 16, Note 2 describes $103.9 million in direct sponsored research conducted by the College in FY 2006, of which $64.2 million occurred in the Laboratory for Laser Energetics. Beginning in FY 2007 for a two year period, the indirect cost recovery rate is scheduled to decline from 56 to 54 percent.

Table 20 describes the College endowment funds, noting that the endowment at the end of FY 2006 was $369.1 million. In that year the College core 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. The College currently is particularly focusing on its faculty. The shrinkage in faculty size in Arts and Sciences between 1990 and 2005 has meant a comparatively smaller cohort of professors with 10 to 20 years of experience, who are a key to sustaining and enhancing strong academic programs.

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).³⁹ 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.⁴⁰ Reducing the Simon School’s endowment payout rate and increasing the faculty size are two strategic challenges for the Simon School. To achieve both will likely require a combination of building the endowment, increasing enrollments in degree programs, and developing new degree or non-degree programs. In FY 2007, the Simon School is particularly focusing on increasing its full time MBA enrollment through its Early Leaders initiative and anticipates a 25 percent increase in this year’s MBA enrollments compared to last year. Specialized one year master’s programs in the fields of medical management, marketing, and accounting have grown from 15 students to 65 students between FY 2005 and FY 2007. The Simon School also is currently reviewing the sustainability of its Executive MBA program, which has experienced substantial enrollment decline as major Rochester corporations such as Kodak have become less involved in this program.

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 and gift income, 7.5 percent.⁴¹ The FY 2006 endowment payout rate of 6.1 percent was only somewhat above the University’s target 5.5 percent payout rate and was based on an endowment of $244.1 million at year end FY 2006.⁴² 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. With respect to graduate scholarships, Eastman has begun a transition in its enrollment from 550 undergraduate and 350 graduate students to 600 undergraduate and 300 graduate students as a means to provide a higher proportion of full tuition scholarships to graduate students.

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 $4.9 million (72 percent) was provided by net tuition and fees and $1.1 million (16 percent) by endowment payout.⁴³ 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.⁴⁴ Warner is notable for generating significant non-core revenue from grants and contracts ($1.7 million in FY 2006) and for non-operating transfers to fund a reserve for future facilities and other projects, which in FY 2005 and 2006 combined were equal to $1.475 million.⁴⁵ 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

As a general proposition, the University of Rochester, as with most of its peers, has a breakeven budget model, contingent upon a specified endowment spending rate. Incremental resources for new programs or faculty growth must come largely from one or more of the following sources of funds.

1. (1) Sponsored Program Support. Table 27 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. The Medical Center is currently revising its bridge funding program to retain its outstanding research faculty and support junior faculty during this time of NIH budget constraints. Many of the clinical departments have significantly increased sponsored funding from non-NIH sources in recent years, in part to respond to the effects of leveling of NIH funding. These sources included the Department of Defense, the Department of Agriculture, NASA, 
   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, a major source of support for faculty in the physical sciences and engineering.
2. (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, Table 28 illustrates that the University has had considerable success in recent years in securing both federal and state directed appropriations.
3. (3) Debt Capacity. Table 29 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. As a percentage of assets, our long term debt has changed little in recent years (e.g., in FY 2003, $444 million of debt was 16.4 percent of $2.713 billion in total assets; in FY 2006, $541 million of debt was 15.6 percent of $3.473 billion in total assets).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.”⁴⁶ 

   In FY 2007, the major projects for the upcoming bond issue include:

   Project	Amount ($ in millions)
   Cancer Center Building	$45.0
   Central Utilities Infrastructure Projects	28.0
   SMD Renovation Projects – mainly renovations and addition at CVRI and deferred maintenance	26.0
   Data Center Relocation and Renovations	23.5
   College Renovation Projects including Residential Life Projects and Bridge Funding for the Biomedical Engineering/Optics Building)	19.1
   SMH Renovation Projects and Equipment	16.4
   Advancement and Alumni Center	10.2
   University Health Service Building	6.8
   Total	$175.0

   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 (Moody’s A1 and Standard & Poor’s A+, both with a stable outlook) at two year intervals. After the bond issue planned in FY 2007, the next bond issue will likely be in FY 2009. Over six years, the University reasonably can anticipate $300 to $450 million of debt issuance. The more debt capacity is used to generate incremental revenues, the more the University can borrow to the upper end of that range. Similarly, the more private or other sources of funding pay for facilities projects such as those listed above, the more debt capacity will be available for other projects. 

