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University' Microfilms International 300 N. Zeeb Road Ann Arbor, Ml 48106 8415215 F ie ld e r, J a m e s D elp , J r . CASE STUDIES OF INSTITUTIONAL RESPONSES TO THE CONDITION OF FISCAL STRINGENCY 1974-1975 TO 1978-1979 BY THREE MICHIGAN UNIVERSITIES AND STATE COLLEGES M ichigan S tate U niversity University Microfilms International 300 N. Zeeb Road, Ann Arbor, Ml 48106 Ph.D. 1984 CASE STUDIES OF INSTITUTIONAL RESPONSES TO THE CONDITION OF FISCAL STRINGENCY 1974-1975 TO 1978-1979 BY THREE MICHIGAN UNIVERSITIES AND STATE COLLEGES By James D. F ie ld e r, J r . A DISSERTATION Submitted to Michigan S tate University in p a r tia l fu lfillm e n t o f the requirements fo r the degree of DOCTOR OF PHILOSOPHY Department of Administration and Curriculum 1983 ABSTRACT CASE STUDIES OF INSTITUTIONAL RESPONSES TO THE CONDITION OF FISCAL STRINGENCY 1974-75 TO 1978-79 BY THREE MICHIGAN UNIVERSITIES AND STATE COLLEGES By Janies D. F ie ld e r, J r . The purpose o f th is study was to obtain information regarding i n s t itu tio n a l s tr a te g ie s t h a t were implemented in response to the con­ d itio n o f fis c a l stringency during the period 1974-75 to 1978-79. The researcher used a d e sc rip tiv e methodology, including as d a ta -c o lle c tio n techniques (a) the c o lle c tio n , review, and analysis of in s t it u t io n a l data reported to the S tate of Michigan, Department of Management and Budget; (b) the c o lle c tio n and review o f i n s titu tio n a l published documents; and (c) sem i-structured interviews with adminis­ tra tiv e sta ff. The findings obtained during the d a ta -c o lle c tio n por­ tio n of the p ro jec t were reported in i n s t itu tio n a l case stu d ie s . The findings fo r each case study were combined into major findings fo r the research study. This study examined on a case-study basis Grand Valley S tate Colleges, Oakland U niversity, and the University o f Michigan fo r the period of 1974-75 to 1978-79. There were several important findings documented by the study. 1. The three in s t it u t io n s did en ter a period o f continuing profound fis c a l stringency in 1974-75. James D. F ie ld e r, J r . 2. The th ree i n s t it u t io n s used a v a rie ty of cost-reduction programs to respond to fis c a l stringency, including the term ination of tenured fac u lty members and the discontinuance o f academic programs. 3. The respondents from the i n s t it u t io n s reported an upsurge in fund-raising a c t i v i t i e s to augment s t a t e ap propriations. 4. The respondents from the i n s t it u t io n s concurred t h a t the major problem encountered was in te rn al communication. 5. The respondents from the i n s t it u t io n s reported a major change in the type of i n s titu tio n a l planning from operational (short term) planning to a combination o f operational and s tr a te g ic planning (long term). 6. The respondents from the i n s t it u t io n s reported t h a t suc­ cessful responses to f i s c a l stringency had occurred a t each i n s t i t u ­ tio n . 7. The respondents from the i n s t it u t io n s sta te d t h a t the b e n efits from the period o f f is c a l stringency did not outweigh the disadvantages. To Nathan James Fielder ACKNOWLEDGMENTS My sincere thanks a re due to my friend s and fam ily, who were in d ir e c tly responsible fo r the completion o f t h i s study. Special thanks and appreciation are due to Dr. Walter F. Johnson, whose confidence exuded and aided me in the tw ilig h t o f t h i s study. Appreciation i s also due to the other members o f the guidance committee fo r t h e i r support, c r i t i c a l in s ig h t, and most o f a l l fo r the challenge o f academic p u rsu it: Dr. Fred Ignatovich, Dr. Gary North, Dr. Harry McKinney, Dr. Max Raines, and Dr. James Rainey. I would e sp e c ia lly lik e to thank P at, my w ife, fo r her unswerving support on t h i s study. My p a re n ts, Ann and James, deserve acknowledgment, fo r i t was under t h e i r tu te la g e t h a t I developed the goal t h a t anything is possible i f you put your mind to th e completion of the task . TABLE OF CONTENTS Page LIST OF TABLES................................................................................................. v ii Chapter I. II. III. IV. THE PROBLEM......................................................................................... 1 Introduction ................................................................................. Purpose ............................................................................................. Definitions ..................................................................................... Need fo r the S t u d y ..................................................................... Procedures ..................................................................................... Lim itations and Scope ................................................................. O v e r v i e w ......................................................................................... 1 6 6 8 9 10 11 REVIEW OF THE LITERATURE............................................................. 12 Review of the L ite ra tu re ......................................................... Michigan in the 1 9 7 0 s ................................................................. Data B a s e ..................................................................................... Data R eview ................................................................................. Summary............................................................................................. 12 49 49 50 67 METHODOLOGY......................................................................................... 71 Design of the S t u d y ..................................................................... Setting o f th e Study ................................................................. Research Propositions ................................................................. Sample Selection ......................................................................... Procedures f o r Obtaining Data ................................................. Semi-Structured Interviews ..................................................... Data-Analysis Procedures ......................................................... 71 73 73 77 79 82 85 CASE STUDIES..................................................................................... 87 Case Study: Grand Valley S tate Colleges ............................. Proposition 1 ............................................................................. Proposition 2 ............................................................................. Proposition 3 ............................................................................. Proposition 4 ............................................................................. Proposition 5 ............................................................................. Proposition 6 ............................................................................. 87 89 92 108 110 113 115 iv Page V. Proposition 7 ............................................................................ Proposition 8 ............................................................................ Proposition 9 ............................................................................ Proposition 1 0 ........................................................................ Proposition 11 Case Study: Oakland University ............................................ Proposition 1 ............................................................................ Proposition 2 ............................................................................ Proposition 3 ............................................................................ Proposition 4 ............................................................................ Proposition 5 ............................................................................ Proposition 6 ............................................................................ Proposition 7 ............................................................................ Proposition 8 ............................................................................ Proposition 9 ............................................................................ Proposition 1 0 ........................................................................ Proposition 11 Case Study: University of Michigan .................................... Proposition 1 ............................................................................ Proposition 2 ............................................................................ Proposition 3 ............................................................................ Proposition 4 ............................................................................ Proposition 5 ............................................................................ Proposition 6 ............................................................................. Proposition 7 ............................................................................ Proposition 8 ............................................................................ Proposition 9 ............................................................................ Proposition 1 0 ........................................................................ Proposition 1 1 ......................................................................... 117 119 120 121 122 123 125 127 132 134 136 138 139 140 142 143 144 145 147 150 154 158 159 160 161 161 162 163 164 SUMMARY AND IMPLICATIONS............................................................ 166 Summary of the S t u d y ................................................................. Major F i n d i n g s ............................................................................ The S ta r t of Fiscal Stringency ........................................ Cost-Reduction Programs ........................................................ Revenue-Augmentation Programs ............................................ Problems Encountered ............................................................ I n s t i tu t i o n a l Planning ........................................................ E ffective Programs ................................................................ Im plications of the Study ........................................................ C o n c lu s io n s................................................................................. Im plications fo r Future Study ............................................ 166 169 169 171 179 183 185 187 189 189 191 v Page APPENDICES........................................................................................................ 193 A. LETTER OF INTRODUCTION................................................................. 194 B. LETTER OF REQUEST..................................... 196 C. SAMPLE LETTERS................................................................................. 198 D. PILOT STUDY QUESTIONNAIRE ............................................................. 201 E. REVISED QUESTIONNAIRE ..................................................................... 204 BIBLIOGRAPHY .................................................................................................... vi 209 LIST OF TABLES Actual and Projected Operating Revenues o f a Public and a Private University fo r 1974-75 and 1984-85 .................... 41 Fiscal-Year Equated Students by I n s t i tu t i o n and Fiscal Year: 1970-71 Through 1978-79 ................................................ 51 Total Michigan Higher Education Student Credit Hours . . . 53 Total Michigan Student Credit Hour Rank Change .................... 54 Michigan Higher Education Full-Time Faculty ........................ 56 Michigan Higher Education Fall Headcount ................................ 57 Fiscal Year Equated Student Per Headcount ............................ 58 S tate Expenditures fo r Higher Education as Percentage of Total S tate General Fund/General Purpose Expenditures Excluding Capital Outlay ............................................................ 61 Michigan Higher Education Total General Fund Expenditures by Reporting Program .................................................................... 62 Expenditures fo r S tate Colleges and U n iv e rs itie s , 1968-69 to 1980-81 ........................................................................................ 63 Michigan Higher Education S tate Appropriations ..................... 65 Michigan Higher Education Tuition and Fee Revenue . . . . 66 . . . 68 Michigan Higher Education Indirect-Cost-Recovery Revenue . 69 Expenditures fo r S tate Colleges and U n iv e rsities: 1974-75 to 1978-79 ........................................................................ 78 Grand Valley S ta te Colleges I n s titu tio n a l Data .................... 91 Grand Valley S ta te Colleges Calculated Data 91 Michigan Higher Education Investment-Income Revenue vii ........................ Page Grand Valley S ta te Colleges' Spring 1979 Administrative Actions ................................................................................................ 106 Oakland University I n s titu tio n a l Data ........................................ 128 Oakland University Calculated Data ................................................ 128 The University o f Michigan I n s titu tio n a l Data ........................ 149 The University ......................... 149 o f Michigan Calculated Data The University of Michigan General-Fund Expenditures in 151 Instru ctio n al Units ........................................................................ Higher Education Price Index ............................................................ 155 The University o f Michigan Tuition and FeeRevenues . . . . 156 The University o f Michigan Tuition Rates .............................. 156 Grand Valley S tate Colleges' Personnel Cost-Reduction S tra te g ie s ............................................................................................ 173 Oakland U n iv e rsity 's Personnel Cost-Reduction S tra te g ie s . . 174 The University o f Michigan's Personnel Cost-Reduction S tra te g ie s ............................................................................................ 174 Programmatic-Reductions Summary .................................................... 179 Revenue-Augmentation S tra te g ie s .................................................... 183 CHAPTER I THE PROBLEM Introduction The Golden Years (Han & Wynn, 1970) o f American higher edu­ cation occurred in the l a t e 1950s and 1960s. Now higher education is encountering the New Depression in Higher Education (Cheit, 1971) during the 1970s. During the l a t e 1950s and most of the 1960s, higher education experienced unprecedented growth. Student e n r o l l ­ ment doubled, income and expenditures t r i p l e d , and physical-plant outlay increased fourfold (Cheit, 1971). During th is period o f accelerated growth, th ere was l i t t l e need fo r p r i o r it y s e ttin g . It was evident t h a t increasing enrollments and r e la te d increasing revenue could support a ll the proposed programs. However, growth in higher education was not lim ited to enrollment in creases, c a p ita l-o u t!a y improvement, or revenue increases. The expansion also included pro­ grammatic a lte r a tio n s and a d d itio n s, increased public se rv ic e , and increased research e f f o r t s . The se cu rity of an expanding budget also allowed fo r g re a te r c r e a t i v i ty and innovation in in s tr u c tio n , research, and public se rv ice . The mood on campuses has been described as "ex pansio nistic," with college personnel tapping new resources a t the s t a te and national le v e ls . The "Golden Years" brought a sense o f s a tis f a c tio n and confidence to the American public as i t began to 1 2 recognize th a t higher education was a v a ila b le to the masses in unparalleled q u a n titie s . During t h i s period of rapid growth, i n s t it u t io n a l plans were not c a re fu lly developed to provide fo r the con tin u ity o f physical plan t maintenance, fa c u lty sa la ry o r tenure schedules, f i s c a l commit­ ments to expensive academic programs, curriculum development, and the overall fin an cial s t a b i l i t y of colleges and u n iv e r s itie s (Cheit, 1971). I n s titu tio n s were caught up in the notion o f trading up in order to compete with s i s t e r i n s t i t u t i o n s . The r e s u lta n t a ctio ns led to u n d ercap italizatio n and overextension on a program, physical p la n t, and expenditure basis (Cheit, 1971, p. 138). Higher education in the United S tates and in Michigan is cu rre n tly experiencing the "prospect o f no growth or even decline in enrollments and income" (Ashworth, 1979; Mi 11ik en , 1979). The S tate of Michigan i s fe e lin g the e f f e c t o f declining revenue, and enrollment figures in d ic ate t h a t a downturn in the number of students attending educational i n s t it u t io n s has already occurred. The fa c to rs a f f e c t ­ ing the financial s ta tu s o f higher education in Michigan are numerous and complex. Presently, Michigan i s f a l l i n g in national comparative rank­ ings fo r the funding of higher education i n s t i t u t i o n s . According to a national survey completed by Chambers (1977), Michigan ranks f o r t i e t h among a ll s t a te s when comparing percentage increases in higher education appropriations over the l a s t ten y e a rs. I f the Michigan appropriation increases had kept pace with the national average over th is period, support fo r Michigan higher education 3 in s t it u t io n s would be $129 m illion g rea ter than the current le v e l, i . e . , g re a te r by 16 percent. As rec en tly as 1966-67, Michigan's s t a te support f o r higher education, on a per c ap ita b a s is , ranked seventh among the 50 s t a t e s . Measured by the same standard, Michigan's rank dropped to twenty-fourth fo r 1979-80. When ranked in terms of funds per $1,000 of personal income, Michigan's s t a t e appropriations f o r higher education were ranked nineteenth in 1966-67 and dropped to t h i r t y - f i f t h in 1979-80. Ten years ago, higher education in Michigan received 20.7 percent o f the s t a t e ' s general fund/general purpose budget. In 1978-79, only 17.6 percent o f t h a t budget was appropriated fo r higher education (Michigan S ta te U niversity, Budget Request, 1979). Even with the increases in t u i t i o n revenue t h a t have occurred, the overall budgets of i n s t i t u t i o n s have decreased in actual purchas­ ing power per stu d e n ts, according to preliminary data reported by the federal government's National Center fo r Education S t a t i s t i c s (Chronicle of Higher Education, 1979). In the period under examination, 1974-75 to 1978-79, th ere were two Executive Orders t h a t reduced appropriations to Michigan higher education i n s t i t u t i o n s . An Executive Order occurs when the projected s t a t e revenues f a l l below the projected expenditures of monies already appropriated. The Governor o f the s t a t e has the r e s p o n s ib ility fo r managing a balanced budget; thus an Executive Order is used to reduce mid-year expenditure p a tte rn s . On December 16, 1974, Governor William G. Milliken issued Executive Order 1974-11, which 4 reduced the Fiscal Year 1975 s t a t e appropriations to public four-year colleges and u n iv e rs itie s by $6,419,117. The o il embargo and ensuing economic recession in Michigan continued longer than was a n tic ip a te d , f u rth e r compounding the fin a n ­ c ia l s itu a tio n fo r the s t a te . On December 9, 1974, Governor Milliken issued Executive Order 1975-12, which reduced appropriations to s t a t e colleges and u n iv e r s itie s by $7,510,250 fo r f is c a l year 1976. Any December reduction o f s t a t e appropriations by Executive Order causes i n s t it u t io n s to d r a s t i c a l l y c u r ta il planned expenditures, since two-quarters of the i n s t it u t io n a l f is c a l year have already passed. Following two years with an Executive Order, the i n s t it u t io n s of higher education were expending fewer constant d o lla rs per student than in Fiscal Year 1974. In Fiscal Year 1974 the i n s t it u t io n s expended an average o f $1,935 per Fiscal Year Equated Student, in Fiscal Year 1975 the fig u re dropped to $1,869 per stu d e n t, and in Fiscal Year 1976 the fig u re dropped to $1,781. I t was not u n til Fiscal Year 1979, f iv e years l a t e r , t h a t the constant d o lla rs expended per student surpassed the Fiscal Year 1974 le v e l. Constant d o lla rs r e f l e c t a div isio n o f current d o lla rs by the Higher Education Price Index yearly fig u re ; t h i s c a lc u la tio n d e fla te s the curren t d o lla rs to the Fiscal Year 1967 le v e l. This fiv e-y e ar period i s the period under examination during th is research p ro jec t. A second f a c to r co ntributing to budgetary c o n stra in ts on a s t a t e and national level i s declining enrollment. One of the most important elements influencing u n iv ersity planning today is the 5 probable decrease in enrollments projected to occur during the 1980s and 1990s. A recent publication sta te d : "Higher education in the United States has grown throughout most o f i t s 340 y e ars. Now i t faces a q u arter o f a century of l i t t l e growth o r no growth in e n r o l l ­ ments fo r the f i r s t time in history" (Carnegie Foundation, 1976). In March 1979, the Michigan S tate Colleges and U niversities P re sid e n ts' Council published an enrolIm ent-projection research p ro ject completed by Dr. James R. Moor, J r . Moor concluded th a t the Michigan postsecondary education secto r . . . should expect a v irtu a l ste a d y -sta te in enrollments through the e a rly 1980's; followed by slow and then more rapid declines through the mid 1990's, ranging, a t a maximum of from 15 percent to 20 percent of present enrollment. . . . I f the economic growth and base education assumptions are c o rre c t, baccalaureate e n r o l l ­ ments may f a l l as much as 30,000 students by the mid 1990's , while ju n io r colleges w ill experience up to a 40,000 student decline, (p. 65) The Moor rep ort projected a continuing decline in enrollm ents, which supports the hypothesis o f increasing financial and programmatic con­ cern fo r the Michigan i n s t it u t io n s o f higher education. The l a t e s t enrollment fig u res fo r the public four-year i n s t i ­ tu tio n s in Michigan describe a declining s e ttin g . Since the peak year of student-hour production, there has been a 5.4 percent decline fo r the to ta l system (Endriss & F ie ld e r, 1979). At recent executive and l e g i s l a t i v e hearings the presidents of Michigan's colleges and uni­ v e r s i t i e s painted a dim p ictu re o f the enrollment pressures and budget s itu a tio n s t h a t e x is t a t the i n s t i t u t i o n s . The Michigan public four-year higher education system is n a tio n ally renowned fo r excellence, d i v e r s ity , and autonomy. Each 6 of these d escrip to rs has been threatened by the condition of fis c a l stringency. The S ta te of Michigan has the c o n stitu tio n a l respon­ s i b i l i t y to provide the c itiz e n s o f t h i s s t a te with a sound educa­ tio n al system. Past and present problems caused by the condition of f is c a l stringency could se rio u sly impede the delivery of the educa­ tional services unless educational leaders system atically plan the best possible use o f physical, f i s c a l , and human resources. Purpose This research p ro ject was designed to obtain information regarding how the i n s t i t u t i o n s responded to a period o f f is c a l stringency t h a t ex isted from 1974-75 to 1978-79. This research pro ject was lim ited to a review o f the in stru c tio n a l program. The purpose was to obtain information regarding i n s t it u t io n a l s tr a te g ie s th a t were implemented in response to the condition of f is c a l s t r i n ­ gency t h a t existed in the period under examination. The format o f t h i s study is d e s c rip tiv e , with propositions fo r in v e s tig a tin g , ra th e r than research hypotheses used as research guidelines. D efinitions Fiscal stringency—A condition of lim ited s t a te revenue and e sca latin g s t a t e c o s ts , which n e c e ssita te the mid-year curtailm ent o r elim ination o f planned or e x istin g programs (Glenny, 1974, p. 8 ). Retrenchment—Midyear cutbacks required when the s t a t e finds i t s revenues i n s u f f ic ie n t to cover authorized budget le v e ls (Glenny, 1974, p. 8). 