   Within the six year time period, there are a number of projects that are likely to be undertaken. The most probable projects today appear to include:

   Project	Amount ($ in millions)
   College Renovations	$ 17
   River Campus Improvements	6
   Residential Life (Fire Safety and Renovations)	20
   Renovation of Anderson & Wilder Halls	22
   Central Utilities Renewal	10
   Routine Medical Center Renovations	40
   Total	$115

   Each of these projects is similar to other projects that have been approved by the University Board of Trustees in the past.

   This analysis should be viewed as tentative and assumes continued favorable performance by the University’s Medical Center and by the University’s endowment. If there is a downturn in either category, that will impinge upon the University’s ability to borrow. 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.

4. (4) Development. Table 30 reports annual gift revenues in FY 2005, distinguishing total giving and funds added to the endowment. Table 30 highlights that the University of Rochester underperforms virtually all AAU universities both in terms of total giving and in annual additions to the endowment. A different analysis is provided by the Lombardi Program on Measuring University Performance, which, using 2003 data and based on a study of 149 leading public and private institutions, reported that the University of Rochester was ranked 35th overall for endowment resources, but was ranked 80th for annual giving.⁴⁷ 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. Development will be discussed in detail in other reports.
5. (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. Table 31 describes University of Rochester endowment size, additions to the endowment, and sources of growth for the five years ending June 30, 2005 as well as preliminary data for FY 2006. As Table 32 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 Table 33 documents, principally because of the relatively low new value of gifts added to our endowment and the relatively higher level of endowment payout at the University of Rochester, the growth in our endowment has systematically lagged behind relevant benchmarks and peers.
6. (6) Tech Transfer and Commercialization. Since the Bayh-Dole Amendment of 1980, universities have received royalty revenues from patent licensing. A significant number of universities have also received income from equity interests in startup companies. Table 34 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.⁴⁸ 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 (which makes possible the rapid creation of high quality halftone images governing how printers, fax machines, and other devices apply toner particles). The patent for the technology used in the pneumococcal vaccine expires in 2007 and certain of the patents for the Blue Noise Mark 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 (HPV), a discovery that will dramatically decrease the incidence of cervical cancer. This technology has been licensed to Merck, whose product Gardasil was recently approved for sale to the public, and separately to Glaxo Smith Kline, which has not yet brought a product to market.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.
7. (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.

In preparing this analysis I reviewed multiple and somewhat overlapping peer sets to examine past trends. The most relevant peer set is the AAU private universities with medical centers. This peer set involves 19 universities, whose average enrollment in fall 2004 was 17,282. The University of Rochester today has the second smallest enrollment of this peer group with 8,329 students (only Brown University is smaller with 8,004 students; Case Western is next largest with 9,095 students). ⁴⁹

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 experiencing enrollment increases while the University of Rochester declined in enrollment by 10.4 percent. These student enrollment trends are consistent with the broader AAU United States membership, which also includes public universities and private universities without medical centers,⁵⁰ 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 2004.⁵¹

COFHE data are available for a different set of leading colleges and universities. Between 1990 and 2004, 26 of the 30 other reporting COFHE institutions had an increase in student enrollment, which averaged 10.6 percent for these institutions during that time period.⁵²

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.⁵³ Notably, all but one of the top 30 universities in the U.S. News set reported enrollment gains.

A review of faculty size between 1989 and 2004 shows a similar pattern. 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,⁵⁴ and an average of 977 non-medical faculty for all AAU private universities.⁵⁵

Between 1989 and 2004, the University of Rochester non-medical faculty grew from 519 to 556 (7.1 percent growth over 15 years). The average non-medical faculty growth among AAU private schools with medical schools between 1989 and 2004 was 57.4 percent (all 19 schools grew, with only one university growing at a slower rate than the University of Rochester).⁵⁶ For all AAU private schools, the average non-medical faculty growth between 1989 and 2004 was 48.9 percent (all 26 schools grew, with only two growing at a slower rate than the University of Rochester).⁵⁷For all AAU public and private universities, the average non-medical faculty growth between 1989 and 2004 was 37.8 percent. ⁵⁸ For the COFHE colleges and universities, the average non-medical faculty growth between 1989 and 2004 was 47.4 percent (all 31 colleges and universities grew, with only two growing at a slower rate than the University of Rochester).⁵⁹For the U.S. News & World Report Top 50 National Universities, the average non-medical school faculty grew 48.3 percent between 1989 and 2004.⁶⁰

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 faculty or approximately 81 percent of all AAU private universities (519 for the University of Rochester compared to 675 for the average of AAU private universities with medical centers and 639 for all AAU private universities).⁶¹By 2004 the University of Rochester nonmedical faculty was approximately 51 percent of the average AAU private university with a medical center faculty and 57 percent of all AAU private universities (556 for the University of Rochester compared to 1089 for the average of AAU private universities with medical centers and 977 for all AAU private universities).⁶²

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.⁶³

Student and faculty size data are particularly notable when one focuses solely on undergraduate enrollment, particularly in the College of Arts, Sciences, and Engineering. 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.⁶⁴ 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 (excluding the School of Engineering), 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. In 2004, the Arts and Sciences faculty of the College of Arts, Sciences, and Engineering 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 then was approximately 56 percent of the average of the counterpart Arts and Sciences faculties at the 15 COFHE universities for which data are available.⁶⁵

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.⁶⁶The 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. It was notable that our undergraduate admissions selectivity in fall 2005 was poorer (at 48 percent) than that of the other non-Ivy COFHE universities (Duke, Georgetown, Johns Hopkins, MIT, Northwestern, Rice, Stanford, the University of Chicago, and Washington University), which ranged from below 15 to 40 percent of applicants. Similarly, it was striking that our admissions yield (percentage of students who accept our admissions offer) was lower, most recently at 21 percent, than this set of universities, which ranged from 30 to over 65 percent.⁶⁷

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 historical 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.⁶⁸

Table 49 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; other departments ranked below our NIH aggregate results.

Table 50 highlights the covariance between NIH aggregate rankings and U.S. News & World Report medical school rankings. Between 2000 and 2004, the University of Rochester ranged between 28th and 32nd in both NIH rankings and U.S. News Medical School rankings.

Between 1995 and 2005, Table 51 documents that the School of Nursing steadily improved its ranking of NIH funding from 37th to 12th.

For the College of Arts, Sciences, and Engineering the most widely respected rankings were last published by the National Research Council in 1995.⁶⁹ The National Research Council is currently preparing new rankings.

The absence of current National Research Council data, however, has tended to highlight the significance of U.S. News rankings. Table 53 presents U.S. News’ Top 50 National University data between 1990 and 2005. The University of Rochester declined from 25th in 1990 to 34th in 2005. Two other data are noteworthy in Table 53: (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.

There are several other undergraduate or graduate rankings, none of which is as widely followed as U.S. News.⁷⁰

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).

Table 54 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 in U.S. News. In Business Week rankings between 1990 and 2004, the Simon School declined from 20th to 29th. In the 2006 Wall Street Journal rankings, the Simon School climbed from 17th to 6th on the Regional Ranking List of 51 of the nation’s business schools.⁷¹

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.

A. STRENGTHEN EXISTING PROGRAMS

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 in this planning period. Each school and the Medical Center today are developing draft strategic plans that will articulate their priorities. Ultimately the University senior leadership and the Board of Trustees will develop an overarching plan that will address University wide priorities.

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.

There is a further dimension to strengthening outstanding existing programs that must be stressed. We should consistently focus on building the strongest possible academic and clinical programs with the most efficient and most nimble infrastructure. I have been highly impressed by the Medical Center’s cost efficiency initiatives and by central University projects such as the cogeneration plant which was designed to maximize available resources for our academic and clinical programs. This fall I will begin a conversation with our senior academic leadership and later with members of the Board of Trustees on what further steps we can take to be most effective in utilizing our current resources.

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 in Part III 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

We live in the age of academic interdisciplinarity. The University of Rochester has had many significant interdisciplinary successes both within and between schools and the Medical Center. Given the significance of interdisciplinarity to our future, 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. The Committee may use its discretion to request periodic or ongoing participation in its deliberations by others within the University. The Committee will be provided resources to visit, if it so chooses, other leading academic institutions, or to invite appropriate visitors from other institutions to share their insights with the Committee. 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. But the Interdisciplinary Review Committee will provide a vehicle to ensure that the University will pursue all appropriate steps to ensure that projects involving two or more schools and/or the Medical Center can be effectively established if they are in the best interests of the University.