7 R eallocation—A fis c a l event t h a t re d ire c ts resources (Glenny, 1974, p. 9). Operational planning—The planning and management of resources (fin a n c ia l, m a te ria l, and human) during a fu tu re time frame (spanning more than one year) with the objective o f being f le x ib le and adapt­ able during a period o f change. S tate f is c a l y ear—A time period th a t extends from October 1 of a given year to September 30 o f the following year. r ia tio n s are recommended in terms of a s t a te f is c a l S tate approp­ year and l a t e r converted to an in s t it u t io n a l fis c a l year. I n s titu tio n a l f is c a l year—A time period t h a t extends from July 1 o f a given year to June 30 of the following year. The s t a te appropriation fo r i n s t it u t io n a l f is c a l year i s calculated by captur­ ing 75 percent of the s t a te f is c a l year appropriation plus 25 percent of the previous s t a t e f is c a l year appropriation. Student c r e d i t hour—Number of semester c r e d it hours times the number of students taking the course. Program discontinuance—The term ination of an academic pro­ gram consistin g of more than one course. Declining enrollment—The decreased production o f student c re d it hours a t a sp e c ific i n s t it u t io n as reported by th a t i n s t it u t io n to the Department of Management and Budget. The decrease may also be in te rp reted from a Fiscal Year Equated Student fig u re . Fiscal year equated student—A constant used to provide con­ sistency and comparability among the Michigan public four-year i n s t i ­ tu tio n s , used as a measure of student enrollment. Undergraduate 8 t o ta l student c r e d i t hour production is divided by 31 student c r e d i t hours to compute the undergraduate FYES fig u re . Graduate I student c re d it hour production i s divided by 24 SCHs to compute FYES a t the Graduate I le v e l. Graduate II student c r e d i t hours (SCHs) are divided by 16 to compute Graduate II FYES. Need f o r the Study The issue o f f i s c a l stringency is very tim ely since the S tate o f Michigan begins to a d ju st to financial and demographic changes. These changes have already begun to occur and are projected to in te n ­ sify . Limited information is c u rre n tly av ailab le d e ta ilin g how i n s t it u t io n s o f higher education responded to the s t a t e f is c a l s t r i n ­ gency th a t existed between 1974-75 and 1978-79. This study i s important to the S tate o f Michigan, i t s c i t i ­ zens, stu d e n ts, le a d e rs , and a ll persons involved in Michigan higher education. The S ta te of Michigan has a very larg e investment in higher education, an investment too larg e to allow waste due to a lack of planning (Pierce & M illiken, 1979). For the 1979-80 fis c a l y e ar, the S tate o f Michigan is appropriating $623 m illion to the fouryear i n s t i t u t i o n s fo r general-fund support (Public Act 93, 1979). According to Senator Jack Faxon (1979), "the management of constrained budgets i s lik e ly to become the sin g le most troublesome problem ever to face the Michigan higher education community." I t i s evident t h a t research is necessary to determine what management s tr a te g ie s have proven e ff e c tiv e in dealing with t h i s problem. Such research has been requested by members of the S tate of Michigan L egislature and the Executive Office. 9 Dr. Gerald H. M ille r, former Director of the Department of Management and Budget, sta te d in a speech to the 1979 "Patterns" conference held in May 1979 t h a t the need fo r research and planning to deal with the "decade of financial c o n stra in ts" is imperative. F in a lly , t h i s study i s important in providing information fo r other adm inistrators who w ill be facing p a ra lle l s i t u a t i o n s . This study will id e n tify th e in s t it u t io n a l adm inistrative responses to fis c a l stringency. The P re sid e n t, Vice-President fo r Academic A ffa irs , and Vice-President fo r Business A ffairs will be asked to respond to questions during an interview designed to obtain information concern­ ing the responses to f i s c a l stringency. We need to know what s tr a te g ie s the educational leaders a t the i n s t it u t io n s implemented in response to the condition o f f is c a l stringency. The immediate and long-range success of higher education depends on improved i n s t i t u ­ tion al management and planning. The id e n tif ic a tio n o f programs th a t have been implemented a t the i n s t it u t io n s i s necessary public i n f o r ­ mation in order to prepare other i n s t i t u t i o n s fo r the a n tic ip a te d decline in s t a te appropriations and student enrollments. Procedures F i r s t , a thorough and systematic review o f the in s titu tio n a l data submitted to th e Department o f Management and Budget fo r the years 1974-75 to 1978-79 will occur in order to obtain information regarding a lt e r a t io n s in programs, expenditures, and cu rren t s t a f f ­ ing p a tte rn s. This review o f in s t it u t io n a l data will use trend analysis to determine any changes t h a t have occurred in reported in stru ctio n al data f i l e s . 10 Following a review o f the data and l i t e r a t u r e , personal semistru ctu red interviews w ill be conducted. The purpose o f the i n t e r ­ views i s to add v e rif ic a tio n and c l a r i f i c a t i o n to the data summary conclusions. The interviews will also provide in sig h t into areas th a t could not be reviewed through data a n aly sis. The sem i-structured interview format i s widely used in current educational and social research as a means o f obtaining information which is a v aila b le through no other means. The sample selected fo r t h i s p ro jec t w ill be obtained from the Michigan public four-year i n s t i t u t i o n s . The sample population interviewed will c o n sist o f th ree groups of in s titu tio n a l adm in istrato rs. The P resid en ts, Vice-Presidents f o r Business A ffa irs , and Vice-Presidents fo r Academic A ffairs will be asked to respond to a s e t of questions. The interview r e s u lts will be compiled and pre­ sented in a n a rra tiv e d e sc rip tiv e format. Limitations and Scope This research p ro jec t is lim ited to the research techniques used fo r a case study. lim ited in two ways. The data a n alysis o f the research will be F i r s t , the in s titu tio n a l rep resen tativ es selected to be interviewed will be lim ited both by the design of the sampling technique and by t h e i r w illingness to be interviewed. Second, the d a ta -c o lle c tio n technique t h a t will be used is a sem i-structured interview format; th e re fo re , the r e s u lts are subject to the lim ita ­ tions associated with the use of such techniques. This study is also lim ited to a fiv e-y e ar period between 1974-75 and 1978-79. The analy­ s i s of submitted i n s t itu tio n a l data and the content o f the interviews 11 w ill be lim ited to obtaining information regarding the in stru ctio n al programs a t the th ree public four-year i n s t it u t io n s chosen fo r th is case study. Overview This research p ro jec t is divided into fiv e chapters. The f i r s t chapter was the statement o f the problem, which included a b r ie f intro d u ctio n , purpose, d e f i n i ti o n s , need fo r the study, procedures fo r the study, and lim ita tio n s o f the study. A more extensive review o f the p e rtin e n t l i t e r a t u r e i s found in Chapter I I . Chapter II I con­ s i s t s of a d e scrip tio n of the methodology used fo r the study. D etails are presented fo r the c o lle c tio n techniques and treatm ent of the re su lts. Chapter IV rep o rts the findings o f the study as presented in a d e scrip tiv e -ca se -stu d y format. and im plications fo r fu tu re research. Chapter V co n sists of conclusions CHAPTER I I REVIEW OF THE LITERATURE Chapter II i s a review o f national l i t e r a t u r e th a t has been w ritten concerning the finan cial s t a b i l i t y o f the American i n s t i t u ­ tio n s o f higher education. P a rtic u la r a tte n tio n was given to includ­ ing reviews o f several national s tu d ie s , re p o r ts , a r t i c l e s , and books pertaining s p e c if ic a lly to the instructional-program changes in response to f is c a l stringency. The second section of t h i s chapter is a review o f the Michigan higher education se c to r in a data format. The section contains data on enrollment tre n d s , expenditure tre n d s , and revenue changes th a t have occurred in Michigan. The section on Michigan i l l u s t r a t e s through data the fa c ts t h a t were presented in the f i r s t n a rra tiv e sectio n . Review of the L itera tu re Higher education in the United States during the 1950s and 1960s was a growth-oriented industry. Capital o u tla y , appropria­ t io n s , and enrollment increased dram atically during th is period (Jenny & Wynn, 1970). The s t a r t o f the 1970s signalled a change in the environ­ ment in which higher education was accustomed to functioning. The following quotation i l l u s t r a t e s the point: The market i s now transformed: we presently face a g lu t of Ph.D.s and prospective professors; the baby boom is over; the age-cohort i s declining; the d r a f t may be ending. And since 12 13 i n s t it u t io n s always change in response to changes in t h e i r market, major s h i f t s in power will be occurring in higher edu­ cation in the next several years. Many i n s t i t u t i o n s w ill be beating the bushes fo r students and will be able to be choosy about re c ru itin g fa c u lty . (H e fferlin , 1971, p. 41) Bowen and Douglas (1971) concurred with H efferlin and f u rth e r c l a r i f i e d the environmental s itu a tio n : The i n s t it u t io n s a re equally obliged to o ffe r new programs of education, research, and public service re la te d to the p re s s­ ing environmental, urban, and social problems of American so ciety . The net r e s u l t of a l l these forces i s fin an cial stringency, (p. 2) Quindry and Masten (1976) also addressed the educational environment: There was c o n siste n t improvement in postsecondary financing from 1950 to 1968 and a decline th e r e a f te r . The decline r e fle c te d the disenchantment of the public and s t a t e l e g i s ­ la tu r e with higher education, waning enthusiasm fo r sc ien ­ t i f i c research, and growing national enthusiasm fo r social programs, (p. 516) A study completed by Hechinger (1971) indicated t h a t the decade of the 1970s was to be a d i f f i c u l t one. Hechinger sta te d : "America's i n s t i t u t i o n s o f higher learn in g , both public and p r iv a te , have entered a period o f profound f is c a l stringency" (p. 37). A national study completed by Earl Cheit in 1970-71 was spon­ sored by the Carnegie Commission on Higher Education and the Ford Foundation. The study was designed to answer th ree main questions: (1) What are the c h a r a c te r is tic s of the fin ancial problem facing higher education? of d if f e r e n t types? (2) How general i s the problem among i n s t it u t io n s (3) How are the colleges and u n iv e r s itie s respond­ ing to t h e i r fin an cial problems—with programs, co st red uction, and income production? The study included 41 i n s t it u t io n s o f which 23 were p riv ate and 18 public. The in s t it u t io n s ranged in siz e from 14 714 students a t Tougaloo College to 46,881 a t the U niversity of Minnesota, Minneapolis, fo r the f a l l 1968 enrollment. The Cheit survey o f the financial condition of the i n s t i t u ­ tio n s was completed in 1970. The data fo r the p ro jec t were co llec ted through the use o f a stru ctu red -in terv iew format. Supportive income, expenditure, and enrollment data were c o llec ted fo r the years 1959-60 to 1970-71. The interview guideline consisted o f 30 questions sub­ divided into th e following se ction s: overall fin an cial c o nd itio n, fa c to rs condition, e ffic ie n c y and p ro d u ctiv ity , increasing income, reducing expenditure, and policy view and recommendations. The sum­ mary statements f o r the p ro jec t sta te d t h a t "the essence of the problem is t h a t costs and income are both r i s i n g , but co sts a re ris in g a t a steady or a slowly growing r a t e , whereas income is growing a t a declining ra te " (Cheit, 1971). During the 1960s, cu rrent fund expenditure increased by 8.1 percent per student per year. For the i n s t i t u t i o n s reported in fin a n ­ c ia l d i f f i c u l t y , the r a te was 10.3 percent increase per y e ar. Accord­ ing to the study there were fiv e major components fo r expenditure growth. The components were general i n f l a t i o n , fa c u lty s a l a r i e s , student a id , co st o f campus disturbances, growth in r e s p o n s ib ility , a c t i v i t i e s , and a s p ira tio n s . Cheit indicated t h a t almost a l l o f the i n s t it u t io n s in the study were cuttin g expenditures, and most p riv ate schools were being forced in to d e f i c i t s . The study findings supported the f a c t t h a t income was growing but a t a decreasing r a t e . Cheit reported th a t growth r a te s were declining in the following areas: federal government support, g i f t s 15 and g ra n ts, and endowment Income. S tate appropriations were reported as continuing to grow a t approximately the same r a t e on the national scene. Tuition had been increased annually, and many i n s t it u t io n s found t h a t t h i s was lim itin g access of students to the i n s t i t u t i o n s . The second major question addressed the prominence o f the fin an cial problem throughout higher education. At the time o f th is study, 29 o f the 41 colleges and u n iv e r s itie s (71 percent) were judged e ith e r in or heading fo r fin an cial d i f f i c u l t y , according to the c r i t e r i a used in the study. not in fin an cial The remaining 29 percent were considered d i f f i c u l t y a t the time o f the study. The c r i t e r i a fo r the study were as follows: An i n s t i t u t i o n was judged in fin ancial d i f f i c u l t y i f i t s cu r­ ren t financial condition forced upon i t a loss o f program o r services th a t are regarded as p a rt of the program. An i n s t i t u ­ tio n was c la s s if i e d as headed fo r financial tro u b le i f , a t the time o f the study, i t had been able to meet current responsi­ b i l i t i e s without reducing q u a lity , but e it h e r could not ensure th a t i t could much longer meet program and q u a lity standards or could not plan support fo r evolving program growth. Those c o l­ leges and u n iv e r s itie s which could meet cu rren t q u a lity and program standards and could, with some assurance, plan the program growth they wanted, were c la s s if i e d not in fin an cial tro u b le . (Cheit, 1971). The study was not generalized beyond the sample o f the study since the methodology did not include random sampling as a se lec tio n technique. A generalizatio n t h a t was made was t h a t the findings in d i­ cated t h a t a ll types of i n s t it u t io n s were a ffe c te d . Cheit s ta te d , "No cla ss o f i n s t i t u t i o n i s exempt from the problem or fr e e from financial d i f f i c u l t y . " As noted by the author, the in s t it u t io n a l type th a t was affe cte d the most was the urban i n s t i t u t i o n . 16 The th ir d question th a t was addressed was how are the colleges and u n iv e r s itie s responding to t h e i r financial problem. The common c r ite r io n used fo r determining financial strength was the presence or absence o f planned program growth or reduction. The i n s t it u t io n s headed fo r fin an cial d i f f i c u l t y have c u rta ile d expenditures by l i m i t ­ ing program growth, freezing p o sitio n s , and executing other c o stsaving measures. According to Cheit, th ere was l i t t l e evidence t h a t the i n s t i t u t i o n s headed f o r fin ancial d i f f i c u l t y had cut academic programs. The r e s u lts o f the study indicated th a t the i n s t i t u t i o n s in fin an cial d i f f i c u l t y had gone more deeply in to co st c u ttin g . Some o f these i n s t it u t io n s were reported to have dropped departments and graduate majors. The following quotation indicated the approaches employed by the i n s t i t u t io n s : The i n s titu tio n a l responses have followed the lik e l y sequence of cuts in maintenance f i r s t , with the next cuts being in expenditures f o r su p p lies, equipment, and t r a v e l . Funds are dropped fo r experimental programs and e x tra c u rric u la r a c t i v i ­ t i e s and events. The pressure o f th e cost-income squeeze is strong enough t h a t schools have begun to reduce funds made a v a ila b le fo r student aid and special admissions. There are reductions in campus communication budgets, cu ltu ral a c t i v i ­ t i e s , and c e rta in kinds o f student se rv ic e s. Also, there ty p ic a lly are cuts in the number o f nonacademic employees. (Cheit, 1971) The in s t it u t io n s u n iv ersally included fund ra is in g as a response to financial d i f f i c u l t y . Cheit reported t h a t th ere was also an increase in academic and financial planning. The fourth major question th a t developed during the study was whether o r not medical schools were an important fa c to r in the financial trouble of u n iv e r s itie s . A special repo rt on medical and 17 dental education was c r i t i c a l l y underfunded and recommended p o lic ie s fo r increased financial support. medical education: The study included one question on "Is the medical school a s ig n if ic a n t f a c to r among the major fa c to rs influencing the finan cial s itu a tio n ? " The outcome of th is study was an ind icatio n th a t the in s t it u t io n s were attempting to e s ta b lis h the medical schools as f in a n c ia lly independent o f the in stitu tio n . The study generated four additional questions to which Cheit responded. Is the money c r i s i s on campus having beneficial e ffe c ts? Are the schools doing enough to gain control of t h e i r financial situ a tio n ? How serious i s the fin an cial problem lik e ly to become i f present trends continue? What broader issue must colleges and uni­ v e r s i ti e s face as a r e s u l t o f t h e i r fin ancial problems? The b e n e fit reported by the i n s t it u t io n s was the increased willingness on campus to review the c o st o f o perations. The increased willingness to manage through c o st-a n a ly s is techniques had been reported by a d m in istrato rs, f a c u lty , and stud en ts. The second question re la te d to i n s t itu tio n a l control o f the financial s itu a tio n was more complex. I t was apparent from the study t h a t the in s titu tio n s were increasing the attempts to reduce expendi­ tu re s and to increase income. A second component of t h i s s itu a tio n was t h a t th ere were d e f in ite fac to rs t h a t in h ib ited the in s titu tio n s from accomplishing these o b jec tiv e s. Cheit sta te d in the study: Any planned adjustment of funds between academic f i e l d s must take account of fa c u lty tenure as a bar to f l e x i b i l i t y and the academic t r a d itio n t h a t precludes laying o ff fa c u lty . There is a difference in expectations between campus and industry. 