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: Development 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 development, which over time will yield significant net benefits to the schools and the Medical Center after an initial period of investment. I have also requested a review as to whether our existing tech transfer and commercialization infrastructure and interschool interdisciplinary programs work as effectively as they should.⁷²

In reviewing other university strategic plans, I was struck by the extent to which these aspects of centralization are consistent with earlier developments at most of our peers (e.g., particularly development and communications) or ongoing developments (e.g., particularly in technology transfer and interdisciplinary or multidisciplinary activities).⁷³

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.

While much of the detail of this balance will be honed as we move towards a final set of strategic plans, two points already are evident. First, the Provost is likely to perform an increased role in coordination of interschool interdisciplinary programs. These programs are typically academic, and the Provost is the chief academic officer at the University of Rochester. Second, at the conclusion of the strategic planning process, I look forward to working with the Board of Trustees to review how our current board committee structure best can be harmonized with the underlying University structure.

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.⁷⁴

Our program on staff diversity is an ongoing one, which began before I started in July 2005 with the hiring of Stan Byrd as Manager of Multicultural Affairs and Inclusion in the Office of Human Resources to provide consultation, coaching, and training support for staff diversity and inclusiveness throughout the University. Stan Byrd, Chuck Murphy, Director of Human Resources, and others from the University recently visited selected universities that have been successful in staff diversity and will soon report to our Board Personnel Committee regarding ongoing efforts. During this past year, the University hired a new Multicultural Recruitment Specialist, Judie Myers Gell, who, among other projects, is focusing on how to broaden local and national outreach efforts.

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. Compared to peer universities within COFHE, in some fields our record is impressive. In the social sciences, for example, 48 percent of our assistant professors are female. Among our COFHE peers, the median percentage of female assistant professors in the social sciences is 38 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 appointed a Task Force on Faculty Diversity and Inclusiveness that very soon will officially present to me a report with 31 unanimously adopted specific recommendations, notably including a recommendation that the University employ a faculty diversity officer who will report to the President and 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.⁷⁵

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. Many of these projects were extraordinary successful long before I arrived, including the Medical Center’s nationally recognized efforts in community health. 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.⁷⁶Earlier 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.

The University begins from an enviable position in this effort. Our 153 buildings encompass 10.6 million gross square feet. Our land holdings total 687 acres. The University is fortunate in owning more than 200 undeveloped acres (exclusive of lands now covered with surface parking lots), which afford flexibility in future planning. The University also has benefited from opportunities to acquire noncontiguous land at highly desirable prices, such as the 63 acres on Bailey Road that will house the Cardiovascular Research Institute.

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,”⁷⁷ 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 (notably including attracting and retaining the most outstanding faculty) 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, particularly through their medical centers, their engineering and science programs, and the culture they add to the community through arts, humanities, and liberal arts. 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

This document is 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.

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¹ Nonfarm Establishments – Employees, Hours, Earnings by Industry: 1980 to 2002, Chart No. 629 (U.S. Census Bureau. Statistical Abstract of the United States: 2003) at 411; County Business Patterns, U.S. Census Bureau 2004).

²State and Area Employment, Hours, and Earnings: Rochester, N.Y. Manufacturing 1990-2006 U.S. Department of Labor, Bureau of Labor Statistics, Bureau of Labor Statistics Data. http://www.bls.gov/sae/home.htm#data.(Aug. 24, 2006).

³Spellings Commission Report, Draft Report (7/14/06) at 1.

⁴Spellings Commission Report, supra n.3, at 1 n.1.

⁵Schiff, E. Preparing the Health Workforce (2006), Issue Paper Released by the Secretary of Education’s Commission on the Future of Higher Education. Washington, DC: U.S. Department of Education 2006. From a different perspective, George Mason University Public Policy Professor Richard Florida has highlighted the rise of the “creative class” (defined to include individuals in science, engineering, architecture and design, education, arts, music and entertainment, and knowledge based professionals), which he calculated had grown from less than 10 percent of the United States workforce in 1900 to 20 percent in 1980 and to over 30 percent in 2005 (39 million individuals), currently receiving nearly half the national wage and salary income, or about as much as the manufacturing and service sectors combined. Richard Florida, The Rise of the Creative Class xiii-xiv, 8-9 (Basic Books 2002); Richard Florida, The Flight of the Creative Class 29 (HarperBusiness 2005); cf. Steven Brint, Professionals and the Knowledge Economy: Rethinking the Theory of the Post-Industrial Society, 49 Current Sociology No. 1 at 101 (July 2001) (reviewing literature and estimating that the scientific-professional knowledge economy represents 36 percent of the workforce in 1994 and was growing faster than other sectors).