18 The th ird question re la te d to future projections of the fin an ­ c ia l problems. The study supported the f a c t t h a t the financial troubles w ill continue. Cheit reported th a t fin an cial conditions are dynamic and th a t the financial condition a t two in s t it u t io n s worsened s i g ­ n ific a n tly in the two months immediately following campus v i s i t s . The University o f Michigan reported t h a t the le g is la tu r e reduced appropriations below what was a n tic ip a te d . The College of San Mateo was reported not in finan cial tro uble a t the time o f the study, but with the defeat of a local tax-m illage e le c tio n , the college f e l l in to fin an cial d i f f i c u l t y . San Mateo reported t h a t i t a n ticip a te d laying o f f 40 percent of i t s s t a f f and reducing enrollment. The College of San Mateo reported four reasons fo r the mi11age defeat: (1) general re v o lt ag ainst high ta x e s, (2) a reduced regard fo r higher education g enerally , (3) a reaction o f older people ag ain st the cu r­ rent s ty le s o f younger people, (4) a ling ering resentment against some campus a c t i v i t i e s following the May 1970 invasion o f Cambodia. The fin a l question addressed by t h i s comprehensive financial study was:What broader issues must colleges as a r e s u l t o f t h e i r fin an cial problems? and u n iv e r s itie s face The universal response to th is question was t h a t i n s t it u t io n s must re s to re public confidence in higher education. Three main ingredients were id e n tifie d as neces­ sary fa c to rs: F irst, the colleges and u n iv e r s itie s must appear to be govern­ able. Thecampus disorders s ig n if ic a n tly disrupted both campus operation and the public image of the i n s t i t u t i o n s . Second, the i n s t it u t io n s must dispel the image o f being in e f f i c i e n t and non-productive. Accountability fo r expenditures is now being c alled fo r by the general public. The i n s t it u t io n s must address 19 th is question in te r n a lly in order to reply to external demands fo r the information. Third, the i n s t it u t io n s of higher educa­ tio n must develop an i d e n tif ia b le purpose. (Cheit, 1971) The h isto ry o f higher education has been linked d i r e c tl y to serving a purpose fo r the American so c ie ty , whether t h a t reason was to provide education and m obility fo r the influx o f post-World War II GIs, or to provide young graduates in response to Sputnik. The cur­ re n t s ta tu s o f higher education was mixed with no s p e c ific s e t o f purposes o r p r i o r i t i e s . Cheit summarized the study in the following quotation: F i r s t , t h i s study makes c le a r t h a t the money c r i s i s in higher education i s indeed r e a l. Almost no school is immune from i t s e f f e c t s . For most schools, i t will mean serious problems of retrenchment and readjustment. As t h i s study has shown, the extent to which colleges and u n iv e rs itie s of a ll types are in economic trouble is g re a t, and they are genuinely working a t reducing t h e i r fin an c ia l d i f f i c u l t i e s . Furniss (1974) concurred with Cheit*s findings on f is c a l stringency and s ta te d th a t Colleges and u n iv e r s itie s faced with sta b le or declining e n r o l l ­ ments and funds, with s p ira lin g i n f l a t i o n , or with l e g i s l a t i v e commands to change t h e i r missions may be required to reduce or elim inate programs and term inate s t a f f , (p. 159) A Carnegie Commission study completed in 1971 sta te d th a t Higher education in the early 1970's i s experiencing i t s g r e a t­ e s t financial c r i s i s . This anomalous ju x ta p o sitio n o f triumph and depression is a f a c t th a t must be accepted, and adjustments must be made to i t . I t may seem u n fa ir to some; i t may be wel­ comed by o th e rs ; but i t remains a dominant r e a l i t y in higher education and in American Society, (p. 1) The Carnegie Commission study t i t l e d The More E ffective Use of Resources: An Imperative fo r Higher Education (1972) id e n tifie d three primary areas of d ifference between the 1960s and the 1970s. F i r s t , the t o t a l - c o s t increases were due to both q u a n tita tiv e and 20 q u a lita tiv e growth. Second, i n f la tio n increased a t a f a s t e r ra te than the momentum o f the growth. Third, while growth increased and the cost per u n it program increased, income was leveling o f f . Jellema (1973) studied 540 p riv ate colleges and u n iv e r s itie s to determine the fin an c ia l soundness of the i n s t i t u t i o n s . The base year fo r the c o lle c tio n o f data was 1968, and 1971 was the end point fo r the data p ro je c tio n . Jellema sta te d : Not only was the number o f i n s t i t u t i o n s reporting d e f i c i t s in cre asin g , but th e ex ten t o f the d e f i c i t s they a re running was increasing. In 1968, 35 percent o f the p riv a te i n s t i t u ­ tio n s reported d e f i c i t s ; in 1969, 43 percent. Next the fig u re jumped to 58 percent and then increased an additional 2 percent the following year. The increase in the siz e o f the c o lle c tiv e net d e f i c i t a f t e r 1970 i s due more to the ex ten t o f the d e f i c i t s in i n s t i t u t i o n s with d e f i c i t s than to increasing numbers o f i n s t it u t io n s with d e f i c i t s , (p. 9) A follow-up study was conducted, surveying 507 i n s t i t u t i o n s of the o rig in a l group. The findings were dramatic, in d ic atin g t h a t the d e f i c i t was g re a te r than a n tic ip a te d . The p rojectio n f o r fu tu re action was likew ise negative, with increasing d e f i c i t s a t affected in stitu tio n s . Jellema noted t h a t some i n s t it u t io n s had responded by tem porarily (one o r two years) freezing fa c u lty s a l a r i e s , in c re a s­ ing t u i t i o n , and seeking g re a te r endowment (p. 24). The second p a rt o f the Jellema study focused on enrollment a t the 431 p riv a te i n s t i t u t i o n s t h a t completed the surveys. Jellema concluded from the research t h a t fewer applicants were generating an increased number o f a p p lic a tio n s , and a higher percentage o f a p p li­ cants were being accepted into the i n s t it u t io n s (p. 33). Jellema s ta te d th a t th ere was a need to improve several areas in order to 21 compete in the higher education market of the fu tu re . These areas fo r improvement included data c o lle c tio n , data a n a ly sis, admission p ra c tic e s , and academic programs. The th ir d major area examined in the Jellema study was the revenue portion of the i n s t i t u t i o n 's budget. Jellema noted t h a t on the national scene, 68.1 percent of general-fund revenue was gener­ ated by t u it i o n and f e e s , 15.3 percent from r e s t r i c t e d and u n re s tric te d g i f s t , 7.6 percent from endowment income, 1.7 percent contributed se rv ic e s, and the remaining 7.3 percent from o th er sources (p. 56). The author sta te d t h a t the tr a d itio n a l sources of revenue were "in su f­ f i c i e n t l y e la s t ic " to meet increasing needs (p. 86). Jellema proposed the establishm ent of a fe d e ra lly sponsored income-contingency loan plan. The plan would aid the student wish­ ing to attend a p riv ate i n s t i t u t i o n , and i t would aid the i n s t i t u t i o n because o f the guaranteed nature o f th e federal loan. This plan would help o f f s e t the increasing cost d i f f e r e n t i a l t h a t e x is ts between the public and p rivate s e c to r. The authors concluded t h a t the i n s t i t u ­ tio n s must improve management e ffic ie n c y and deveiopment-funa genera­ tio n and liv e with decreased program expectations. In the section on i n s t it u t io n a l expenditure, Jellema noted th a t the average expenditure p a ttern i s 50.4 percent in stru c tio n and departmental research; 25.2 percent f o r general a d m inistration , student se rv ic e s, s t a f f b e n e f its , and general in s t it u t io n a l expenses; 12 percent fo r th e operation and maintenance o f p la n t; 5.3 percent fo r l i b r a r i e s ; and th e remainder fo r a ll other expenses (p. 89). 22 The fin al se ctio n enumerated the responses to the d e f i c i t budgets a t the p riv a te i n s t i t u t i o n s . The responses as presented by Jellema included, in order of frequency: Borrow other (including from current funds); tr a n s f e r from unappropriated surp lu s; ra is e t u i t i o n ; increase fund ra is in g a c t i v i t i e s , defer maintenance, retrench expenditures, tr a n s f e r from other re se rv e s, borrow from endowment, spend principal o f funds functioning as endowments; cut back on depreciation allow­ ance, spend appreciation on endowment funds, (p. 139). The New Depression in Higher Education—Two Years Later (1973) was a follow-up study based on the e a r l i e r p ro je c t completed by Cheit in 1971. The f i r s t study validated the point t h a t expenditures were r is in g f a s t e r than income, and the r e s u ltin g gap was putting most of America's colleges and u n iv e r s itie s under heavy and increasing fin an ­ c ia l pressures. The conclusions o f the two-year follow-up study were summarized by Cheit (1973) in seven statements: 1. 2. 3. 4. 5. 6. 7. The i n s t i t u t i o n s generally have improved fin an cial condition. On the whole, p riv a te i n s t it u t io n s a re in somewhat b e tte r control o f t h e i r s itu a tio n s than public i n s t i t u t i o n s . There are s t i l l g re a te r extremes o f fin an cial condition in the p riv ate se cto r versus the public. Within the public secto r s t a t e colleges feel most secure and research u n iv e r s itie s most insecure. As a group, the research u n iv e r s itie s seem to be in the g re a t­ e s t s t a t e of concern about th e fu tu re . Administrators a t i n s t it u t io n s o f a l l types endorse student aid programs and believe t h e i r i n s t i t u t i o n s would ben efit from them. F in a lly , the assessment of fin an c ia l condition i s d i f f i c u l t and the present f is c a l s t a b i l i t y i s f r a g i l e . Cheit fu rth e r c l a r i f i e d t h a t the f is c a l s t a b i l i t y was f r a g i l e fo r several reasons: 1. 2. In fla tio n is an unpredictable external influence on the in stitu tio n . Trends in voluntary support v a c i ll a te rap id ly and are very su scep tib le to change due to reform in tax laws. 23 3. 4. Enrollments a re expected to decline instead of remaining steady. S tate aid i s expected to decrease as a portion o f the s t a te budget. The author commented on the future of higher education in his summary statem ents: A concern th a t th is process o f reduced expectations may have fu tu re adverse consequences is expressed in the response from Harvard U niversity, which notes th a t financial stringency has the e f f e c t of s a c r if ic in g innovation and imagination. I t " s a c r if ic e s the fu tu re fo r the p resen t." Future c on stitu en cies are unrepresented. In the mid-1970s th ere was a growing awareness of the d i f f i ­ c u ltie s faced by American higher education. Planning and budgeting became relev ant to p ics of campus conversation as the fa c u lty became aware of the impending financial press. Increasing concern was focused on the tenure process and potential problems t h a t i t caused. The concern was t h a t , during a s t a te of declining enrollment or declining fin an ces, the in s t it u t io n s th a t are heavily tenured would lose much of t h e i r fin an cial f l e x i b i l i t y (Furniss, 1974). The loss of f l e x i b i l i t y during times of financial press elevated the importance o f the tenure process. West (1974) proposed a tenure quota system based on s a la r ie s instead of numbers o f f u l l ­ time fa c u lty members. The system was designed to aid the i n s t it u t io n s in t h e i r response to f is c a l stringency. West noted the typical i n s t i ­ tu tio n a l response: As budgets and enrollments shrink in colleges and u n iv e rs i­ t i e s throughout the country, adm inistrators are lim itin g the percentages o f tenured fac u lty in order to s tr e tc h fin a n ­ c ia l resources, (p. 96) 24 Nisbet (1973), in "The Future of Tenure," enumerated seven other reasons fo r the decline of the tenure s tru c tu re . They were as follows: 1. 2. 3. 4. 5. 6. 7. Rearrangement o f national p r i o r i t i e s The degraded positio ns of u n iv e r s itie s and colleges The b lurrin g of academic and non-academic functions The r i s e of new and competing i n s t it u t io n s The re v o lt o f the young and ambitious The r i s e of labor unions The rage to l i t i g a t e . Joney (1972) concurred on the current position of tenure. Honey c l a r i f i e d t h a t i f fa c u lty influence was aimed a t narrow fac u lty in t e r e s t s , then i t was running counter to the expectations of i n s t i ­ tu tio n a l responsiveness and a cc o u n ta b ility (p. 25). The American Association o f University Professors (AAUP) (1975) noted the economic p osition of the fa c u lty members in a report on the economic s ta tu s of the profession: "1974 was a year of severe recession accompanied by unprecedented in f la ti o n . Faculty members bore t h e i r share of the re s u ltin g economic hardships." The AAUP rep o rt sta te d t h a t i n f la tio n erased any fa c u lty gains made in regard to purchasing power. Jenny (1975) sta te d in an a r t i c l e fo r The Journal of Educa­ tio n Finance th a t Most recent stud ies on i n f la tio n in higher education support William Bowen's e a r l i e r findin gs. Bowen reported th a t the expenditure mix in higher education in s t it u t io n s is such in both nature and weighting th a t in f la tio n ra te s fo r i n s t i t u ­ tional costs exceed those t h a t prevail in the economy as a whole, (p. 27) Jenny concluded the a r t i c l e by recommending t h a t higher p r io r ity should be given to in s t it u t io n a l planning t h a t would allow fo r 25 the continuation o f experimentation, innovation, and expansion o f key d is c ip lin e s (pp. 28-33). Meeth (1974) noted the h is to ric a l re s ista n c e to planning within the higher education se c to r. The following quotation by Palola and a sso c iates concurred: " I n s t i tu t i o n s , a d m in istrato rs, and f a c u ltie s are very r e lu c ta n t planners." In a study completed by Meeth, the author examined 66 e stab ­ lished independent colleges t h a t offered baccalaureate degrees. The c o lle c tio n o f data f o r the study was accomplished through the use of surveys with follow-up c l a r i f i c a t i o n interview s. The data were d e ta ile d to the level of individual reporting of courses, the in s tr u c to r by name, c r e d i t hours generated, t u i t i o n charged fo r the course, and extensive breakdown of income and expenditure data. The author noted t h a t th e re were problems caused by lack o f complete data submission and in co n siste n t data. The data c o lle c te d were analyzed in order to determine the cost of the curriculum, cost per c r e d i t hour, and other in stru c tio n a l cost r a t i o s . C alculations were also completed to include student load and fa c u lty teaching loads. Meeth discussed the use o f the cost a n alysis f o r planning purposes. The most extensive use of the c o s t- analysis m aterial provided was the inclusion in in s t it u t io n a l longrange planning e f f o r t s (p. 100). The data were provided to various i n s t it u t io n a l audiences, including boards of t r u s t e e s , fa c u lty sen ates, and alumni. The author suggested using the data to i n i t i a t e in s titu tio n a l self-exam ination stu d ie s . 26 Meeth outlined a comprehensive planning stra te g y t h a t could be followed by i n s t i t u t i o n s . 1. 2. 3. 4. 5. The suggested steps included were: Building a data base, Data an aly sis and in te r p r e ta tio n , Cost an aly sis s tra te g y , Application o f s tra te g y , Planning stra te g y , (p. 145) The author reported the advantages and disadvantages of long-range planning, as well as suggested d a ta -c o lle c tio n forms. Meeth concluded Quality Education fo r Less Money by compiling 12 recommendations th a t were designed to reduce c o s ts , to increase e ff ic ie n c y , to increase e ffe c tiv e n e ss , and to increase in s t it u t io n a l s t a b i l i t y . 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Maintain a 1 to 5 r a t i o between part-tim e and f u ll-tim e fac u lty and s t a f f . Hire fa c u lty with f le x ib le s k i l l s . Develop a strong i n s t it u t io n a l research o f f ic e . Develop long range plans. P a r tic ip a te in cooperative e f f o r t s with other i n s t i t u t i o n s . Reduce the siz e o f the fa c u lty and the a d m inistration . Develop plans and programs fo r reducing a t t r i t i o n . Increase enrollment. Expect adm inistrators to teach. Relate budget spending to income. Change concepts of purchasing. Develop economic policy guidelines fo r the curriculum, (p. 149) Meeth recommended t h a t i n s t i t u t i o n s must increase enrollment and reduce a t t r i t i o n in order to increase in s t it u t io n a l s t a b i l i t y . A key f a c to r in attendance had h i s t o r ic a l l y been the derived and a n t i c i ­ pated b e n efits gained from a college education. A study completed in 1974 questioned the soundness o f any assumptions regarding retu rn on college investment: I t is important to recognize th a t the market turnaround o f the seventies is a far-reach ing unprecedented development of s i z ­ able dimensions. By a ll relevant measures, the economic s ta tu s of college graduates is d e te r io r a tin g , with employment prospects f o r the young declining exceptionally sharply. (Freeman & Hollomon, 1975, p. 24) 27 Freeman and Hollomon (1975) pointed out th a t the r a te o f return on the college investment f e l l s ig n if ic a n tly between 1969 and 1974. According to one s e t o f e stim ate s, the retu rn dropped from 11 to 12 percent in 1969 to 7 to 8 percent in 1974 (p. 27). The authors' analysis o f the causes of the 1970s turnaround suggested t h a t the mar­ ket development represented a major break with the p a st. The basis fo r t h i s dramatic change has been the balance o f supply and demand. Paradoxically, th ere has been an increase in the number of college graduates a t the same time as a decrease in the number of p o sition s a v aila b le fo r the graduates. The authors s ta te d t h a t the job market had a s ig n ific a n t e f f e c t on student enrollment. The e f f e c t of declining enrollment would hold d ire consequences f o r the i n s t i t u t i o n s . Lack o f growth w ill reduce the f l e x i b i l i t y of higher education to meet changing demands fo r education and research. The t r a ­ d itio n a l mode of adju stin g the mix o f fa c u lty among f i e l d s , a lte r in g the c h a r a c te r is tic s of new te a c h e rs, w ill be severely lim ited , (p. 29) Freeman and Hollomon concluded t h a t the fin an c ia l problems of higher education in a period of decline may be compounded by increases in the cost of other inputs. The pressures of both academic and non- academic costs would press the fin an c ia l s tru c tu re o f the i n s t i t u t i o n s . The financial s t a t e o f higher education was studied by Lupton, Augenblick, and Heyison and reported in the September 1976 Change magazine. The authors reviewed the fin a n c ia l condition o f 2,163 i n s t it u t io n s through a n alysis o f data provided to HEGIS. Approxi­ mately one-half o f a l l the i n s t it u t io n s were rated as fin a n c ia lly unhealthy. An important finding o f t h i s study was t h a t th ere was a 28 d ir e c t c o rre la tio n between siz e and fin ancial w ell-being. The i n s t i ­ tu tio n s with over 10,000 students as a group were in s u b s ta n tia lly b e tte r financial condition. Certain economies of scale were reportedly rea liz ed in la rg e r i n s t i t u t i o n s , p a rtic u la rly in the area of fixed c o sts. The large i n s t i t u t i o n s also had the advantage o f g re a te r financial f l e x i b i l i t y (pp. 25-26). The analysis o f the expenditure performance of various i n s t i ­ tu tio n s i l l u s t r a t e d t h a t the expenditures fo r healthy in s t it u t io n s grew a t a 50 percent r a te as compared to the expenditure growth p a t­ te rn a t the f in a n c ia lly unhealthy i n s t i t u t i o n s . The an alysis also indicated t h a t healthy i n s t i t u t i o n s increased expenditures in the areas of in s tr u c tio n , while unhealthy i n s t i t u t i o n s increased expendi­ tures in public serv ice and research. The authors also reviewed the influence of enrollment changes a t the i n s t i t u t i o n s . The findings supported the hypothesis th a t above-average enrollment increases r e f l e c t fin ancial s t a b i l i t y fo r the period 1972-1974 (p. 28). Bowen and Glenny (1976) completed a major one-year study t i t l e d S tate Budgeting fo r Higher Education: S tate Fiscal Stringency and Public Higher Education. This study reviewed the in s t it u t io n a l responses to f is c a l stringency during the year 1975. Bowen and Glenny sta te d : The procedures and c r i t e r i a fo r reducing expenditures are of immediate p ra c tic a l concern to s t a te and i n s t it u t io n a l o f f i ­ c ia ls and budget p ro fessio n als. Of more crucial importance retrenchment presents in cameo form, major problems with which higher education must grapple over the next two decades. Which academic programs w ill be given p r i o r it y in the face of f is c a l stringency or enrollment d e clin e , o r both? (p. 1) 29 The authors developed a s e t o f six questions re la te d to fis c a l stringency and retrenchment. 1. 2. 3. 4. 5. 6. The questions are as follows: What are the immediate responses to retrenchment? How s e le c tiv e can they be? Who should p a rtic ip a te in e stab lish in g procedures and s e l e c t ­ ing p r i o r i t i e s and c r i t e r i a fo r retrenchment? What impediments are th ere on the f l e x i b i l i t y required to respond to f i s c a l stringency? How can these be overcome? What special academic and support programs should receive p a rtic u la r a tte n tio n during retrenchment? What c r i t e r i a and procedures should be used f o r lay o ff of personnel during retrenchment? What are the possible longer term im plications of retren ch ­ ment? (p. 15) Bowen and Glenny responded to the f i r s t question by d i f f e r ­ e n tia tin g between immediate across-the-board cuts and the a n ticip a te d curtailm ent o f expenditures. The authors concluded from the study t h a t unexpected mid-year revenue reduction caused the i n s t it u t io n s to respond with equal across-the-board c u ts. Across-the-board cuts may be j u s t i f i e d o r unavoidable when retrenchment s t r i k e s without warning and must be implemented without delay, but there seems to be no excuse f o r making across-the-board cuts when ample warninq has been given. (p. 26) Several p o ten tial problems were noted by the authors in r e l a ­ tion to across-the-board c u ts. F i r s t , these equal cuts implied th a t a ll subordinate u n its presen tly were being equally funded. Second, d isc retio n fo r the cuts was ty p ic a lly granted to subordinate u n its ; the action taken may have caused disproportionate expenditures in l a t e r years ( P h i l li p s , 1975, p. 25). Third, across-the-board cuts generally resu lted in severe reductions in the nonpersonnel a re as. Who should p a rtic ip a te in e stab lish in g procedures and s e l e c t ­ ing p r i o r i t i e s and c r i t e r i a fo r retrenchment? This second question was answered in three summary statements by Bowen and Glenny. 30 1. 2. 3. Wide p a rtic ip a tio n is often the only means to keep people informed in a rapid ly moving s itu a tio n . Selection and a p plicatio n o f c r i t e r i a and procedures are d if f e r e n t during retrenchment than during periods o f growth. Retrenchment req uires a wider range o f people than usually p a rtic ip a te in academic programning and budgeting, (p. 27) The authors concluded from the r e s u lts of the study t h a t the p a r t i c i ­ pation of the fac u lty was a necessary ingredient in order fo r the i n s t i t u t i o n to su ccessfully respond to f is c a l stringency. The reply to the th ir d question, "What impediments are th ere on the f l e x i b i l i t y required to respond to f is c a l stringency?" was broken in to two sectio n s. The f i r s t section was a b r i e f review of the s t a t e p o lic ie s or procedures th a t lim ited the in s t it u t io n a l f l e x i ­ b ility . The authors noted from the study th a t the s t a t e agencies ra re ly interceded in the internal management decisions of an i n s t i t u ­ tio n (p. 34). The s t a t e r e s t r i c t i o n s imposed on the higher education sector are ty p ic a lly the same as those imposed on other s t a t e agencies ( e . g . , t r a v e l , expense, sa lary c o n tro ls, e t c . ) . Bowen and Glenny sta te d th a t the l e g i s l a t i v e language included in an appropriation b i l l t h a t sp ecified expenditure on a lin e -ite m basis proved r e s t r i c t i v e to the in stitu tio n . I n s titu tio n a l r u le s , re g u la tio n s, and procedures also lim ited the f l e x i b i l i t y o f an i n s t i t u t i o n 's response to fis c a l stringency. The authors concluded from the study th a t th ere was a reluctance on the p a rt o f i n s t it u t io n s to change in te rn al ru le s or reg u la tio n s. This re sistan c e was reportedly due to the concern fo r disrup tion of the normalcy of campus operations. 