⁶See, e.g., National Academy of Sciences, National Academy of Engineering, Institute of Medicine, Rising above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future (Washington, D.C. 2005); American Association of Universities (AAU), National Defense Education and Innovation Initiative: Meeting America’s Economic and Security Challenges in the 21st Century (Jan. 2006); White House, American Competitiveness Initiative: Leading the World in Innovation (Feb. 2006).

⁷Table 1.

⁸Table 2. To compare across the University, only tenured and tenure track faculty were used in Table 2. When tenured, tenure track, and clinical faculty are analyzed, 84 percent of our faculty were in the health professions, engineering, computer science, mathematics, and natural sciences.

⁹Table 3.

¹⁰In 2005, 16 percent of the University of Rochester’s full time enrollment involved international students. Of a sample of 154 institutions of higher education, this meant that we ranked 21st in international students overall, tied with Cornell University and the University of Pennsylvania and slightly ahead of Yale, Brown, Duke, and NYU. 2005 Open Doors Report, Institute of International Education.

¹¹Table 4.

¹²These universities were Brown, Carnegie Mellon, Case Western, Columbia, Duke, Emory, Georgetown, Harvard, Johns Hopkins, Northwestern, Stanford, Syracuse, Tufts, the University of Pennsylvania, and the University of Southern California, as well as the AAU Report, Reinvigorating the Humanities (2004); University of Rochester “Dashboard” Data and other materials.

¹³Preliminary Report from the University Planning Committee for Science and Engineering, Enhancing Science and Engineering at Harvard 4-5 (July 2006) (“Harvard Report”).

¹⁴The Duke University Strategic Plan articulated a similar theme: While the modern research university was forged from an alliance of disciplines, with knowledge largely fostered within traditional departmental or school structures, recent decades have seen an accelerated integration of knowledge across the sciences, social sciences, and humanities, in fields ranging from the biosciences to cultural studies…. Important new understandings of the nature of research reveal that interdisciplinarity and integration were key factors in major discoveries in biomedical sciences in the twentieth century….Given that technology is changing faster than our imaginations can keep up, it is not surprising that many of the traditional departments and disciplines around which universities were organized a hundred years ago are being tested in 2000. Duke Strategic Plan II-4-5 (Nov. 2005 (“Duke Strategic Plan”).

¹⁵AAU, Reinvigorating the Humanities 42-43 (2004).

¹⁶Id. at 40.

¹⁷The Harvard Report recommended a new Harvard University Science and Engineering Committee (HUSEC), consisting of the Provost, the deans of four schools, and elected or appointed representatives from science and engineering constituencies, including Harvard affiliated hospitals, to evaluate and partially fund University wide science and research endeavors. The Report proposed that HUSEC allocate 75 interdisciplinary FTEs over the next ten years and a portion of research space on each campus as well as evaluate and fund interdisciplinary research proposals, pointedly noting: “The three enabling resources for new initiatives are funds, FTEs, and space.” Harvard Report, supra n.13, at 6-7, 26, 29-33.

¹⁸Id. at 9-10.

¹⁹Id. at 33-38.

²⁰Id. at 44-45.

²¹Id. at 8, 39.

²²Carnegie Mellon Strategic Plan 6 (1998).

²³Emory University, Where Courageous Inquiry Leads: Strategic Plan 2005-2010 (Draft 4: Oct. 12, 2005).

²⁴Northwestern Strategic Plan 6 (Final Draft Nov. 12, 2004).

²⁵Duke Strategic Plan, supra n.14, at IV-13.

²⁶Harvard Report, supra n.13, at 89-90.

²⁷Duke Strategic Plan, supra n.14, at IV-30-31.

²⁸Id. at IV-8 (Provost Bridge Funds); Brown University, The Plan for Academic Enrichment 14 (2004); Northwestern Strategic Plan, supra n.24, at 7.