31 Bowen and Glenny concluded th a t F l e x ib ility i s e sse n tia l i f the response to f is c a l stringency is to be e ff e c tiv e . I f the principal actors can s e le c t t a r ­ gets fo r reduction or r e d is tr ib u te resources among programs o r campuses, o r both, higher education can remain a viable and dynamic e n te rp ris e . The mere existence of f l e x i b i l i t y will not assure i t s c re a tiv e use, but without f l e x i b i l i t y the e n te rp ris e will sta g n ate, (p. 30) The authors responded to the fourth question by explaining a paradox t h a t e x is ts . The study r e s u l ts indicated the d e sire o f i n s t i ­ tu tio n a l adm inistrators to p ro tect the experimental and innovative programs, affirm ativ e a ctio n , and programs fo r a d u lts. However, the d e sire fo r protection did not n ecessarily t r a n s la te in to in su la tin g these programs from possible reduction. Bowen and Glenny noted the importance of these innovative programs fo r the fu tu re o f higher education. The support of these programs occurred due to the r e a l l o ­ cation of e x istin g monies from other less-im portant programs. The authors noted t h a t the "protection of these programs w ill come about only through d e lib e ra te and p o sitiv e action" (p. 43). The f i f t h question was in the area t h a t had caused the most l i t i g a t i o n and refe rred to the procedures and c r i t e r i a used fo r per­ sonnel la y o ff. Bowen and Glenny sta te d t h a t personnel la y o ff was d e fin ite ly the " th o rn ie st" issue and t h a t study r e s u lts indicated t h a t there were four main aspects across the s t a t e s : procedural, programmatic, a t t i t u d i n a l , and budgetary (p. 52). The i n i t i a l response to personnel la y o ff was the discovery t h a t careful and exact procedures did not e x is t. mended the following: The authors recom­ "We do strongly urge t h a t procedures be examined and rev ised , or th a t new procedures be adopted before the 32 need fo r t h e i r use a ris e s " (p. 52). 1n re la tio n to programmatic concerns. A sim ilar finding was reported The issue o f program c u r t a i l ­ ment or discontinuance had been tre a te d as secondary 1n nature. Rather than waiting fo r events to rein fo rce the p o s s ib i l i ty t h a t retrenchment will be considered almost so le ly in terms of personnel decisio n s, higher education systems and i n s t i ­ tu tio n s should i n i t i a t e reviews of academic programs e arly enough to provide a context fo r s ta ffin g changes when the evil day of f is c a l stringency comes, (p. 54) The a tt i tu d i n a l aspect regarding personnel lay o ff was reported by Bowen and Glenny as being as important as the personnel provisions. The authors concurred with Furniss (1974), who s ta te d th a t a campus environment "low in anxiety and c o n f lic t may be a s u ita b le goal fo r retrenchment procedures" (p. 171). The key item discussed regarding budgetary concerns was the need to provide f l e x i b i l i t y . This f l e x i b i l i t y allowed the personnel adm inistrators other a lte rn a tiv e s to la y o ff s , including t r a n s f e r to other departments or reduced workload schedules to spread the reduc­ tio n . The l a s t question addressed the long-term im plications of fis c a l stringency. This study indicated th a t most periods o f f is c a l stringency had been of very short d u ratio n , with a quick recovery period following. The authors noted t h a t the curren t and projected fu tu re indicated a longer period o f f is c a l stringency. This extended period would a ff e c t s ta te - le v e l program p r i o r i t i e s , student access, student choice, and t u i t i o n p o lic ie s . The authors sta te d : Although retrenchment brings immediate responses t h a t may or may not have implications fo r the f u tu r e , the major long­ term r e s u l t , we b elieve, will be systematic change in the adm inistrative processes th a t support academic and budgetary decisions, (p. 61) 33 Bowen and Glenny concluded the rep o rt of the study by s ta tin g 11 key guidelines to be applied during a period of f is c a l stringency. The authors sta te d t h a t planning was extremely necessary to deal with the adversity caused by f is c a l stringency. The planning would include the following guidelines: 1. 2. 3. 4. 5. 6. 7. 8. 9. S electiv e as opposed to across-the-board reductions will usually be the more appropriate response, i f time i s a v a i l ­ able to implement them. Only by accident w ill proportionate cutbacks recognize the d if f e r e n t i a l needs of campuses and programs. Across-the-board reductions may be the only a l t e r n a t i v e , i f time i s not a v a ila b le or i f in s t it u t io n a l morale i s perceived to require them. I f used, such reductions should be based on to ta l annual budgets to the exten t p o ssib le , not on fund b a l­ ances a t the time o f the reductions. The happenstance o f expenditure timing should not replace e a r l i e r , more consid­ ered, judgments on r e l a t i v e needs. Fixed or r e l a t i v e l y fixed costs should be c le a r ly i d e n tif ie d , examined, and widely publicized. U t i l i t y costs and contrac­ tual sa lary commitments, fo r example, reduce the margin for programmatic response. These lim its on f l e x i b i l i t y should be e x p l i c i t l y s ta te d . Existing fa c u lty and student c o n su lta tiv e groups should be brought in to discussions as e a rly as p o ssib le . I f appropri­ a te groups do not e x i s t , ad hoc advisory committees should be e stab lish ed and kept f u lly informed. In s titu tio n a l ru le s and regulations lim itin g f i s c a l f l e x i ­ b i l i t y should be id e n tifie d and revised to assure maximum fle x ib ility . S ta te ru le s and regulations lim itin g f is c a l f l e x i b i l i t y should be id e n tifie d and appropriate changes requested to assure maximum f l e x i b i l i t y . Use of f l e x i b i l i t y by subordinate u n its should be analyzed and, i f necessary, control points should be e stab lished to assure th a t fu tu re needs in both personnel and support areas are not s a c r if ic e d to cu rre n t convenience. Procedures fo r fa c u lty la y o ff o r relo catio n should be r e ­ examined. The actual or imminent use of these procedures is lik e ly to in d ic a te m odifications t h a t had not been considered when procedures were o r ig in a lly developed. Governors and l e g is la tu r e s must in d icate e x p l i c i t l y what changes in s t a t e policy they wish to have implemented when fis c a l stringency upsets the expected and tr a d itio n a l r e l a ­ tio nsh ips among student access, program q u a lity , and s t a t e support. 34 10. 11. S ta te higher education agencies and i n s t i t u t i o n s must base budget requests on r e a l i s t i c m ulti-year f is c a l projections t h a t incorporate sp e c ific academic program p r i o r i t i e s . Governors and l e g is la tu r e s must recognize, a t l e a s t in p rin ­ c i p l e , the need fo r m ulti-year funding in higher education so th a t r e a llo c a tio n of funds can be phased over time. (p. 80) Folger (1977) sta te d in "Prospects fo r Higher Education Finance in the Next Decade" t h a t The period from 1974-1976 stands out as one in which a combina­ tio n o f rec essio n , la r g e r than expected enrollment in cre ases, and double d i g i t i n f la tio n combined to produce fis c a l d i f f i c u l t y fo r most i n s t i t u t i o n s . Higher education in s t it u t io n s also d i s ­ covered th a t t h e i r p r i o r it y f o r s t a t e funding was not as high as i t had been and th a t in a recession period, the costs o f w elfare, h e a lth , unemployment compensation and other more imme­ d ia te problems took p r i o r it y over the long range investment in education, (p. 189) The author predicted t h a t there w ill be two major trends t h a t will dram atically a ff e c t higher education. Folger projected an enrollment decline fo r the period 1975-1985 in both the public and p riv ate sec­ to rs. The second major aspect was the e ff e c t t h a t i n f la tio n would have on higher education. Double-digit in f la tio n quickly eroded any gain made by lim itin g expenditures. In an a r t i c l e fo r Newsweek, Sewall and Lee (1979) concurred with Folger on the enrollment decrease. They s ta te d , "Across the nation enrollments w ill tumble in the next ten y ears; before 1990, the population o f 18 to 24 year olds will decline by an estimated 15 percent" (p. 100). Scott (1978) s ta te d th a t federal-government regulations were another f a c to r lim itin g the in s t it u t io n a l responsiveness. He noted th a t federal support had increased fo r students and supported research but declined fo r the i n s t i t u t i o n s . The increasing federal regulations 35 were placing la rg e r burdens on the in s t it u t io n s (Finn, 1975; Hal p e rin , 1978; S c o tt, 1978). Adams (1977) c ite d s p e c ific data re la te d to federal support of higher education: Two examples i l l u s t r a t e t h i s v o l a t i l i t y of federal support in terms o f constant d o l la r , federal expenditures fo r graduate fellowships increased from roughly $35 m illion in 1960-61 to a peak of roughly $250 m illion in 1967-68, only to drop p re c ip i­ tously to $50 m illion in 1974-75. S im ila rly , federal construc­ tio n loans and grants rose from roughly $11 m illion in 1953-54 to a peak of $1,500 m illion in 1967-68, only to f a l l to $210 m illion in 1974-75. (p. 87) Adams fu rth e r sta te d t h a t The half-h earted commitment of the federal government to higher education, and curren t methods of financing i t by the s t a t e s , tend to undermine a central function of public higher education, which is to serve as an instrument o f v e rtic a l m obility in a democratic so c iety . This is esp ecially so in periods of rap id ly r is in g prices fo r t u it i o n and a u x ilia ry se rv ice s, (p. 88) At the close o f the decade there was much conern in the higher education se c to r regarding the level of funding th a t the i n s t i ­ tu tio n s were receiving as well as in the se cto r of fin an c ia l s t a b i l i t y a t the i n s t i t u t i o n s . The Three R's o f the Eighties was w ritten by Mortimer and Tierney in 1979 and examined the in s t it u t io n a l responses to the fis c a l changes th a t have occurred. case stu d ies: This study also included th ree s p e c ific the University of Michigan, the University of Pennsyl­ vania, and the Pennsylvania S tate College System. The research p ro jec t was divided in to th ree major sectio n s. The f i r s t section reviewed the projected conditions in which the in s t it u t io n s w ill be operating. The fu ture conditions included were "declining numbers of college-age youths, changing trends in 36 in s titu tio n a l revenues, i n f la ti o n r a t e s , and trends in in stru c tio n a l expenditures." The second major section o f the study reviewed the major i n s t itu tio n a l s t r a te g ie s employed "to cut expenses including reductions in growth r a t e s , reductions in the budget base, changes in stu d e n t-fa cu lty r a t i o s , internal r e a llo c a tio n s , program review, s t a f f reductions and d ism issa ls, and program discontinuance" (p. 2 ). The fin a l section summarized the rep o rt and sta te d nine recommendations based on the analysis of l ik e l y trends fo r the 1980s. The enrollment projection supported in the study by Mortimer and Tierney was i l l u s t r a t e d by the following quotation: According to the Chronicle a r t i c l e , the demographic fo re c a s t is fo r a 19 percent national decline in the number of eighteen year olds between 1980 and 1990. C a rtte r (1976) estim ates th a t the decline in the tra d itio n a l college-age cohort (18 to 21 year olds) w ill be somewhat sm aller, approximately 15 percent. Neither percentage is comforting nor i s i t temporary. I f one were to look beyond 1990, the potential pool o f college students will have declined 6 to 15 percent by the year 2000, and by 5 to 12 percent by s ta tin g th a t "we cannot expect population growth to add to the growth of college enrollments beyond what will happen over the next several y e a rs." (p. 6) The enrollment decline has not been u n iv ersally accepted. Bowen (1975) pointed out t h a t the older students would a f f e c t the decline of students from 18 to 21 years of age. The nontraditional student population p a rtic ip a tio n was d i f f i c u l t to p ro je c t. C a rtte r and Soleman (1976) pointed out t h a t i t would take approximately fiv e part-tim e students to replace one tr a d itio n a l f u ll-tim e student. It was doubtful t h a t th ere would be enough nontraditional students to o f f s e t the decline in tra d itio n a l stu dents. Student m atriculation ra te s were reported as d i f f i c u l t to p re d ic t. Mortimer and Tierney (1979) pointed out t h a t the college-age 37 m atriculation ra te s were approximately 50 percent in several s t a te s . Bowen (1975) sta te d th a t college enrollment could be doubled i f these high ra te s became a national phenomenon. According to Mortimer and Tierney, the m atricu lation trends r e fle c te d a decline in attendance, not an increase. The decline in attendance ra te s had been a ttr ib u te d to the end of the d r a f t , according to C a rtte r (1976) and to the decrease in economic incentive fo r college attendance. Freeman (1976) sta te d t h a t as the r a te o f fin an cial retu rn drops to 7 or 8 percent the students may e le c t not to attend college but instead to work. Of g rea ter concern to the individual i n s t it u t io n s than the national trend was the local attendance issu e . Population s h i f t s were occurring throughout the United S ta te s , with in-migration occur­ ring in the sunbelt region and out-migration occurring in the in d u s tria l-o rie n te d n ortheast section of the country. In i t s September 5, 1978 issu e , the "Chronicle of Higher Edu­ cation" presented a map of the s t a te s th a t expect to gain in the number o f 18 year o ld s, and s ta te s expected to lose or remain the same. (M agarrell, 1978, p. 1) College enrollment will also continue to be r e fle c te d by s t u ­ dent preference. The cu rrent trend toward sp e c ific career or voca­ tional academic areas has a lte re d the programmatic mix a t the in stitu tio n s. The i n s t it u t io n a l f l e x i b i l i t y to respond to student choice will increasingly become more important. Mortimer and Tierney referenced t h i s point and emphasized the change to job-o riented cur­ r ic u la and changing p a tte rn s of majors. ized as: This subjection was summar­ 33 Hollander (1978) supports the development of "enrollment re la te d a lte r n a tiv e s " to the present "enrollment driven" budget model; t h i s change would improve the i n s t i t u t i o n s ' chance o f p o sitiv e ly responding to the enrollment d eclin e. (p. 10) Mortimer and Tierney pointed out t h a t the i n s t i t u t i o n s were not aware of the e f f e c ts on enrollments th a t a tu it i o n increase would cause. Jenny (1967) sta te d th a t such information was d i f f i ­ c u lt to obtain due to the complex fa c to rs th a t influence college attendance. Jackson and Weatherby (1975) concluded t h a t an increase in t u it i o n costs would decrease the likelihood of college attendance. The tu it i o n and fee fa c to rs fo r the p riv ate i n s t it u t io n s were also extremely important. The higher student costs of p riv ate i n s t i t u ­ tio n s versus public i n s t i t u t i o n s were of major concern fo r presidents o f p riv a te i n s t i t u t i o n s th a t were attempting to provide a c c e s s i b il i ty . Jenny and Wynn (1970) sta te d th a t a re s u ltin g "student-aid subsidy gap c o n s titu te s one o f the f a s t e s t growing elements in an i n s t i t u ­ t i o n 's cost s tr u c tu r e ." The second revenue source fo r i n s t itu tio n a l funds enumerated by Mortimer and Tierney was the federal government. The main point of th is subsection was th a t federal-government aid to higher educa­ tio n was continuing to in crease, but a t a much slower r a t e . Cheit pointed out in The New Depression in Higher Education: A Study of Financial Conditions a t 41 Colleges and U n iv ersities th a t federal funds obligated to colleges and u n iv e r s itie s increased a t a r e l a ti v e ly rapid ra te in the e a rly and mid-1960s, only to slow p rec ip ito u sly to 2 percent per year s t a r ti n g in 1968. The increased federal regulation connected to the appropriations was also negatively a ffe c tin g the 39 i n s t i t u t i o n s , according to Roark (1978) in the a r t i c l e , "U n iv ersities Could Lose Millions in Research Pay," w ritte n f o r The Chronicle of Higher Education. S tate appropriations were id e n tifie d as the th ir d major revenue source fo r the i n s t i t u t i o n by Mortimer and Tierney. However, according to Magarrell (1978), the higher education se c to r had l o s t i t s high p r i o r it y within the s t a te budget. This s h if tin g o f s t a te p r i o r i t i e s was r e fle c te d in decreased appropriations fo r the i n s t i t u ­ tio n s . Another important fa c to r was the e a r l i e r recession in the decade of the 1970s, which had eroded much of the i n s t it u t io n a l f l e x i ­ b i l i t y fo r responding to decreased s t a t e appropriations (p. 13). The fourth revenue source id e n tifie d by Mortimer and Tierney was in the area of p riv a te g i f t s . The point was made t h a t p riv ate g i f t s flu c tu a te with the economy. In good times p riv a te g i f t s increased, and in a recession g i f t s decreased. The p riv a te g i f t s as a revenue source were also influenced by tax laws. The 5 percent w rite - o f f given to p riv a te c itiz e n s or businesses t h a t support c h a r i t ­ able organizations was the impetus fo r donations. Mortimer and Tierney pointed out t h a t any change in the tax laws could s i g n i f i ­ cantly a ff e c t th is revenue source. The f i f t h revenue source id e n tifie d in The Three R's of the E ighties: Reduction, Reallocation and Retrenchment was endowment income. The authors c l a r i f i e d two important issues regarding th is revenue source. The f i r s t important issue was the maintenance of the purchasing power o f the endowment. Without careful management and reinvestment p r a c tic e s , the value of the endowment could be 40 eroded. The second important issue concerning endowment management was the concern fo r a high r a te o f re tu rn . Magarrell and Cheit both pointed out t h a t the events of recent years had led the i n s t it u t io n s to in v est in h ig h -in te re s t bonds versus common stocks (p. 14). The fin a l source of in s t it u t io n a l revenue was id e n tifie d as other income. This source was defined by Mortimer and Tierney to include sa le s and services of education a c t i v i t i e s ( e . g . , sa les of s c i e n t i f i c and l i t e r a r y pu blicatio n s, the products o f dairy creameries, food technology d iv is io n s , and poultry farm s), the recovery of in d ire c t c o s ts , and incidental fees and r e n t­ a ls . This type o f revenue tends to be r e l a ti v e ly more impor­ t a n t fo r public and p riv ate u n iv e rs itie s than o th er types of i n s t it u t io n s prim arily because o f t h e i r research o rie n ta tio n . (P. 14) Mortimer and Tierney projected to ta l revenue needs fo r higher education by multiplying the percentage o f revenues derived from various sources times the to ta l operating revenues fo r the base year o f 1974-75. The ten-year projectio n i s i l l u s t r a t e d in Table 1 and in d icates a 6.3 percent average annual r a te of growth fo r the public u n iv e rs itie s and a 7.9 percent average annual growth r a te fo r the p riv ate i n s t i t u t i o n s . The projections of revenue included in Table 1 contain sev­ eral assumptions t h a t , i f erroneous, could s u b s ta n tia lly a f f e c t the outcomes of the p ro jec tio n s. Mortimer and Tierney c l a r i f i e d t h e i r projections with the following statement: The supplementary assumptions are imbedded in the average annual growth ra te s fo r the various sources of revenues. I t i s a t t h i s point t h a t revenue fo rec asts become extremely hazardous. For the public u n iv e rs ity , these growth r a te s were derived from recent experience (1972-73 through 1976-77) o f one such i n s t i ­ tu tio n . The growth r a t i o s fo r the p riv ate u n iv e rs itie s were, Table 1 . --Actual and projected operating revenues® o f a public and a p riv a te u n iv e rs ity f o r 1974-75 and 1984-85*> (in thousands o f d o l la r s ) . Source0 Tuition and fees Federal government S tate & local government G ifts Endowment income Other Total income Public University Average Base Projected Annual Year 1984-85 Growth (1974-75) Values Rate 15,118 23,364 47,150 2,749 740 16,587 105,708 7.8 6.4 5.2 7.4 6.4 7.5 6.3 32.039 43.447 78,278 5,613 1,376 34,169 194,992 P rivate University Average Base Projected Annual Year 1984-85 Growth Values (1974-75) Rate 19,913 19,656 2,441 5,845 3,918 12,461 64,234 9.2 8.0 4.0 6.4 6.4 7.5 7.9 48,013 42,436 3,613 10,869 7,286 25,669 137,886 ®Excludes revenues fo r c a p ita l expenditures, student a id , and a u x ilia ry e n te rp ris e s . ^Assumptions: a. The two i n s t i t u t i o n s had balanced budgets in 1974-75. Thus, to ta l revenues were s e t equal to to ta l expenditures. b. The level o f enrollment remains constant over the 1974-75--1974-75 period. cThe d is tr ib u tio n o f to ta l revenues by source was based on the percentage shown in Mortimer and Tierney, 1979, Table 1, p. 15. 42 fo r the most p a r t , borrowed from Hopkins and Massey (1977). I t should be r e i t e r a te d t h a t these growth r a te s may diverge s ig n if ic a n tly from the actual growth th a t will occur, (p. 16) A review o f the projections indicated t h a t the r a te o f growth would cause several o f the revenue sources to double during the time span. The discussion of in s t it u t io n a l expenditures was the next subsection o f the re p o rt. The authors sta te d t h a t projecting expendi­ tu re data was more r e l i a b l e than projecting revenue. The expenditures were continuing to grow a t a rapid pace. The explanation o f the growth, in in s titu tio n a l expenditures have focused on th ree fa c to r s : i n f l a t i o n , increased responsi­ b i l i t i e s , and the nature of educational technology (Bowen, 1969; Jenny & Wynn, 1970; Balderson, 1974). (p. 17) According to Mortimer and Tierney, the increase in costs fo r goods a t the i n s t it u t io n s was higher than the increase o f the consumer price index. The ra tio n a le fo r th is statement p e rta in s to the co st of specialized goods consumed by the i n s t it u t io n s versus general goods consumed by the public. Increased r e s p o n s i b i li t ie s , the second area c ite d , ty p ic a lly represent high-cost areas of s p e c ia liz a tio n . Examples given in the rep o rt were specialized high-cost research programs and graduate stu d ie s . Federally mandated programs have also increased i n s t it u t io n a l r e s p o n s ib ilitie s and c o s ts . The th ir d area id e n tifie d f o r expenditure increases was educational technology (p. 18). Mortimer and Tierney rep o rt discussed two aspects in t h i s area. The Educa­ tio n was not able to a ff e c t costs by increasing technology due to the f a c t th a t education was a la b o r-in te n siv e , not a c a p ita l- in te n s iv e , organization. 43 Costs per student increased r e l a ti v e to costs in general. The second aspect was t h a t cost e ffic ie n c y was d i f f i c u l t to achieve in a period of sta b le or declining enrollment. Cost per student increased dur­ ing a period of declining enrollment due to increasingly "fixed" labor c o sts. The authors noted t h a t the i n s t it u t io n s have responded to f is c a l stringency by c u rta ilin g expenditures in the following manner. A number of actions were taken to accomplish t h i s level o f reduction. I n s titu tio n s deferred the maintenance of t h e i r physical p la n ts , froze the s a la r ie s of fa c u lty and s t a f f , l e f t vacancies u n f i ll e d , and increased the effic ie n cy of t h e i r operations in food handling, purchasing and c la ss scheduling (C heit, 1973; Jellema, 1973). Such a c tio n s , how­ ever, represent temporary so lu tio ns to the "cost-income squeeze." Continuation of such p ra c tic e s could have adverse consequences fo r the q u a lity o f in s t it u t io n a l fa c u lty and f a c i l i t i e s (Wynn, 1974). (p. 20) The second major section of the Mortimer and Tierney study discussed i n s titu tio n a l s tr a te g ie s employed in response to financial exigency. There were six primary areas presented: reductions in growth r a t e s , reduction in budget base, in te rn a l re a llo c a tio n s , program review as resource r e a llo c a tio n , s t a f f reduction s, s t a f f dismissed, s t a f f retrenchment, and program discontinuance. Reductions in growth ra te s were mainly dependent on a reduc­ tio n o f the increases in sa la ry packages. Mortimer and Tierney stated t h a t i n s titu tio n a l expenditures are 70-80 percent salary c o sts. The reduction o f a salary increase in any given year will have a long­ term e ff e c t on the i n s t i t u t i o n 's budget. Mortimer and Tierney id e n tifie d two primary areas fo r reduc­ tio n of the budget base. The f i r s t area discussed re la te d to changes 44 in s t a f f composition a t the i n s t i t u t i o n and the discussion o f the pros and cons o f increasing the number o f part-tim e fa c u lty . McCabe and Brezner (1978) sta te d t h a t increased employment of part-tim e fac u lty may o f f e r some cost savings, since part-tim e fac u lty received lower stipends and often received few, i f any, frin g e b e n e fits . Mortimer and Tierney quoted Ernst and McFarlane (1978) on the cons of part-tim e fa c u lty employment: Part-tim ers may not be as fa m ilia r with the c o lle g e 's m issions, philosophies, and academic p o lic ie s . I t i s d i f f i c u l t to meld part-tim e and f u ll- tim e fa c u lty into a cohesive college f a c u lty , e sp e c ia lly i f m ultiple locatio ns are involved. I t also i s quite d i f f i c u l t to coordinate course content, develop uniform standards of student performance, and e s ta b lis h con tin u ity o f in stru c tio n when part-tim e fa c u lty are used excessively, (p. 27) Mortimer and Tierney sta te d t h a t o ther techniques fo r changing s t a f f composition re ly on the promotion and tenure p o lic ie s . I n s titu tio n s have used a v a rie ty o f techniques, including extending pre-tenure period, increasing the proportion of nontenured position s to tenured p o sitio n s , and e sta b lis h in g e arly retirem ent programs. The second area discussed fo r reduction o f the budget base re la te d to changing s tu d e n t-fa c u ity r a t i o s . Mortimer and Tierney id e n tifie d three ways to increase the stu d e n t-fa c u lty r a t i o . "F irst, increase the number o f students and hold the number of fa c u lty con­ s t a n t, second reduce the number o f fa c u lty and hold student numbers constant or t h i r d , a combination o f the two" (p. 28). Mortimer and Tierney sta te d t h a t the i n s t it u t io n s appear to be responding to the fin an cial stringency through increased use o f re a llo c a tio n o f in te rn al resources. Pennsylvania S tate University 45 reported the response to the revenue-expenditure gap as reductions in the expenditure base due to intern al budget r e a llo c a tio n s . A fiv e -y e a r planning and budget process was begun in 1977 to guide budgetary decisions a t Penn S tate. These plans a re based on income and expense projections fo r the period. Each college and adm in istrativ e u n it on the campus plans on the basis of budget ta r g e ts th a t a re assigned by central adm inistration. (p. 29) Mortimer and Tierney reported th a t the University of Michigan was w illin g to provide in sig h t into the internal-management process regarding re a llo c a tio n . Harold T. Shapiro, then the Vice-President fo r Academic A f fa irs , provided c l a r i f i c a t i o n regarding i n s t it u t io n a l procedures. In h is a r t i c l e , "Resource Planning and F l e x ib i l it y ," Shapiro explores some o f the meanings and uses of fis c a l f l e x i b i l i t y and some o f the re la tio n s h ip s between resource planning and resource f l e x i b i l i t y a t The University o f Michigan. He rep o rts t h a t since 1969-70, th ere have been several reductions in the base operating budget, some imposed by the s t a te in the form of s h o r t f a l l s in expected s t a t e appropriations and others s e l f imposed to meet perceived p r i o r it y o b je c tiv e s. These reduc­ tio n s varied from one-third o f 1 percent to 3 percent o f the to ta l annual base operating budget. For the most p a r t , the self-imposed c o ntractions o f the budget re su lte d in what he c h ara c te riz e s as temporary and ad hoc measures. While in the decade of the s i x t i e s th ere had been considerable d isc re tio n a ry f l e x i b i l i t y b u i l t in to the budget, t h i s f l e x i b i l i t y had dimin­ ished to p r a c t ic a l l y zero in the sev en ties, (p. 30) In regard to f l e x i b i l i t y in re a llo c a tio n s , Shapiro sta te d t h a t fin an c ia l f l e x i b i l i t y is no more than the conventional and prudent p ra c tic e o f maintaining s u f f ic ie n t financial l iq u i d i ty so t h a t i f revenues f a l l o r expenditures increase unexpectedly, monies can be found to f i l l the gap. That gives the organiza­ tio n time to a d ju s t; i t avoids c r i s i s management and sudden d isru p tio n in operations which might cause permanent and i r r e p ­ arab le damage, since f o r most i n s t it u t io n s real growth as a source o f f l e x i b i l i t y will no longer be the case. (p. 21) The in te r n a l- r e a llo c a tio n plan a t the University o f Michigan was c a lle d the " P r io r ity Fund" and consisted o f a continual re a llo c a tio n 46 process. The " P rio rity Fund" represented 1 percent o f each u n i t 's funding returned to the i n s t i t u t i o n to e s ta b lis h a central fund. The un its requested increased funding to e s ta b lis h new programs, equipment improvement, or program adjustment. This p r i o r it y fund had also a lte re d the approach to the budget-planning cycle. Mortimer and Tierney sta te d t h a t the budget cycle had changed to r e f l e c t a planning mode versus an a f t e r - t h e - f a c t reporting of expenditures. In the 1975 Carnegie Report t i t l e d More Than S urvival, the foundation recommended the establishm ent o f an i n s t itu tio n a l self-renewal fund of from 1 to 3 percent annually. This fund would increase the f l e x i b i l i t y of i n s t i ­ tu tio n a l response and allow fo r newer and expanded programs to be implemented. Mortimer and Tierney pointed out t h a t program review was increasing in use as a tool to re a llo c a te resources. Lee and Bowen (1971) indicated t h a t program review was used to e s ta b lis h the need f o r new o r expanded programs, not fo r the rev erse. The authors c ite d additional stu d ies in d icatin g t h a t program review was becoming a more intense a c t i v i t y on campuses throughout the United S ta te s. In the 1978 rep o rt by Barak and Berdahl t i t l e d "State-Level Academic Program Review in Higher Education," the following trend was reported: In 1960 th ere were 16 s ta te - le v e l governing boards, and in 1975 th ere were 19 governing boards a ll o f which had p o ten tial pro­ gram review a u th o rity . In 1960 th ere were 8 s ta te - le v e l coor­ dinating agencies, 3 with program approval a u th o rity and 4 with au th o rity to recommend. In 1978 there were 28 coordinating agencies of which 20 had program review and 8 had a u th o rity to recommend approval, (p. 32) As noted by the a u thors, the area of program review had increased in frequency o f use and also depth of a n a ly sis. A 47 decision-making process by Mortimer and McConnell was c ite d as a recommended in s titu tio n a l process th a t could improve in s titu tio n a l responsiveness. 1. 2. 3. 4. 5. 6. The process and c r i t e r i a must themselves be th e su b je ct of e a rly c o n su ltatio n before a lte rn a tiv e s become r i g id if ie d . The procedures should be jo in tly formulated by both fa c u lty and a d m in istrato rs. Where p o ssib le , th e re must be adequate time to conduct reviews. The inform ation must be fre e ly a v a ila b le to a ll persons concerned with the review. Those who would r e s t r i c t the fre e flow o f inform ation should bear the re s p o n s ib ility fo r ju s tify in g th e r e s tr ic tio n . Once reviews have been conducted, th ere should be adequate feedback concerning the r e s u lts . Any decisions reached should be communicated w idely, (p. 35) S ta ff red u c tio n s, d ism issa ls, and retrenchment was th e next area presented by Mortimer and Tierney. There was su b sta n tia l evidence to support the notion th a t s t a f f retrenchment was widely supported as an in s titu tio n a l option used to respond to fin an cial d if f ic u lty . The authors c ite d a study on s ta ff-re d u c tio n p o lic ie s by Sprenger and Schultz as im portant evidence to in d ic a te the implementation of s t a f f reduction procedures. The study included 163 in s titu tio n s from 14 d iffe re n t s ta te s ; th e data i ll u s t r a te d th a t 74 percent o f the p riv a te fo ur-year in s titu tio n s and 66 percent of the public fo ur-year i n s t i t u ­ tio n s had undergone o r were c u rre n tly in the process o f s t a f f reduc­ tio n s fo r the years 1970-1973. A quotation from the rep o rt enumerated the increases in s t a f f reduction: The number o f fu ll-tim e s t a f f who were a ffected by reduction increased s u b s ta n tia lly each year fo r the th ree -y ea r p erio d , increasing from a to ta l of 178 in 1972-72 to 259 in 1972-73 and to 517 in 1973. That rep resen ts an increase over 291 percent in th re e y e a rs, (p. 22) 48 Following is a rank order of the reasons fo r s t a f f reductions reported in th e Sprenger and Schultz study: 1. 2. 3. 4. 5. 6. Decreased enrollm ent Increased operating costs Reduced s ta te funds Decreased federal funds Decreased co n trib u tio n s Decreased foundation grants Fifty-tw o of the 91 in s titu tio n s reported th a t an enrollm ent decrease was the primary reason fo r s t a f f reductions. Sprenger and Schultz also reported the methods o f reducing s t a f f and ranked them in order of frequency. 1. 2. 3. 4. 5. 6. 7. 8. Commonly used methods were lis te d as Not f i l l i n g vacancies—277 Terminating non-tenured f a c u lty --201 Terminating p art-tim e fa c u lty —125 Terminating teaching a s s is ta n ts —118 Early retirem en t—51 S en io rity o f tenured fa c u lty —48 Reassignment—35 Performance—34 (p. 36) The area of program discontinuance in a time of d eclining resources was the l a s t issue discussed by Mortimer and Tierney in the second sectio n of th e study. The authors sta te d th a t the d isco n tin u ­ ance of academic programs was an "almost in e v ita b le outcome of budget gaps." The authors also sta te d th a t th ere are su b sta n tia l problems th a t must be overcome in order to e ffe c t change. The authors c ite d a 1978 study by Davis and Dougherty th a t id e n tifie d six b a rrie rs to program closure: 1. 2. 3. 4. 5. 6. Lack of data base to in te rp re t c r i t e r i a Time consuming involvement of academic o f f ic e s , dean, and fa c u lty members Emotionalism and re s u ltin g decreased o b je c tiv ity D istru st by fa c u lty due to lack of c o n su lta tiv e processes Ambivalence over making decisions P o litic a l clim ate—public versus p riv a te in s titu tio n s w ill vary on th is (p. 45) 49 Program closure was tie d d ire c tly to the question of fa c u lty term ina­ tio n or reassignm ent. Both areas were of primary concern fo r the academic adm in istratio n s a t the in s titu tio n s . The fin a l sectio n o f th is rep o rt consisted of nine summary statem ents based on the an aly sis of the reported d a ta . Mortimer and Tierney concluded th a t: 1. 2. 3. 4. 5. 6. 7. 8. 9. National discussion of demographic focuses too s im p lis tic a lly on declin e in th e numbers o f c o lleg e age youth w ithout concomi ta n t a tte n tio n to the d iffe re n t sectio n al and regional growth s t a t i s t i c s and the su p erio r com petitive p o sitio n o f c e rta in types of i n s titu tio n s . Concentration on the projected decline in enrollm ents d iv e rts a tte n tio n from the continuing "cost-income squeeze" faced by most i n s titu tio n s . There is l i t t l e f l e x i b i l i t y in most in s titu tio n a l budgets because colleges have been ad ju stin g to the cost-income squeeze since the e a rly 1970's. There is a need to clean up some of the terminology re la te d to what c o n s titu te s le g itim a te bases fo r reducing the size of s t a f f or clo sin g programs. P attern s of fa c u lty -a d m in istra tiv e in te ra c tio n w ill undergo severe s tre s s when considering red u ctio n s, re a llo c a tio n s , and retrenchm ents. There is no way to fre e ad m in istrato rs from the n ecessity o f hard decisions in th e area of red u ctio n s, re a llo c a tio n s , and retrenchm ents. I t is d i f f i c u l t to overestim ate th e need fo r s tra te g ie s th a t w ill increase in s titu tio n a l f l e x i b i l i t y . In s titu tio n s must s tr iv e to develop a c o n siste n t philosophy th a t synthesizes stra te g y fo r th e 1980's. Within these environmental c o n s tra in ts , th e in s titu tio n must adopt goals with operational meaning, (p. 55) Michigan in the 1970s Data Base The data base used fo r th is section is a computerized systemwide information network. In 1974-75 the Department o f Management and Budget, S ta te o f Michigan, in s titu te d a computerized data system fo r th e public four-year in s titu tio n s . Since th a t i n i t i a l y e ar, 50 numerous data items have been added to o r d eleted from the data base. The cu rre n t data base c o n sists o f data entered via remote term inals by the in s titu tio n s in adherence to c o n siste n t d e fin itio n s and in s tru c ­ tio n s issued by th e S ta te o f Michigan. The system was designed to aid in the com pilation o f in s titu tio n a l and systemwide data th a t would enable in te re s te d p a rtie s to perform in s titu tio n a l a n a ly sis. Data Review This sectio n c o n sists o f th ree main aspects of Michigan higher education. The aspects to be reviewed are enrollm ent tre n d s , expen­ d itu re tre n d s , and revenue tre n d s. Michigan higher education has followed the same general enrollm ent p a tte rn as th a t found throughout the United S ta te s . Table 2 contains actual enrollm ent data fo r th e years 1970-71 to 1978-79. A review o f the data i l l u s t r a t e s the flu c tu a tio n in the actual Michigan higher education enrollm ent p a tte rn . The f i r s t h a lf of th e decade can be c h aracterized as a growth period with f i s c a l year equated students increasing 7.3 percent between the years 1970-71 and 1975-76. Since 1975-76 th e re has been a su b sta n tia l decrease in f is c a l- y e a r equated stu d e n ts, a decrease of 6 percent. The Michigan elementary and secondary school systems have already experienced th e declin e in student numbers. This trend is a n tic ip a te d to a ff e c t the in s titu tio n s of higher education in the decade of the 1980s. Many elementary schools have been clo sed , with teaching personnel term inated. The enrollm ent decline due d ir e c tly to b irth has not y e t a ffe cte d Michigan higher education, y e t the Table 2 .—F isca l-y e ar equated students by i n s titu tio n and f is c a l y e ar: 1970-71 through 1978-79. In s t. 1970-71 1971-72 1972-73 1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 CMU EMU FSC GVSC LSSC MSU MTU NMU OU SVSC UMAA UMD UMF WSU UMU 14,676 18,084 9,551 3,241 1,403 41,253 5,313 7,723 6,643 1,503 36,093 835 1,573 28,666 22,834 14,996 18,396 9,645 4,041 1,449 41,124 5,426 7,761 6,981 1,658 35,516 1,400 1,820 28,942 21,867 14,736 17,027 9,537 4,874 1,640 40,349 5,491 7,414 7,403 1,695 36,221 1,837 2,077 26,715 20,806 14,651 16,151 9,377 5,410 1,672 40,623 5,373 7,498 8,241 1,717 36,744 2,506 2,447 26,871 20,267 14,962 16,214 10,161 6,071 1,788 42,380 5,943 7,624 8,537 2,027 37,471 3,301 2,554 28,397 20,181 15,827 16,131 10,230 6,480 1,985 42,839 6,416 7,975 8,612 2,409 37,469 3,858 2,739 30,819 20,127 15,712 15,136 10,347 6,146 2,116 41,096 6,804 8,055 8,493 2,396 36,658 4,180 2,730 27,780 19,635 15,883 14,506 10,377 5,849 1,997 40,730 7,297 8,043 8,825 2,420 35,613 4,242 2,716 26,215 19,182 15,771 13,712 10,721 5,445 2,023 40,201 7,638 7,804 8,873 2,531 35,197 4,472 2,742 24,381 18,907 199,391 201,022 197,822 199,548 207,611 213,916 207,284 203,895 201,418 Total Source: Bureau o f th e Budget, Operating Budget Requests—Appendix A, Final fo r Respective Year. 52 system has declined over 12,000 f is c a l- y e a r equated students since th e peak year of 1975-76. I t should be noted th a t 1975-76 may, in f a c t, be an a r t i f i c i a l l y high year due to the s t a t e 's economy. In 1974, o il embargo and auto rec essio n , which s ta rte d in f is c a l year 1974-75 and continued in to 1975-76, d ire c tly a ffe c te d enrollm ent a t the in s titu tio n s . In times of economic turmoil and increasing unemployment, th e re h is to r ic a lly has been a one-year enrollm ent surge. The end o f th e recession and the increase in the number o f employment o p p o rtu n ities usu ally sig n a ls the resp ectiv e declin e in student e n ro ll­ ment. This scenario held tru e fo r the Michigan experience in th e years 1974 through 1976. Another im portant fa c to r to consider is th a t enrollm ent changes have not occurred equally across academic subprograms. Table 3 con­ s i s t s o f stu dent c re d it hour production by academic subprogram fo r the years 1974-75 to 1978-79. Table 4 is the c a lcu late d rank change by academic subprogram between the years 1974-75 and 1978-79. Table 4 supports the hypothesis th a t th ere has been a s ig n ific a n t s h i f t in stu d ent enrollm ent from the tr a d itio n a lly c la s s if ie d lib e ra l a r ts curriculum toward th e hard sciences and sp e c ific te c h n ic a l-c a re e ro riented curriculum s. The academic d is c ip lin e s o f Business and Com­ merce Technology and Computer and Information Sciences have incurred the g re a te s t in c re ases—171 percent and 90 p ercen t, re s p e c tiv e ly . The d isc ip lin e s of Education and Library Science have received th e la rg e s t decreases in student enrollm ent—23 percent and 30 p erc en t, respec­ tiv e ly . 53 T able 3 . --T o ta l Michigan h ig h e r ed u c a tio n s tu d e n t c r e d i t h o u rs. Program 1974-75 1975-76 1976-77 1977-78 1978-79 T otal S tu d en t T otal S tu d en t T otal S tu d en t T o tal S tu d en t T otal S tu d en t A gric and Nat Resources 83,524 91,770 89,416 85,829 81,468 A rc h ite c t and E nvir Des 22,662 23,475 21,962 23,922 22,531 7,368 7,922 7,744 8,094 8,302 B io lo g ic a l S ciences 297,077 300,387 270,211 264,058 241,054 B usiness and Management 464,552 509,801 547,960 596,377 627,880 64,638 65,787 67,110 63,120 72,297 Area S tu d ie s Communications Computer and In fo Sci E ducation 35,657 37,995 39,410 46,197 67,807 813,568 832,087 768,293 705,111 625,892 E ngineering 197,442 210,408 226,557 241 ,038 259,685 F ine and A pplied A rts 280,265 285,634 264,386 262,906 256,492 F oreign Languages 152,633 154,698 143,247 142,621 140,058 74,627 78,541 78,115 74,987 75,513 Home Economics Law L e tte r s L ib ra ry S cience 58,061 58,955 56,753 57,574 57,211 652,812 667,173 635,281 625,087 612,189 21,403 19,670 16,733 15,305 14,811 367,731 389,025 390,288 402,699 397,531 3,881 4 ,035 4,315 4,449 4,141 P hy sical S ciences 385,386 403,043 389,017 376,566 373,828 Psychology 302,918 307,754 292,052 281,777 286,802 M athem atics M ilita ry S cience 99,815 104,085 100,712 106,916 121,005 S o cia l S cien ces 966,584 994,892 924,466 882,829 130,296 I n t e r d i s c i p l i n a r y Stud 202,864 178,883 194,757 170,995 157,382 10,196 10,829 11,451 10,031 27,446 P u b lic A f f a ir s and Servs B usiness & Commerce Tech 0 O 141 201 H ealth & Paramed Tech 21,850 24,398 24,561 22,134 22,063 Mech & E n gineering Tech 70,124 87,664 93,760 95,686 95,530 2,736 4 ,716 6,468 7,669 4,907 0 O 0 3,232 Data P ro c e ssin g Tech N atural S ciences Tech P u b lic S e rv ic e Technology 0 O 0 0 23,101 23,971 25,810 M edicine 225,372 229,880 215,612 214,949 216,961 D e n tis try 32,006 32,658 33,509 33.138 31,445 P u b lic H ealth 24,207 25,344 23,172 19,919 20,137 Pharmacy 35,956 36,155 31,015 30,120 30,613 Nursing 52,150 4 9,000 51,939 59,026 62,617 V e te rin a ry M edicine 26,301 25,245 24,056 23,209 24,997 O ther H ealth P ro fe ss io n s 35,651 44,006 47,074 46,285 50,673 0 420 1,196 2,091 3,243 6 ,0 92,017 6 ,2 9 6 ,3 3 5 6 ,1 1 5 ,6 9 9 6 ,0 26,826 5 ,9 54,050 O ste o p ath ic M edicine Optometry Program t o t a l 54 Table 4 .