²⁹Duke Strategic Plan, supra n.14 at IV-14 particularly focusing on storage of large databases, high performance (parallel) computers, and scientific visualization.

³⁰See, e.g., Johns Hopkins, Report of the Committee for the 21st Century 4 (1994), proposing adoption of a single academic calendar.

³¹Duke Strategic Plan, supra n.14.

³²In 2005, Moody’s reported that the University of Rochester received 64 percent of its revenues from health care. This was greater than other private universities for which Moody’s prepared bond ratings, including Vanderbilt (62 percent), Emory (60 percent), and the University of Pennsylvania (51 percent). MFRA (Municipal Financial Ratio Analysis), www.moody’s.com.

³³Tables 10-11. At year end FY 2006, Strong Memorial Hospital had 89 days of cash on hand or $178 million and Highland Hospital had 75 days of cash on hand or $40 million.

³⁴Table 12-1.

³⁵Tables 12-1 and 12-2.

³⁶Table 13.

³⁷Table 14.

³⁸Table 15.

³⁹Table 21.

⁴⁰Table 22.

⁴¹Table 23.

⁴²Table 24.

⁴³Table 25.

⁴⁴Table 26.

⁴⁵Table 25.

⁴⁶Moody’s Investors Serv., High Profile New Issue, Report No. 96,731 for Univ. of Rochester (Feb. 16, 2006) at 5.

⁴⁷Lombardi Program on Measuring University Performance, The Center: The Top American Research Universities (Dec. 2005).

⁴⁸See, e.g., Chronicle of Higher Education, Aug. 25, 2006, at 30 (listing the University of Rochester as 10th in licensing income with a total in FY 2004 of $33.7 million).

⁴⁹Table 35.

⁵⁰Table 36.

⁵¹Table 37.

⁵²Table 38.

⁵³Table 39.

⁵⁴Table 40.

⁵⁵Table 41.

⁵⁶Table 40.

⁵⁷Table 41.

⁵⁸Table 42.

⁵⁹Table 43.

⁶⁰Table 44.

⁶¹Tables 40-41.

⁶²Ibid.

⁶³Table 45.

⁶⁴Table 46.

⁶⁵Table 47.

⁶⁶Report from Thomas Jackson at the Board of Trustees Retreat 2005, The University of Rochester: Some Thoughts on Size, Quality, Reputation, Resources, and Governance.

⁶⁷COFHE Redbook Entering Class 2005: Table B.1 (Dec. 2005).

⁶⁸Table 48.

⁶⁹Table 52.

⁷⁰See, e.g., Hugh D. Graham & Nancy Diamond, The Rise of American Research Universities: Elites and Challengers in the Postwar Era (Johns Hopkins Univ. Press 1997) (ranking University of Rochester graduate programs 12th on a size adjusted basis); Newsweek, Aug. 28, 2006, at 66 (characterizing the University of Rochester as one of 25 “New Ivies”).

⁷¹Wall St. J., Sept. 20, 2006, at R4.

⁷²Cf. Duke Strategic Plan, supra n.14, at IV-32-33 (describing Office of Science and Technology Transfer, noting that Duke is among the top twenty universities in venture activity, having launched a dozen companies with Duke or Duke-related technology during the past two years).

⁷³Cf. Harvard Report, supra n.13, at 46-47 (advocating shared research tools, research computing, and technology to address shortcomings in Harvard’s research and instructional technical infrastructure); Northwestern, supra n.24, at 12-13 (briefly describing an “enabling infrastructure” including a “faculty concierge” function administered by the Provost’s Office to assist the faculty with developing ideas and implementing initiatives); and Duke Strategic Plan, supra n.14, at II at 38-46, VI at 13-18 (intensify the use of information technology).

⁷⁴See, e.g., Harvard Report, supra n.13, at 24, 38-39; Duke Strategic Plan, supra n.14, at 10, IV 32-37; VI 25-27; Emory, supra n.23, at 45.

⁷⁵Cf. Spellings Commission Report supra n.3, at 1 nn.2, 3; Emory supra n.23, at 45-46.

⁷⁶See, e.g., Jane Gordon, UConn Decides to Build Its Own College Town, N.Y. Times.com Real Estate (Aug. 9, 2006).

⁷⁷Karin Fisher, The University as Economic Savior, Chronicle of Higher Education, July 14, 2006, at A18.

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^*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.