—Total Michigan student c re d it hour rank change. Program Business & Commerce Tech Computer and Info Sci Natural Sciences Tech Other Health Professions Mech & Engineering Tech Business and Management Engineering Public A ffa irs and Servs Nursing Area Studies Communications Mathematics M ilitary Science Home Economics Health & Paramed Tech A rchitect and Envir Des Law Denti s try Agric and Nat Resources Physical Sciences Medicine V eterinary Medicine Psychology L etters Foreign Languages Fine and Applied Arts Social Sciences Pharmacy Public Health Biological Sciences In te rd is c ip lin a ry Stud Education Library Science 1974-75 to 1978-79 170.87 90.42 82.36 42.25 36.28 35.17 31.54 21.25 20.11 12.85 11.87 8.11 6.08 1.19 0.98 -0.58 -1.47 -1.76 -2.46 -3.00 -3.73 -4.98 -5.32 -6.22 -8.24 -8.49 -14.10 -14.90 -16.88 -18.86 -22.43 -23.07 -30.94 The unequal increases and decreases in student enrollm ent w ithin academic subprograms increased the i n f le x ib i l i ty of i n s t i t u ­ tio n a l budgets attem pting to respond to changing student in te r e s ts . I t was d i f f i c u l t to move tenured fa c u lty from such diverse academic programs even with re tra in in g programs. A review o f Table 5 presents 55 fu ll-tim e fa c u lty numbers fo r the to ta l Michigan four-year public system. The fa c u lty changes, even though only th ree years o f computer­ ized data e x is t, m irror the changes recorded in the c re d it hour pro­ duction by academic subprograms. A key fa c to r th a t must be considered concerning the enrollm ent s itu a tio n is the changing student c h a r a c te r is tic s . The decrease in fis c a l year equated students a t the four-year in s titu tio n s occurred a t th e same time th a t the headcount enrollm ent increased a t the i n s t i ­ tu tio n s . A p a ra lle l does e x is t between fis c a l year equated students and headcount fig u res in th a t both increased u n til fis c a l year 1975-76. However, unlike th e fis c a l year stu d e n ts, headcount fig u re s have not continued to d e clin e . Table 6 represents the Michigan public four- year in s titu tio n s headcount trend data. Table 7 rep resen ts the calcu ­ la te d f is c a l year equated students per headcount. A review of data in Table 7 is supported by the explanation th a t the data r e f le c t decreasing fu ll-tim e student attendance and increased p art-tim e student attendance. Several reasons are reported fo r th is s itu a tio n . F irs t, students were e le c tin g to respond to increased co sts by taking fewer courses each term , thus decreasing c o st per term and increasing length o f time in co lleg e. Second, the students were o ld e r, with employment and other outside r e s p o n s ib ilitie s . This change increased the in s titu tio n a l co sts fo r supportive serv ices due to increased numbers of students generating fewer c re d its per stu d en t. This trend was expected to continue, causing g re a te r e ffe c t on in s titu tio n a l programs and budgets. 56 Table 5 .—Michigan higher education fu ll-tim e fa c u lty . Program Agric and Nat Resources A rchitect and Envir Des Area Studies B iological Sciences Business and Management Communications Computer and Info Sci Education Engineering Fine and Applied Arts Foreign Languages Home Economics Law L etters Library Science Mathematics M ilitary Science Physical Sciences Psychology Public A ffairs and Servs Social Sciences In te rd is c ip lin a ry Stud Business & Commerce Tech Data Processing Tech Health & Paramed Tech Mech & Engineering Tech Natural Sciences Tech Public Service Technology Osteopathic Medicine Medicine D entistry Public Health Pharmacy Nursing V eterinary Medicine Other Health Professions Optometry In stru c tio n to ta l 1977-78 1978-79 FT Faculty FT Faculty 282 24 0 428 557 76 45 1,101 547 594 308 119 90 916 34 436 0 599 290 170 1,075 199 20 0 54 190 16 0 0 0 0 99 64 297 30 87 9 9,053 289 29 0 440 616 87 47 1,088 568 597 307 140 87 934 36 476 0 583 287 189 1,082 182 22 0 49 196 24 0 0 0 0 104 61 300 49 98 13 9,292 1979-80 FT Faculty Change 1977-78 to 1979-80 278 30 0 439 657 63 63 994 570 604 303 131 89 899 36 466 0 567 293 200 1,039 170 37 0 54 203 25 3 0 0 -0.014 0.250 0.000 0.027 0.180 0.393 0.393 -0.097 0.041 0.016 -0.015 0.103 -0.017 -0.018 0.059 0.069 0.000 -0.053 0.009 0.176 -0.033 -0.145 0.850 0.000 -0.007 0.068 0.580 0 0.000 0.000 0.000 0.000 104 62 298 39 106 17 0.051 -0.031 0.004 0.300 0.220 0.889 9,178 0.014 Table 6 . —M ichigan h ig h e r e d uca tio n f a l l headcount. 1974-75 Fall Headcount 1975-76 Fall Headcount 1976-77 Fall Headcount 16,354 20,424 17,745 20,373 17,690 19,265 9,264 6,677 2,064 9,460 7,340 2,371 Michigan S ta te Univ. Michigan Tech. Univ. 46,831 5,366 48,670 5,958 9,934 7,540 2,457 46,921 Northern Michigan Univ. Oakland U niversity 8,848 10,216 2,638 9,548 10,526 3,232 9,287 10,457 3,322 U niversity o f Michigan U o f M—Dearborn Campus U o f M—F lin t Campus Wayne S ta te U niversity 36,895 37,273 4,858 Western Michigan Univ. 22,846 3,474 38,073 23,279 36,648 5,275 3,685 34,818 22,973 230,606 242,180 236,659 Col 1ege Central Michigan Univ. Eastern Michigan Univ. F e rris S ta te College Grand Valley S ta te C oll. Lake Superior S ta te C oll. Saginaw Valley S ta te C oll. Colleges to ta l 4,298 3,179 34,706 6,387 1977-78 Fall Headcount 1978-79 Fall Headcount 17,886 19,333 9,965 7,469 2,261 47,034 17,701 18,751 10,208 7,065 2,401 46,338 6,807 9,368 11,051 3,529 7,130 9,400 11,220 3,706 36,510 5,480 36,359 5,957 3,801 34,389 22,497 3,921 33,524 22,272 237,380 235,953 Table 7 .—Fiscal year equated student per headcount. Col 1ege 1974-75 1975-76 1976-77 1977-78 1978-79 0.91 0.79 1.10 0.89 0.79 1.08 0.89 0.89 0.75 1.04 Grand Val1ey S ta te Col1. Lake Superior S tate C oll. Michigan S ta te Univ. 0.91 0.88 0.89 0.73 1.05 0.77 0.87 0.90 Michigan Tech. Univ. 1.11 0.86 0.84 0.84 0.88 1.08 Central Michigan Univ. Eastern Michigan Univ. F e rris S ta te College Northern Michigan Univ. Oakland U niversity Saginaw Valley S tate C oll. U niversity o f Michigan U o f M—Dearborn Campus U o f M—F lin t Campus Wayne S ta te U niversity Western Michigan Univ. Colleges to ta l 0.79 1.04 0.78 0.82 0.86 0.88 0.89 0.87 1.07 1.07 0.84 0.87 1.07 0.84 0.82 0.87 0.81 0.86 0.80 0.83 0.79 0.77 1.02 0.75 0.72 0.69 0.68 1.01 0.98 0.97 0.77 0.80 0.79 0.79 1.00 0.79 0.74 0.77 0.71 0.75 0.82 0.88 0.81 0.86 0.80 0.85 0.76 0.85 0.76 0.85 0.90 0.88 0.88 0.86 0.85 0.70 59 Expenditures were th e second main area of Michigan data to be reviewed. Expenditures of Michigan s ta te government fo r a ll purposes increased by 191 percent from 1970 to 1979, and by 51 percent a f t e r a d ju stin g fo r population and p ric e changes. The increase may have re s u lte d from new a c t iv i t ie s in q u a lity o f serv ices o r in e ffic ie n c y , o r a combination o f these fa c to rs . I t was d i f f i c u l t to measure changes in q u a lity and e ffic ie n c y in s ta te o p eratio n . I t was a lso d i f f i c u l t to d istin g u ish q u a n tita tiv e ly between new and expanded a c t i v i t i e s . I f i t was assumed th a t q u a lity and e ffic ie n c y did not m a te ria lly change from 1970 to 1979, the increase in expenditure could be a ttrib u te d to new and expanded a c t i v i t i e s , both of which were governmental responses to problems a ris in g from changes in technology and so c ie ta l values. There were nine major c ateg o ries o f s ta te government a c t i v i ­ tie s . Between 1970 and 1979, four experienced expenditure increases in excess o f population and p rice increases (General Government, Health and W elfare, Safety and C orrection, and R egulatory); four experienced expenditure increases le s s than population and p rice increases (Education, Conservation and R ecreation, T ran sp o rtatio n , and G rants); and one area experienced an in crease equal to population and p rice increases (Mental H ealth). The major category exceeding population and p rice increases was Health and W elfare—66 percent— and the major area category below population and p rice increases was Education—34 percent. While th ere may be numerous reasons fo r th is phenomenon, several suggested reasons include th e rapid expansion o f Medicaid programs, g reater-than-average p rice increases in medical c a re , 60 g reater-than-average population increases among the aged, and le s s than-average population increases among the younger population. Table 8 contains data on s ta te expenditures fo r higher edu­ catio n as a percentage o f the to ta l s ta te general fund/general purpose expenditures. From 1968-69 to 1979-80, the percentage of s ta te expenditures fo r the public fo ur-year in s titu tio n s dropped from 17.8 percent to 13.7 percent. This 4.1 percent drop had a s ig n ific a n t e ff e c t on the in s titu tio n s and the programs offered a t the i n s t i t u ­ tio n s . Table 9 presents expenditure data by major program a t the in s titu tio n s . The beginning year fo r these data is 1975-76 due to th e in c o n siste n t rep o rtin g o f expenditure data before th a t tim e. The major program a re a , research , has received the highest increase in expenditures—60 percent; in stru c tio n has received only a 42 percent in crease. The area o f p lan t operation and maintenance has ex p eri­ enced a 54 percent in cre ase, due prim arily to th e in fla te d energy c o sts. The in s titu tio n s are c u rre n tly using fewer u n its of fuel than in 1975-76, but the in fla te d costs have more than compensated fo r the decrease in u n its used. Table 10 presents data re la tin g expenditures to f is c a l year equated students in both in fla te d and real d o lla rs . The s ig n ific a n t fa c ts on th is ta b le are th a t in constant d o lla rs (d efla te d by p rice index) both gross expenditures and s ta te appropriations per fis c a l year equated student declined a f te r 1973-74 and did not regain the 1973-74 level u n til 1978-79. This economic v alley was a re fle c tio n o f the s t a t e 's economic recession in 1974-75 and 1975-76, coupled Table 8 . —S ta te expenditures fo r higher education as percentage o f to ta l s ta te general fund/general purpose expenditures excluding c a p ita l o u tla y . j t i QPQP Year Total Higher _____ Education Expends. (M illions) Expends. (M illions) 1968-69 1969-70 $1 ,269.3 1,490.4 263.2 306.4 20.7 20.6 1970-71 1971-72 1,739.8 1,971.1 1972-73 2,283.7 336.4 370.8 425.4 1973-74 1974-75 2,497.7 2,729.2 1975-76 1976-77 1977-78 3,546.6 3,263.2 3,747.0 4,237.1 4,600.4 1978-79 1979-80 Perrpn t Percent S ta te 4-Year In s titu tio n s Expends. (M illions) Percent Percent Community Colleges Expends. (M illions) 19.3 18.8 226.4 253.1 280.6 307.4 17.8 17.0 16.1 15.6 18.6 353.0 15.5 475.0 522.3 683.6 19.0 19.1 19.3 391.5 422.6 591.2 657.5 18.1 17.5 544.3 464.5 15.7 15.5 15.3 14.2 516.9 13.8 100.7 110.1 731.8 803.4 17.3 17.6 576.6 630.0 13.6 13.7 121.9 134.6 Pprc«n t Percent 26.4 41.0 43.4 49.9 58.6 2.1 2.8 2.5 2.5 2.6 66.6 78.2 2.7 2.9 3.2 111.8 3.1 2.9 2.9 2.9 Table 9 . —Michigan higher education to ta l general fund expenditures by reporting program. 1975-76 T otal 1976-77 1977-78 1978-79 1979-80 % In c 75-76 to 79-80 T o tal Gen Fund Expends T o tal Gen Fund Expends T otal Gen Fund Expends T otal Gen Fund Expends T o tal Gen Fund Expends $314,926,422 $336,113,312 $369,078,375 $407,799,142 $448,542,974 0.424 R esearch t o t a l 22,478,101 21 ,5 2 1 ,7 1 9 26 ,4 3 2 ,6 5 3 33,275,733 3 5 ,843,853 0.595 P u b lic s e r v ic e t o t a l 2 1 ,855,914 23,492,911 2 3 ,995,840 2 5 ,399,180 3 0 ,967,735 0.417 Academic su p p o rt 7 7 ,110,547 8 3 ,469,182 88 ,2 4 4 ,5 1 5 9 7 ,799,738 107,372,323 0.392 S tu d en t s e r v ic e s t o t a l 46 ,9 0 6 ,0 8 2 4 6 ,4 2 9 ,8 1 0 50,060,273 4 7 ,8 1 6 ,5 7 0 52,274,857 0.114 I n s t i t u t i o n supp t o t a l 6 4 ,4 7 6 ,4 6 9 6 8 ,4 6 7 ,9 8 0 75,543,114 8 5 ,0 9 7 ,0 6 5 9 4 ,480,696 0.465 P la n t o p e r & main t o t a l 75,960,737 8 5 ,862,883 9 4 ,936,146 108,300,277 117,035,931 0.541 F in a n c ia l a id t o t a l 28,258,196 2 6 ,342,159 28,462,821 29,702,635 33,464,082 0.184 Auxil e n t e r p r i s e s t o t a l 14,685,106 16,044,176 17,412,152 11,532,751 11,785,342 -0 .1 9 7 Mandatory t r a n s f e r t o t a l 9 ,9 4 6 ,0 4 2 11,227,766 10,305,585 9 ,3 9 4 ,1 3 4 7 ,9 5 7 ,9 1 2 -0 .2 0 0 $676,603,616 $718,971,898 $784,471,474 $856,117,225 $939,725,705 0 .389 I n s tr u c tio n t o t a l T otal Table 1 0 .— Expenditures f o r s ta te c o lle g e s and u n iv e r s it ie s , 1968-69 to 1980-81. Higher Gross Education Expend. P rice Per FYES Index Gross Exp. Per FYES in Constant $ 's S ta te Approp. (000) 113.2 $1,750 $226,445 $1,252 $1,106 2,108 121.0 1,742 253,056 1,322 1,093 199,392 2,232 128.6 1,736 280,605 1,407 1,094 486,515 201,022 2,402 135.8 1,768 307,408 1,529 1,125 1972-73 531,011 197,841 2,684 143.0 1,876 352,965 1,784 1,248 1973-74 591,229 199,564 2,963 153.1 1,935 391,543 1,962 1,281 1974-75 644,697 207,504 3,107 166.2 1,869 423,230 2,039 1,226 1975-76 675,325 213,913 3,157 177.2 1,781 435,421 2,035 1,148 1976-77 718,971 207,284 3,469 188.7 1,839 464,497 2,241 1,188 1977-78 784,471 203,895 3,847 201.3 1,911 516,705 2,534 1,259 1978-79 856,117 201,420 4,250 217.1 1,958 576,609 2,863 1,319 Year Gross Expenditures (000) FYES 1968-69 $358,929 180,929 $1,981 1969-70 403,352 191,365 1970-71 445,019 1971-72 Note: S tate Approp. S tate per FYES Approp. in Per FYES Constant $ 's S ta te ap p ro p riatio n s based on Ouly-June fis c a l year from 1968-69 to 1974-75 and on October September f is c a l year th e r e a f te r . 64 with the rap id ly increasing in f la tio n r a te s . In both 1974-75 and 1975-76, th ere was an Executive Order th a t fu rth e r reduced approp­ r ia tio n s to the i n s titu tio n s . I t is im portant to note th a t during t h is time the f is c a l year equated students were also d e clin in g . Revenue is th e th ird major area regarding Michigan higher education th a t is reviewed in th is se c tio n . Revenues o f Michigan s ta te government from a ll sources increased by 201 percent from 1970 to 1979, and by 51 percent a f t e r a d ju stin g fo r population and p rice changes. The d iffe re n c e between the increase in expenditures and revenues re fle c te d a d e f i c it in cu rren t operations in 1970 and a surplus in 1979. The public fo u r-y ear in s titu tio n s of higher education received approximately 66 percent of the average to ta l in s titu tio n a l revenue from s ta te a p p ro p ria tio n s. tio n s fo r the in s titu tio n s . Table 11 presents the s ta te appropria­ The range o f increases was in d ic a tiv e of th e enrollm ent changes, academic program mix, new b u ild in g s, and mis­ sion of th e i n s titu tio n s . Table 12 presents data on the tu itio n and fee portion of in s titu tio n a l revenue. I t should be noted th a t th e enrollm ent increases accounted fo r p a rt o f the variance th a t ex isted between i n s titu tio n s . For those in s titu tio n s th a t have experienced s i g n i f i ­ cant enrollm ent growth (F e rris S ta te College, Michigan Technological U n iversity, Saginaw Valley S ta te College, and U niversity of Michigan— Dearborn) th e tu itio n increases were due prim arily to an enrollm ent in cre ase, not n e c e ssa rily a tu itio n - r a te in cre ase. For those i n s t i ­ tu tio n s th a t have experienced a dramatic lo ss in enrollm ent, the Table 1 1 .— M ichigan h ig h e r e d u ca tio n s ta te a p p ro p ria tio n s . System Central Michigan Univ. Eastern Michigan Univ. F e rris S ta te College Grand Valley S ta te C oll. Lake Superior S ta te C oll. Michigan S ta te Univ. Agric. Experiment S ta. Coop. Extension Service Michigan Tech. Univ. Northern Michigan Univ. Oakland U niversity Saginaw Valley S ta te C oll. U niversity o f Michigan U o f M—Dearborn Campus U o f M—F lin t Campus Wayne S ta te U niversity Western Michigan Univ. I n s titu te o f Gerontology U.P. Health P ro ject MTU—Research Units U o f M—Mental Hlth Unit System to ta l 1974-75 S ta te Approp In s t FY 1975-76 1978-79 S ta te Approp In st FY 1976-77 S ta te Approp In s t FY 1977-78 S ta te Approp In s t FY S ta te Approp In s t FY $ 20,113,405 23,284,415 13,755,427 8,483,313 3,139,316 84,331,188 6,811,571 6,305,084 12,100,107 12,579,944 12,515,903 3,012,130 95,680,635 5,858,288 5,064,082 66,848,995 32,401,575 , 394,887 122,140 1,066,495 8,243,465 $ 20,608,828 24,302,154 14,469,324 9,051,909 3,507,921 87,405,893 6,975,047 6,497,945 12,886,629 13,693,907 13,243,095 3,921,045 98,315,585 6,303,870 5,229,021 69,958,366 33,322,000 547,697 128,016 1,088,100 8,308,327 $ 21,162,024 24,889,250 14,887,680 9,435,075 3,918,628 89,752,924 7,554,875 7,034,600 13,336,870 14,340,650 13,802,802 4,386,750 99,934,197 6,741,850 5,819,550 71,576,444 33,893,000 601,100 205,001 1,138,180 8,451,903 $ 23,386,451 27,542,225 17,032,650 10,564,750 4,458,872 99,382,901 8,956,650 7,983,900 15,215,025 16,342,525 15,301,400 5,125,975 109,937,490 7,519,975 6,755,450 79,727,900 37,318,000 729,175 222,224 1,228,075 8,937,460 $ 26,290,950 30,967,203 19,416,350 11,793,650 5,039,175 109,614,225 10,738,050 8,972,000 17,295,300 18,532,325 17,498,475 5,864,025 130,759,871 8,343,200 7,646,050 90,809,500 41,684,000 805,900 237,375 1,317,225 0 $422,162,365 $439,764,679 $452,863,353 $503,669,073 $563,624,849 Table 1 2 .—M ichigan h ig h e r ed uca tio n t u i t i o n and fe e revenue. 1974-75 Col1ege Central Michigan Univ. Eastern Michigan Univ. F e rris S ta te College Grand Valley S ta te C oll. Lake Superior S tate C oll. Michigan S tate Univ. Michigan Tech. Univ. Northern Michigan Univ. Oakland U niversity Saginaw Valley S ta te Col. U niversity o f Michigan U o f M—Dearborn Campus U o f M—F lin t Campus Wayne S ta te U niversity Western Michigan Univ. Colleges to ta l T uition and Fees 1975-76 T uition and Fees 1976-77 T uition and Fees $ 9,539,000 10,454,000 4,120,000 $ 10,532,688 11,575,673 5,874,252 $ 11,976,489 11,774,783 3,983,000 1,019,064 4,740,657 1,196,817 41,542,041 35,077,000 4,019,000 4,721 ,000 5,858,000 1,112,000 48,033,000 4,746,957 5,321,969 6,269,218 1,486,242 53,055,079 6,950,687 4,852,758 1 ,357,512 44,362,332 5,435,523 6,004,802 7,079,121 1,703,623 1977-78 T uition and Fees 1978-79 T uition and Fees $ 13,123,671 12,519,786 7,544,075 $ 13,105,080 12,485,204 8,655,644 5,073,503 1,410,752 48,408,887 6,259,287 6,522,282 7,174,939 4,814,072 1,639,798 50,792,561 7,052,300 6,225,119 1,813,029 60,595,412 7,473,001 2,040,368 66,791,941 4,001,881 2,209,150 4,653,907 2,377,742 2,364,000 1,707,000 2,768,693 1,912,532 57,427,260 3,482,154 2,092,195 26,685,000 14,183,000 31,160,220 15,430,000 30,058,771 17,002,000 29,919,280 16,721,000 32,297,015 17,236,000 $173,874,064 $197,613,038 $211 ,560,015 $223,296,934 $237,639,752 67 tu itio n and fee percentage change was s ig n ific a n tly below the system average (Eastern Michigan U niversity, Grand Valley S ta te C ollege, Wayne S ta te U niversity, and Western Michigan U n iv ersity ). The tu itio n and fee revenue has kept pace with s ta te appropriations on a systemwide b a sis. The revenue area o f investment income is i llu s tr a te d in Table 13 and r e f le c ts both a revenue increase and an increased i n s t i ­ tu tio n a l dependence on investment income. Table 14 presents data re la te d to federal-governm ent research g ra n ts, and the overhead c o n tra cts arranged by the in s titu tio n s . The system average increased a t a r a te g re a te r than e ith e r s ta te approp­ r ia tio n s o r tu itio n and fee revenue. The 46 percent increase in th is area fo r th e period 1974-75 to 1978-79 re fle c te d the i n s t it u t io n s ' successful attem pt to garner increased outsid e funds. Summary The f is c a l stringency th a t s ta rte d in the middle o f the decade o f the 1970s was real in Michigan higher education. The problems p re­ sented by th is fin a n c ia l i n s t a b i l it y were reported in the l it e r a t u r e as ranging from deferred maintenance o f p la n t to discontinuance of academic programs and s t a f f . One o f the areas of s ig n ific a n t concern explored in several stu d ie s was th e in s titu tio n a l responses to fis c a l stringency. This study was lim ted to examining th e in s tr u c tio n a l- program responses a t the i n s titu tio n s . Michigan higher education has experienced p a ra lle l problems to those reported in th e national l i t e r a t u r e . As the section Table 1 3 .—M ichigan h ig h e r e d uca tio n investm ent-incom e revenue. Col1ege 1974-75 Investment Income Central Michigan Univ. $ 451,000 Eastern Michigan Univ. 400,000 187,000 F e rris S ta te College Grand Valley S ta te C oll. Lake Superior S ta te C oll. Michigan S ta te Univ. Michigan Tech. Univ. Northern Michigan Univ. Oakland U niversity Saginaw Valley S ta te C oll. U niversity o f Michigan U o f M—Dearborn Campus U o f M—F lin t Campus Wayne S ta te U niversity Western Michigan Univ. Colleges to ta l 102,000 41,465 1,889,000 203,000 277,000 105,000 10,000 1,046,000 36,000 1975-76 Investment Income 1976-77 Investment Income 1977-78 Investment Income $ 378,588 293,513 109,297 $ 311,967 189,769 126,825 $ 459,426 255,522 183,435 76,755 39,380 1,233,020 199,678 218,119 72,592 15,695 811,361 55,969 38,121 98,142 312,667 140,382 30,000 1,884,290 145,155 220,630 130,726 33,000 2,713,470 315,580 336,181 178,305 12,879 51,128 1,152,643 1,078,328 148,584 236,313 57,920 11,212 1978-79 Investment Income $ 761,466 403,622 45,000 291,000 520,000 24,016 32,021 26,597 37,867 688,320 57,655 48,046 178,786 87,004 277,000 152,000 367,000 528,300 717,000 $5,603,465 $4,006,821 $4,733,226 $7,777,179 324,000 526,149 $3,209,625 69,113 64,322 Table 1 4 .—M ichigan h ig h e r e d ucation in d ir e c t- c o s t- r e c o v e r y revenue. College Central Michigan Univ. Eastern Michigan Univ. F e rris S ta te College Grand Valley S ta te C oll. Lake Superior S ta te C oll. Michigan S ta te Univ. Michigan Tech..Univ. Northern Michigan Univ. Oakland U niversity Saginaw Valley S tate C oll. 1975-76 1974-75 In d ire c t Cost Recovery $ 1976-77 In d ire c t Cost Recovery In d ire c t Cost Recovery 444,000 150,000 49,000 123,000 10,870 $ 53,656 217,374 72,684 173,354 13,598 5,263,917 $ 53,837 231,242 1977-78 In d ire c t Cost Recovery $ 116,987 211,738 62,390 144,099 11,928 6,454,968 1978-79 In d ire c t Cost Recovery $ 187,187 292,130 36,162 378,000 32,000 262,000 22,000 401,980 62,811 286,567 20,040 132,540 127,894 15,313 5,884,962 480,721 42,804 349,245 29,148 10,836,000 12,500,000 0 0 2,239,467 13,750,000 0 0 2,900,179 3,460,200 4,503,000 686,805 66,655 434,382 42,941 134,226 13,598 6,944,978 744,733 37,882 517,180 45,877 14,409,206 0 U o f M—F lin t Campus Wayne S ta te U niversity 1,581,000 11,836,000 0 0 1,818,208 Western Michigan Univ. 221,000 227,000 230,000 268,000 333,000 $18,611,870 $20,447,189 $22,317,173 $25,151 ,072 $27,156,359 U niversity o f Michigan U o f M—Dearborn Campus Colleges to ta l 0 0 0 70 containing Michigan data i ll u s t r a te d , th e re has been a d e clin e in f is c a l year equated stu d e n ts. When the decline is coupled with high in f la tio n ra te s and slowing s ta te a p p ro p ria tio n s, th e fin a n c ia l prob­ lems become more dram atic. The review of the l it e r a t u r e did not produce any stu d ie s documenting o r analyzing the Michigan in s titu tio n a l response to the condition of fis c a l strin g en cy . However, the l i t e r a t u r e review did serve as a foundation fo r th e development o f research p ro p o sitio n s. The review o f the l it e r a t u r e was presented in a chronological form at, rep o rtin g individual stu d ies re la te d to the to p ic , as recom­ mended by a previous a d v ise r. However, th is research er concluded th a t the a lte rn a te form at, in which the su b je ct m atter is summarized and organized by to p ic , is e a s ie r fo r the reader to follow and would use th a t approach in fu tu re research in v e s tig a tio n . CHAPTER I I I METHODOLOGY This chapter describes th e methodology used in the research p ro je c t. This chapter contains the design of the study, a d e scrip tio n o f case-study methodology, the s e ttin g o f the study, the research p ro p o sitio n s, the se le c tio n o f the sample, the development o f the instrum ent, c o lle c tio n o f the d a ta , and data p resen ta tio n . Design of the Study This study was designed to obtain inform ation regarding i n s t i ­ tu tio n a l s tra te g ie s th a t were implemented in the in stru c tio n a l program in response to th e condition o f fis c a l stringency th a t occurred in Michigan between 1974-75 and 1978-79. The study was based on the use o f case-study methodology. Case- study methodology is c h aracterized by the system atic review o f the su b ject m atter being stu d ied . In the f ie ld o f education, case-study methodology is used to explore areas th a t previously could not be q u an tified and th e re fo re researched. Case stu d ie s are d istinguished by the in te n siv e , d e ta ile d in v e stig a tio n of a sin g le u n it, an in d iv id u a l, a school sy s­ tem, a community, e tc . The depth of an aly sis asso ciated with such stu d ies y ie ld s important and unique inform ation. (Dyer, p. 189) The case-study approach was not r e s tr ic te d and should not be r e s tric te d to one mode of data c o lle c tio n . 71 In f a c t, a v a rie ty of 72 d a ta -c o lle c tio n techniques was required to adequately in v e stig a te a ll aspects o f th e su b je c t. several modes: In th is study the data c o lle c tio n included data c o lle c tio n from s ta te -re p o rte d in s titu tio n a l d a ta , public records, public a c ts , board m inutes, in s titu tio n a l annual statem ents, fa c u lty c o n tra c ts , and in s titu tio n a l planning documents. The data c o lle c tio n a lso included campus v i s i t s with d ir e c t interview s o f the selected ad m in istrativ e personnel. This study used sem i-structured interview s as a d a ta -c o lle c tio n mode instead of mailed q u estio n n aires. mode included: The advantages to the interview (1) a higher completion ra te than mail q u estio n n aires; (2) the interview er could increase the respondents' m otivation to give complete and more accurate answers; (3) interview s perm itted g re a te r f l e x i b i l i t y —the respondent could ask fo r questions to be c la r if i e d , and the interview er could probe fo r more d e ta il when the response was ambiguous or incom plete; (4) the interview er c o n tro lled the sequence in which questions were posed; (5) complex to p ic s th a t were d i f f i ­ c u lt to express in w ritin g could be examined; (6) the interview er could ensure th a t each question was answered; and (7) telephone callbacks fo r c la r if ic a tio n of inform ation from interview s were simple and econ­ omical (Dyer, p. 158). Sem i-structured interview s were used as a d a ta -c o lle c tio n tech ­ nique during th is study. The interview s were conducted with th ree rep resen tativ es.fro m each in s titu tio n in th e study. The th ree i n te r ­ viewees a t each in s titu tio n were the P re sid e n t, V ice-President fo r Academic A ffa irs , and the V ice-President fo r Business A ffa irs. Addi­ tio n a l in s titu tio n a l ad m in istrativ e personnel were contacted to provide 73 fu rth e r c la r if ic a tio n on sp e c ific questions. At each in s titu tio n the Budget D irector and the D irector o f I n s titu tio n a l Studies were ques­ tioned to aid in data c la r if ic a tio n and c o lle c tio n fo r th e study. During t h is study the respondents were not id e n tifie d due to the se n sitiv e nature of th e study. The respondents to the p ilo t study advised th a t individual responses should not be used. In th e i n i t i a l contact with each interview ee, the research er made a commitment to use in s titu tio n a l responses versus in d iv id u a lly id e n tifie d responses. The 11 propositions th a t were established'lduring the l it e r a t u r e review provided th e framework fo r the interview s; the propositions were fu rth e r examined by th e questions. S ettin g o f the Study This study included the Michigan public four-year in s titu tio n s as th e population from which a sample was se le c te d . The sample included th ree in s titu tio n s selected from the div erse 15 public fo u r-y ear i n s t i ­ tu tio n s . The depth and breadth o f academic programs, student e n ro ll­ ment, in s titu tio n a l age, geographic lo c a tio n , p h y sic al-p la n t s iz e , fa c u lty s iz e , and in s titu tio n a l in stru c tio n a l budget a ll were fa c to rs a ffe c tin g th e se le c tio n of a sample. Research Propositions The s e t of 11 propositions was e stab lish ed from a review of the l it e r a t u r e and served as the c en tral focus fo r th is study. These propositions were not research hypotheses to be te s te d , but instead were c en tral issu es th a t reoccurred throughout the l i t e r a t u r e o r to p ics 74 raised in th e p ilo t study. The interview q uestionnaire was designed to obtain inform ation d ir e c tly re la te d to each p ro p o sitio n . The f i r s t proposition was estab lish ed during the i n i t i a l stages of the l i t e r a t u r e review. National l it e r a t u r e and stu d ies contained statem ents th a t the e ffe c ts of fis c a l stringency had begun to appear by the middle o f the 1970s (Auindry & Masten, Bowen & Douglas, C heit, Jenny & Wynn). Proposition 1 : The in s titu tio n s w ill rep o rt th a t fis c a l stringency s ta rte d in the middle o f the 1970s. The second and th ird propositions as su b ject areas occurred with increasing frequency in national lit e r a t u r e throughout the 1970s. There were several national stu d ies completed regarding in s titu tio n a l fin an cial c o n d itio n , but no sp e c ific Michigan stu d ies on in s titu tio n a l fin an c ia l c o n d itio n , reduction of c o s ts , or revenue-augmentation s t r a te gi e s . Proposition 2 : The in s titu tio n s w ill re p o rt th a t cost-saving s tr a te g ie s were implemented in th e in stru c tio n a l program in response to fis c a l stringency. Proposition 3 : The in s titu tio n s w ill re p o rt th a t revenue- augmentation s tr a te g ie s were implemented in response to fis c a l s t r i n ­ gency. The area of personnel reduction as a response to fis c a l stringency was discussed prominently in the l i t e r a t u r e . S ta ff and fa c u lty reductions were reported as one response to f is c a l stringency used by the in s titu tio n s (Bowen & Glenny, 1975; C heit, 1971; F urniss, 75 1974; Jellem a, 1973; Mortimer & Tierney, 1979; Sprenger & S chultz, 1974; Wynn, 1971). Proposition 4 : The in s titu tio n s w ill rep o rt th a t reduction of personnel was used in response to fis c a l stringency. The f i f t h proposition was a c o ro lla ry to th e fo u rth proposi­ tio n and concerned th e area o f academic-program discontinuance. In structional-program discontinuance had been a main concern fo r higher education i n s titu tio n s . The r e s u lts of th e l i t e r a t u r e study demonstrated th e prevalence of dialogue and the increasing a c tiv ity regarding academic-program discontinuance (C heit, 1971; Jellem a, 1973; Mortimer & T ierney, 1979). P roposition 5 : The in s titu tio n s w ill rep o rt th a t th e discon­ tinuance o f academic programs was used as one response to f is c a l stringency. The six th proposition covered th e area of fa c u lty involvement in th e process o f in s titu tio n a l response to f is c a l strin g en cy . Accord­ ing to several a u th o rs, th ere was a g re a te r advantage to having fu ll involvement of fa c u lty in th e process than otherw ise (Bowen & Glenny, 1975; F urniss, 1974). P roposition 6 : The in s titu tio n s w ill rep o rt th a t fa c u lty members were involved in developing in s titu tio n a l responses to f is c a l stringency. The seventh area was not covered extensively in the l it e r a t u r e or th e national stu d ie s but was raise d in th e p ilo t study as an impor­ ta n t to p ic . 76 Proposition 7; The i n s t it u t io n s w ill rep o rt t h a t th e re was some b e n e fit from the period o f f is c a l stringency. The problems t h a t prevented the i n s t it u t io n s from responding to f is c a l stringency was the eighth area t h a t was addressed. Several authors discussed t h i s to p ic as the i n s t it u t io n a l i n a b i l i t y to respond and the r e s u l ta n t e f f e c t on the i n s t i t u t i o n s ' f l e x i b i l i t y (Bowen & Glenny, 1975; Folger, 1977; Mortimer & Tierney, 1979). Proposition 8 : The i n s t it u t io n s w ill not vary in the reporting of major problems encountered in the attempts to respond to f is c a l stringency. Several authors reported th a t the i n s t it u t io n s were responding to f is c a l stringency and id e n tifie d programs and responses t h a t were being implemented. However, no stu d ies of Michigan higher education enumerated responses t h a t were e ffe c tiv e in responding to the f is c a l stringency. Proposition 9 : ing The i n s t i t u t i o n s will not vary in the re p o r t­ of successful responses to f is c a l stringency. The area of i n s t it u t io n a l planning i s of primary concern to t h i s research p ro je c t. The i n s t it u t io n a l planning long and sho rt range, fo r both enrollment and budget c o n tro l, is a necessary ing red ient in a succession-encompass operation (Adams, 1975; Furniss, 1974; Jellema, 1978; Meeth, 1974; Mortimer & Tierney, 1979; Nisbet, 1973). Proposition 10: The i n s t it u t io n s w ill rep o rt t h a t both opera­ tional and s t r a te g ic planning occurred a t the i n s t i t u t i o n during the 1970s. 77 The l a s t proposition concerned a look ahead into the future of Michigan higher education. Mayhew, in his book, Surviving the E ig h tie s, addressed the concern, s ta tin g t h a t the 1980s w ill be a d i f f i c u l t decade fo r American higher education (C heit, 1971; Mortimer & Tierney, 1979; Mayhew, 1979). Proposition 11: The i n s t it u t io n s w ill not vary on the projec­ tio n o f the fu tu re o f higher education as i t r e l a te s to f is c a l s t r i n ­ gency. Sample Selection The common empirical c r i t e r i a used to e s ta b lis h the presence of fis c a l stringency in the Michigan public four-year i n s t it u t io n s was the decline in constant d o lla rs expended per fu ll- tim e student. The decrease in c o n sta n t-d o lla r expenditure per student d i r e c tl y affected the f l e x i b i l i t y o f the i n s t it u t io n a l budget and caused i n s t it u t io n s to respond by implementing the curtailm ent or elim ination o f planned or e x is tin g programs. Table 15, column four, i l l u s t r a t e s the decline in constant d o lla r s . Note the sp e c ific years marked with an a s te r is k . There were two Executive Orders in the period under examination, which caused c o n sta n t-d o lla r expenditures per fu ll-tim e student to decline from the previous y e a r 's f ig u re . The aggregate average fo r the sys­ tem indicated th a t the f i s c a l years 1975 to 1978 were years with reduced c o n sta n t-d o lla r expenditures per f is c a l year equated student as compared to the 1974 le v e l. 78 Table 15.—Expenditures fo r s t a te colleges and u n iv e r s itie s : 1974-75 to 1978-79. Year Fiscal Year Equated Students Higher Education Price Index Gross Expenditures per FYES in Constant Dollars 1974 1975 1976 1977 1978 1979 199,564 207,504 213,913 207,284 203,895 201,420 153.1 166.2 177.2 188.7 201.3 217.1 $1,935 1,869* 1,781* 1 ,839* 1,911* 1,958 *Note decreases in constant d o lla rs from 1974. The c r i t e r i a used in se le c tin g the sample of in s t it u t io n s included in th is case study were: geographical location o f the i n s t i ­ tu tio n , student enrollment (including recent enrollment tr e n d s ), programmatic d iv e r s ity of the i n s t i t u t i o n , f is c a l c o n tin u ity , and the ro le and mission of the i n s t i t u t i o n . The 15 Michigan public fou r- year colleges and u n iv e r s itie s are quite diverse in a ll of the c r i ­ te ria . Because these d ifferen ces might influence the study, an e f f o r t was made to s e le c t i n s t it u t io n s t h a t would provide fo r adequate d iv e rs ity and include a sm all, medium, and large i n s t i t u t i o n . " I t is important to s e le c t a sample of adequate size in order to produce research data t h a t r e lia b ly approximates the data th a t would be obtained i f the e n ti r e population were studied" (Borg & G all, 1974). The sample selected included three of the public four-year in s t i t u t i o n s . The i n s t it u t io n s were selected to obtain a v a ria tio n in enrollment s iz e , fa c u lty s iz e , programmatic o ffe rin g s , age, and differences in ro le and mission. 79 The f i r s t i n s t i t u t i o n selected to be studied was Grand Valley S tate Colleges. This i n s t i t u t i o n was estab lished by the Michigan L egislature in 1960 and grew to a peak o f 6,480 fu ll-tim e students in 1976. Since t h a t time t h i s prim arily lib e ra l a r t s commuter i n s t i ­ tu tio n has declined over 1,000 fu ll-tim e students. The second i n s t i t u t i o n selected was Oakland U niversity. This i n s t i t u t i o n , near Rochester, became an independent s t a t e u n iv ersity in 1970 a f t e r operating as a branch of Michigan S tate University fo r 11 years. Oakland s ta r te d as a baccalaureate-degree-granting i n s t i ­ tu tio n and now o ffe rs su b sta n tia l graduate programs, including doctoral programs in engineering and reading education. Oakland's geographical location in a heavily populated southeastern region o f the s t a te enhanced the continued growth o f the commuter student body. The University of Michigan was the t h ir d i n s t it u t io n selected fo r t h i s case study. The University of Michigan i s a m ultifaceted in s t i t u t i o n with diverse programmatic o fferin g s including th ree pro­ fessional schools. This i n s t i t u t i o n has taken d e lib e ra te action to gradually reduce the student enrollment in order to control the qual­ i t y o f the academic programs. Procedures fo r Obtaining Data The data c o lle c tio n was based on the use o f sem i-structured interview s. The i n i t i a l step in the d a ta -c o lle c tio n process was a contact l e t t e r sent to each prospective respondent. The l e t t e r requested t h e i r co nfidential p a rtic ip a tio n and sta te d the purpose o f the research p ro jec t. A telephone contact followed to make the 80 necessary arrangements fo r scheduling the interview s. The respond­ ents were informed in the telephone contact t h a t the interview would be recorded to f a c i l i t a t e accurate data c o lle c tio n , i f th ere were no objections. The researcher interviewed each respondent on a one-to-one basis in t h e i r respective o f f ic e s . The interviews were designed to take approximately one hour and were to be tape recorded. The i n t e r ­ viewer followed a predetermined format, adhering to a s e t question­ n a ire . During the interview the interview er used a sim plified check l i s t to assure th a t s u f f i c i e n t information was obtained regarding each proposition. The a b i l i t y to r e p lic a te t h i s research fo r v e rif ic a tio n or expansion o f findings was a key element involved in the design and execution o f the study. The case-study research format t h a t was employed contained areas th a t required careful documentation to control s u b je c tiv ity . Research guidelines were developed e arly to provide fo r maximum control o f s u b je c tiv ity . The following summary is a presentation of the actual steps implemented to complete th is study. 1. Selection and refinement of the research to p ic . 2. Review o f relev an t l i t e r a t u r e , including re la te d studies and in s titu tio n a l d ata. 3. Additional review and refinement of the research to pic in conjunction with the l i t e r a t u r e review. 81 4. Preparation of the research p ropo sitio ns, including the review of the l i t e r a t u r e with v e rif ic a tio n provided by a panel of e x p e rts. 5. Preparation o f the p ilo t-stu d y q u estion naire, including sem i-structured question guideline. Careful a tte n tio n was taken to include questions re la te d to the research propositions. 6. P ilo t-stu d y interviews were completed with the President and Vice-President of Business a t Michigan S tate U niversity. 7. Input from these two executive o ff ic e rs was incorporated in to the interview questio nnaire. Substantial improvements were made to the questionnaire to provide increased d ire c tio n to the interview . 8. A sample o f th ree i n s t i t u t i o n s was selected from the 15 Michigan public four-year i n s t i t u t i o n s , including an i n s t i t u t i o n from each category of enrollment: 9. sm all, medium, and la rg e . L etters of introduction were forwarded to the Presidents of Grand Valley S tate Colleges, Oakland U niversity, and the Univer­ s i t y of Michigan, introducing the researcher and requesting t h e i r p a rtic ip a tio n . 10. Approval fo r p a rtic ip a tio n was received from each i n s t i ­ 11. Telephone contacts were completed with the P resid en t, tu tio n . Vice-President fo r Academic A f f a irs , and Vice-President fo r Business to schedule personal sem i-structured interview s. 12. On-site interviews were completed with each o f f i c e r . Additional c l a r i f i c a t i o n questions were directed to the Directors of 82 Budget and I n s titu tio n a l Analysis as were deemed necessary by the research er. 13. The interviews were tape recorded and followed the semi- s tru c tu re d format as presented in the appendices. 14. Answers obtained during the interviews were codified by the researcher. 15. To provide additional v e rif ic a tio n regarding the accu­ racy of the re s e a r c h e r 's c o d ific a tio n , a q u a lifie d professional was retain ed to review th re e taped interviews ag ain st the codified data. 16. The information obtained from each o f the interviews was compiled into an i n s t it u t io n a l case study without reference to the respondent's name. 17. While no attempt was made to compare in s t it u t io n s d i r e c tl y , the principal findings from the th ree case stud ies were summarized to a s c e r ta in some o f the s i m i l a r i t i e s and any unique approaches t h a t were employed to respond to the problem under study. Semi-Structured Interviews The lack of a w ritte n h is to r ic a l record t h a t presented the i n s t it u t io n a l ad m in istrativ e s tr a te g ie s th a t were implemented in response to the condition o f f is c a l stringency n ecessitated the use of other d a ta -c o lle c tio n techniques to obtain the information required to complete the study. Therefore, the method chosen f o r data c o l­ le c tio n in t h i s study was the use of sem i-structured interview s, o r , as defined by Maccoby and Maccoby (1954), a sem i-structured or "semistandardized" interview format. I t consisted o f a format with a 83 s e r ie s of s e t questions t h a t were used in a ll interviews with the option of s l i g h t d ig re s sio n s, which allowed the interview er to ask probing questions. The sem i-structured approach provided fo r increased r e l i a b i l i t y and face v a li d i ty according to the Maccobys (Maccoby & Maccoby, 1954, p. 452). The interview approach also had the advan­ tage of increasing the completion r a t e o f the respondents. The advantages o f the interview over the mailed questionnaire in c e rta in s itu a tio n s were i l l u s t r a t e d by Jackson and Rothney (1961). I t was found in the Jackson and Rothney study, which compared the two datac o lle c tio n techniques, t h a t a higher proportion of the sample com­ pleted each interview item than the corresponding questionnaire item. Also, 98 percent of the planned interviews were completed, compared with 83 percent o f the mailed questionn aires. The sem i-structured interview , th e re fo re , has the advantage of being reasonably o bjective while s t i l l permitting a more thorough understanding of th e respondent's opinions and the reasons behind them than would be possible using the mailed questionnaire. The sem i-structured interview i s generally most appropriate fo r interview stu d ies in education. I t provides a d e sirab le combina­ tio n of o b je c tiv ity and depth and often permits gathering valu­ able data th a t could not be successfully obtained by any other approach (Jackson & Rothney, 1961). The study propositions were designed to encompass a broad range o f to p ic s , and y e t these propositions were also in te n tio n a lly designed to pursue narrow issues as w ell. The propositions were compiled a f t e r review of relev ant l i t e r a t u r e and conversations with respected a u th o ritie s in the f i e l d of higher education. The l i t e r a t u r e contained a questionnaire t h a t served as a comparative model to the formulation o f the research instrument. Earl F. Cheit, the author o f The New Depression o f Higher Education 84 (1971), compiled a questionnaire t h a t was administered to college and un iv ersity a d m in istrato rs. The context o f the questionnaire was the examination o f the financial conditions a t the resp ec tiv e , selected in stitu tio n s . This research instrument was constructed to examine areas t h a t were p a ra lle l to the Cheit questionnaire. A g re a te r emphasis was placed on the a c t i v i t i e s t h a t have occurred during the decade of the 1970s in response to f is c a l stringency. The format and content of the propositions were reviewed by President Robert F. Roelofs, Oakland Community College; Dr. Frederick R. Whims, D irector o f the Education Division, Office of the Budget, Department of Management and Budget; and Douglas Smith, Special A s s is t­ ant to Governor William G. Milliken fo r education. The input th a t was provided by these individuals was analyzed, and appropriate a l t e r a ­ tio n s to the propositions were completed by the research er. A p i lo t study was designed and executed to determine the strengths and weaknesses o f the propositions and the interview tech­ niques. Michigan S tate U niversity, a four-year comprehensive i n s t i ­ tu tio n , was selected fo r the p i l o t study, and the President and VicePresident fo r Business A ffairs were interviewed. A fter the interviews were completed, each respondent was asked to c r i t i c i z e the d e liv ery , con tent, and c l a r i t y of the interview. the coverage of the to p ic . Specific questions addressed Comments were c a re fu lly noted, and approp­ r i a t e changes were made to the interview format. The p i l o t study was very successful in pinpointing the weaknesses o f the questions. The input from the respondents was instrumental in the development of a more e ff e c tiv e and comprehensive s e t of questions. 85 The issues to be pursued by the interviewer were designed to address c r i t i c a l issues perceived by the researcher to have affected the i n s t it u t io n s during the decade o f the 1970s. Each question was not a sin g le e n t i t y , but instead t ie d into the propo sitio ns, which provided c o n tin uity in a logical progression. The questions were designed to obtain information th a t would allow comparative examina­ tio n o f the 11 prop ositions. Each question was designed to be con­ gruent with one of the propositions enumerated in t h i s chapter. Data-Analysi s Procedures At the completion of the interview s, the researcher lis te n e d to each interview and codified the r e s u lts in to n a rra tiv e form. To provide additional v e r if ic a tio n regarding the accuracy of the r e s e a rc h e r's c o d if ic a tio n , an objective professional was retained to review th ree taped interviews ag ain st the codified data. James L. Murdock, Vice-Chancellor of Budget and Finance, University of MichiganF l i n t , provided his services fo r the v e rif ic a tio n process. The r e s u lts of Vice-Chancellor Murdock's in q u irie s indicated th a t the researcher had performed an accurate c o d ific a tio n o f the interview s. The th ree primary interviewees were the Presiden t, the VicePresident f o r Academic A ffa irs , and the Vice-President fo r Business A ffa irs. These o f f ic e r s provided the m ajority of Information; how­ ever, additional a d m inistrative personnel were questioned to complete data c o lle c tio n . The information obtained from the interviews was compiled into an in s t it u t io n a l case study without reference to the in d iv id u a l's name. 86 No comparisons between case studies were completed following the d e scriptive-case-stud y format. The findings fo r each case study were combined into principal findings fo r the research study. CHAPTER IV CASE STUDIES Case Study: Grand Valley S tate Colleges Grand Valley S ta te Colleges, a unique public i n s t i t u t i o n t h a t was estab lish ed during a rapid-growth period o f Michigan's higher education h is to r y , was the f i r s t i n s t i t u t i o n to be involved in the study. The educational focus of the college is on l ib e r a l a r t s ; i t s founders believed t h a t the best preparation f o r successful liv e s and careers comes from the breadth of knowledge and human values associated with the a r t s , humanities, and social and natural sciences. In the f a l l of 1963, the college opened i t s doors to the f i r s t c la ss of 226 stu d e n ts, who came to a one-building i n s t i t u t i o n with a fac u lty of 15 members, 16 l ib e r a l a r t s programs, and an operating budget of $660,904, of which 75 percent came from s t a te a p p ro priatio ns. The founding p rin cip le s of the i n s t i t u t i o n were to provide individual in s tru c tio n through small c la ss s iz e , discussion se ss io n s , seminars, and t u t o r i a l s , a ll of which were c h a r a c te r is tic o f the per­ sonalized education found in small c o lleg e s. A second major premise o f Grand Valley S ta te Colleges was the establishm ent o f individual colleges within the corporate s tr u c tu r e . The colleg e-w ith in -a-co lleg e concept was a fu rth e r attempt to provide increased individualized a tte n tio n and education to the students sp e cia liz in g in the separate colleges. The coexistence o f diverse c o lle g e s, each with i t s own 87 88 philosophy, goals, and programs, was an acknowledgment th a t d iff e r in g s ty le s o f teaching and learning could achieve mutually shared and meaningful educational goals. At the peak of t h i s doctrine th ere was a fed eratio n o f four undergraduate and two graduate c o lleg e s—the College o f Arts and Sciences (estab lish ed in 1963), Thomas Jefferson College (1968), William James College (1971), Kirkhof College (1973), F. E. Seidman Graduate College o f Business and Administration (1973), and the College o f Graduate Studies (1975). All students within each undergraduate college f u l f i l l e d lib e r a l a r t s requirements and then majored in a lib e ra l a r t s d i s c ip lin e , an in te r d is c ip lin a r y f i e l d , or in a professional f i e l d . Grand Valley had shown t h a t the combination o f lib e r a l a r t s and more specialized career preparation was both workable and d e sira b le . In tern sh ip s, independent and in te r d is c ip lin a r y s tu d ie s , special p r o je c ts , senior seminars, c lin ic a l experiences, research p r o je c ts , and performances and e x h ib its enabled students to in te g ra te what they have learned. Grand Valley S ta te Colleges was selected fo r study due to i t s geographic lo c a tio n , program o ffe r in g s , siz e of f a c u lty , and student body. I t represented the sm allest and newest i n s t i t u t i o n t h a t was examined during t h i s study. The unique lib e ra l a r t s programmatic s tru c tu re was a c o n trib uting fa c to r fo r i t s inclusion. The procedure followed to obtain the necessary information was an in-depth review o f the data t h a t Grand Valley had reported to the S ta te of Michigan. Included also was a review o f rele v an t docu­ ments, including Board o f Control minutes, financial statem ents, newspaper a r t i c l e s , and internal documents. The l a s t step used fo r 89 data c o lle c tio n was a campus v i s i t a t i o n , which included interviews with the Presiden t, Vice-President fo r Academic A ffa irs , and the Vice-President f o r Business A ffa irs . The interviews were used to obtain c la rify in g information regarding the propositions t h a t pro­ vided a framework fo r the study. Proposition 1 The i n s t i t u t i o n will re p o rt t h a t the f is c a l stringency s ta r te d in the middle o f the 1970s. The th ree respondents were asked i f they agreed with th is d e fin itio n of f is c a l stringency: a condition of lim ited s t a t e revenue and e scalating costs t h a t n e ce ssitated the mid-year curtailm ent or elim ination o f planned o r e x is tin g programs. The i n s t it u t io n a l rep­ rese n ta tiv e s agreed with the sta te d d e fin itio n . One respondent s ta te d , The se v e rity of the f is c a l problem or the q u a lity of l i f e a t the i n s t i t u t i o n began to d e te r io r a te when fa c u lty and s t a f f members did not have the fin an c ia l resources they believed were neces­ sary to conduct t h e i r a f f a i r s and r e s p o n s i b i li t ie s normally. The period of the mid-1970‘s was recognized by the increasing i n a b i l it y to proceed with the business as usual d o ctrin e. Grand Valley adm in istrators reported t h a t f is c a l stringency s ta r te d during the mid-1970s. A qualifying statement was t h a t the f i r s t time the i n s t i t u t i o n had to cut back was immediately following the o il embargo in 1973-74. The in s t it u t io n a l o f f i c e r s knew the s t a t e was in fin an cial d i f f i c u l t y and recognized t h a t the Executive Order 1974-11, enacted December 1974, and Executive Order 1975-12, enacted December 1975, were the r e s u l ts o f the s t a te revenue problem. The Executive Orders in f is c a l years 1975 and 1976 did not in themselves 90 c re ate a s t a te o f f is c a l stringency, but they did c re ate the condition t h a t led to f is c a l stringency according to one respondent. The spe­ c i f i c financial condition was the i n a b i l i t y o f the i n s t it u t io n to meet the cu rren t o r projected budget without dramatic a l t e r a t i o n . The Executive Orders 1974-11 and 1975-12 n ecessitated fo r the f i r s t time an a lt e r a t io n in the working budget a t Grand Valley S tate Colleges. Decisions were made on how to capture the necessary d o lla rs with the minimum e f f e c t on the i n s t i t u t i o n during the current budget cycle. During the mid-1970s i t was believed t h a t the cuts were temporary cutbacks in appropriations th a t would be restored in subsequent y ears. According to th e respondents, the two Executive Orders th a t occurred in fis c a l year 1975 and f is c a l year 1976 reduced the s t a te appropriations to the i n s t i t u t i o n s of higher education in Michigan. The important ingredien t t h a t heightened the negative e f f e c t o f these reductions was d o u b le-d ig it i n f l a t i o n , which occurred a t the same time. The combined e f f e c t re s u lte d in an actual decrease in constant d o lla rs t h a t were appropriated or expended during t h i s period. Even though the s t a t e reduced the appropriations through Executive Orders, the appropriations from year to year increased when in f la tio n was not discounted. I t was not u n til the i n s t i t u t i o n accounted fo r the i n f l a ­ tio n and enrollment t h a t the tru e e ff e c t on the budget was apparent. Table 16 presents selected in s t it u t io n a l data regarding the approp­ r i a t i o n s , expenditures, and enrollment a t Grand Valley S tate Colleges. Table 17 presents the e f f e c t o f the in te ra c tio n o f these ingredients on a constant d o lla r per f is c a l year equated student b a sis. Table 1 6 .— Grand V a lle y S ta te C olleges i n s t it u t i o n a l d a ta . Year 1974-75 1975-76 1976-77 1977-78 1978-79 S tate Appropriations $ 8,483,313 9,051,909 9,435,075 10,564,075 11,793,650 I n s titu tio n a l Expenditures In stru ctio n al Expenditures Fiscal Year Equated Students $13,067,500 12,584,865 14,613,364 15,940,841 16,954,000 $6,220,800 6,671,120 7,023,417 7,391,813 7,976,211 6,071 6,480 6,146 5,849 5,445 Table 17.—Grand Valley S ta te Colleges c alcu late d d ata. Year Higher Education Price Index Constant Dollars S tate Appropria­ tio n s per FYES Constant Dollars Total Expenditures per FYES Constant Dollars In stru c tio n Expenditures per FYES 1974-75 1975-76 1976-77 1977-78 1978-79 166.2 177.2 188.7 201.3 217.1 $841 788 813 897 997 $1,295 1,096 1,260 1,354 1,434 $616 581 606 623 675 92 Table 17, column 2, presents s t a t e appropriations per fis c a l year equated student d eflated to a c o n sta n t-d o lla r figu re by using the Higher Education Price Index as a d iv is o r. As noted in the t a b l e , years 1974-75 through 1976-77 represented years when the s t a t e approp­ r ia tio n s on a c o n sta n t-d o lla r basis a c tu a lly decreased. The same trend i s tru e when reviewing e it h e r the to ta l in s t it u t io n a l expendi­ tu re s column 3, or the in stru c tio n a l program expenditures column 4, on a c o n sta n t-d o lla r b a sis. The empirical data supported the s t a t e ­ ments made by the in s t it u t io n a l adm inistrators th a t f is c a l stringency s ta rte d to a ff e c t Grand Valley S tate Colleges during the mid-1970s. Proposition 2 The i n s t i t u t i o n w ill rep o rt t h a t cost-saving s tr a te g ie s were implemented in the in stru c tio n a l program in response to f i s ­ cal stringency. The persons interviewed enumerated many sp e c ific s tr a te g ie s t h a t were used, as well as several consequences t h a t re su lte d from the fis c a l stringency. The persons interviewed sta te d th a t the i n s t i ­ tu tio n al s tr a te g ie s used to respond to f is c a l stringency changed as the i n s t i t u t i o n progressed through increasing f is c a l s t r e s s . The issuance o f the S tate of Michigan Executive Order 1974-11 sig n alled the s t a r t o f continuing and inten sify in g budgeting d i f f i c u l t i e s fo r the i n s t i t u t i o n . The response to Executive Order 1974-11 was to follow a strateg y t h a t would minimally a f f e c t the programs o f the i n s t i t u t i o n . The e ff e c t of the Executive Order was to reduce the amount o f funds appropriated to the college. The actual e f f e c t of the Executive 93 Order caused th e I n s t i tu t i o n to receive a decreased allotm ent from the s t a t e than was already budgeted by the i n s t i t u t i o n . This mid­ year reduction in expected revenue n e ce ssitated a corresponding mid­ year reduction in expenditures. Executive Order 1974-11 reduced the o riginal s t a t e appropriation to Grand Valley by $129,187. There was general agreement among the interviewees t h a t the f i r s t s t a t e reduc­ tio n was responded to by one-time, across-the-board c u ts . Areas were id e n tifie d in the budget by expenditure category and nonselective, across-the-board reductions in nonsalary accounts. The following actions were taken by the i n s t i t u t i o n to respond to the necessary mid-year reduction: 1. Funds a llo c a te d fo r professional tra v e l were reduced; both th e frequency o f trav el and the expenditure level per t r i p were examined by executives. An actual cap o f $150 per t r i p was e sta b ­ lis h e d , with the fa c u lty or s t a f f member responsible fo r the balance o f the cost. 2. Funds fo r professional memberships were reduced, with a sp e c ific s h i f t from i n s t i t u t io n a l re s p o n s ib ility to individual respon­ sib ility . The savings in t h i s program were notably low, but i t did e f f e c tiv e ly communicate to the u n iv e rs ity community t h a t a budget problem was occurring. 3. reduction. Funds f o r supplies and o f fic e expenses were targ eted fo r This nonsalary account red u ctio n , according to one respondent, produced the same e f f e c t as the budget lim ita tio n on professional memberships. The action produced lim ited savings but communicated strongly the need to reduce budgets. 94 4. Funds fo r the a cq u isitio n o f equipment, e it h e r new or replacement, were reduced. Those interviewed sta te d t h a t th ere was a very strong rea ctio n to t h i s reduction by fa c u lty members. S ta te ­ ments were made t h a t without the a c q u isitio n of new equipment to replace obsolete o r irre p a ra b le equipment, the academic programs would be severely a ffected and handicapped in making new programmatic o ffe rin g s. 5. Funds fo r the a c q u isitio n of lib r a r y books and resources were reduced. This budget item was id e n tifie d because i t represented a large nonsalary fund source. Concerns were raised regarding th is c u t, but the adm inistrativ e response was t h a t i t was only a one-time cut and th a t i t would be restored in the next annual budget, which promised to be b e tt e r . 6. Funds to o th er nonsalary accounts were reduced in an e f f o r t to prevent reductions in salary accounts. 7. Unbudgeted revenue funds were frozen and l a t e r applied toward the cut in 1974-75. This fund was the r e s u l t of la rg e r t u i ­ tio n revenue than projected, prim arily due to Grand V alley 's continued growth in enrollment. These funds were viewed as unbudgeted revenue and th erefo re re a d ily a v aila b le f o r Executive Order reductions. Executive Order 1975-12 reduced the appropriated monies fo r Grand Valley by $160,000. This second Executive Order within 13 months had a g re a te r e f f e c t on the i n s t i t u t i o n . According to the three persons interviewed, the response to the second mandated reduction was much the same as actions taken in the previous y e ar. A strong attempt was made to p ro tec t sa lary 95 accounts and to reduce again nonsalary accounts and unallocated funds. Additional a c t i v i t y occurred a t Grand Valley S tate Colleges in the form o f executive reorganization and reclaiming sa lary from vacant posi­ tio n s or prolonged searches. Before the reorganization occurred, th e re were four academic Vice-Presidents, each with adm in istrative r e s p o n s i b i li t ie s fo r an undergraduate c o lleg e . The four were t i t l e d Vice-President fo r the College of Arts and Sciences, Vice-President fo r Thomas Jefferson College, Vice-President fo r William James College, and Vice-President fo r Kirkhof College. During 1976 an adm inistrative review was com­ p le te d , and the decision was made to update the s tru c tu re by e lim i­ nating the four Vice-Presidencies fo r college p o sitio n s . The streamlined replacement s tru c tu re included a Vice-President f o r I n s t i ­ tu tio n a l Development, a Vice-President f o r Academic A ff a ir s , and a Vice-President fo r Administration. One respondent sta te d th a t the replacement s tru c tu re much more c lo sely re fle c te d the s tru c tu r e in other contemporary i n s t i t u t i o n s . The cost savings incurred from t h i s reorganization included d i r e c t sa lary savings through the elim ination of one v ic e -p re s id e n tia l-le v e l po sitio n and in d ir e c t savings through the c e n tra liz a tio n o f academ ic-affairs adm in istratio n. As reported by one respondent, the c e n tra liz a tio n o f academica f f a i r s adm inistration in one o f f ic e allowed fo r increased e f f e c t i v e ­ ness and e ffic ie n c y . There could be increased d i r e c t monitoring of departmental budgets, increased a n aly sis of expenditures, and much le s s duplication of s ta f fin g and s t a f f e f f o r t s . I t was sta te d by one 96 respondent th a t t h i s one sp e c ific response was a b en efit to the in stitu tio n . The o th er responses to Executive Order 1975-12 followed the same across-the-board, one-time-cut stra te g y as was followed in the previous c u t. These included reductions by account codes in the f o l ­ lowing expenditure c ateg o ries: t r a v e l , memberships, supplies and o ffic e expenses, equipment, lib r a r y a c q u is itio n s , and other nonsalary accounts. Funds from unbudgeted t u it i o n revenue were also allo ca ted to respond to the reduction. The i n s t it u t io n a l response to Executive Order 1975-12 included the adm inistrative decision to c o ll e c t lim ited sa lary savings from vacant p o sitio n s. Positions were allowed to remain open longer than normal, with the u n its capturing some sa lary savings. The summary statements made by those persons interviewed con­ cerning the response to the two Executive Orders indicated the con­ tinuing in s t it u t io n a l b e lie f t h a t the State o f Michigan revenue problems were sh o rt run in nature. The in s t it u t io n a l responses were prim arily aimed a t squeezing funds out of accounts and using one-time, acrossthe-board cu ts. The f l e x i b i l i t y of the i n s t itu tio n a l budget was c o n stric te d , but the i n te g r it y o f the program was l e f t untouched. According to one respondent, the reductions th a t occurred in f is c a l year 1975 and fis c a l year 1976 were not as harmful as educators led the outside society to believe, and some "b elt-tig h te n in g " was a c tu a lly good fo r the i n s t it u t io n because the college was try in g to do too much fo r too many. The years 1977 and 1978 were without Executive Orders and according to those interviewed were good years fo r the i n s t i t u t i o n . In 1976 the s t a t e appropriation fo r Grand Valley S tate Colleges was $8,964,007. In 1978 the appropriation was $10,823,900. sented a 20.7 percent increase in a two-year period. This rep re­ Enrollment, however, underwent even a more s ig n if ic a n t change, dropping from a high of 6,480 f is c a l year equated students in 1976 to 5,849 fis c a l year equated students in 1978. This 9.7 percent enrollment decline was not planned and caused increasing s tr e s s on both the adm inistra­ tio n of the curriculum and the i n s t i t u t i o n 's revenue budget. The decrease in c r e d i t hour production was most s ig n if ic a n t in the social science and humanities a re a s. Social science dropped from 42,444 student c r e d i t hours produced in 1976 to 31,776 student c r e d i t hours in 1978. This 10,668 student c r e d it hour decline rep re­ sented a loss o f 25 percent o f the d is c ip lin e production. Psychology dropped 2,730 student c r e d i t hours from 1976 to 1978 fo r a 18.8 percent decline. The d is c ip lin e receiving the la r g e s t decline on a percentage basis was in te r d is c ip lin a r y s tu d ie s , from 16,576 student c r e d it hours in 1976 to 10,945 student c r e d i t hours in 1978 or a 34 percent d eclin e. A strong statement by two respondents was t h a t the s i g n i f i ­ cance of these declines was not so much the magnitude but the f a c t th a t the declines occurred in the d isc ip lin e s on which the i n s t it u t io n was founded. The lib e r a l a r t s base with individualized in stru c tio n and strong in te rd is c ip lin a r y education was no longer a tt r a c t in g and re ta in in g students. 98 A second s ig n if ic a n t fa c to r sta te d was th a t the o riginal d is c ip lin e s were heavily tenured, and th erefo re reducing expenditures in those d is c ip lin e s was delayed. During the same two-year period t h a t the student c r e d it hours declined 25 percent in social sciences, the fu ll-tim e -e q u iv a le n t fa c u lty a c tu a lly increased by two fa c u lty members. The d is c ip lin e o f psychology between the years 1976 and 1978 declined 18.8 percent in student c r e d i t hour production while adding th ree fa c u lty members and increasing expenditures by 2.3 percent. I n te rd is c ip lin a ry studies declined 34 percent in student c r e d i t hour production between 1976 and 1978 while declining by four fu ll- tim e equivalent fa c u lty and decreasing expenditures by 28.1 percent. The s ig n if ic a n t decrease in both fa c u lty members and expenditures in the in te r d is c ip lin a r y stu d ies area re fle c te d the a b i l i t y of the college to lay o f f p art-tim e nontenured fa c u lty members. These fa c u lty mem­ bers were ty p ic a lly the l a s t h ire d , with the l e a s t s e n io r ity . Accord­ ing to those persons interviewed, the continuing s h i f t o f student i n t e r e s t from the lib e r a l a r t s to other more marketable degrees was o f increasing concern fo r the executive o f f ic e r s . As sta te d by the interview ees, the student s h i f t was decreas­ ing the i n s t i t u t i o n 's a b i l i t y to respond to f is c a l stringency, and the decline in student c r e d i t hour production, and th ere fo re t u it i o n revenue, coupled with the i n a b i l i t y of the i n s t i t u t i o n 's adm inistra­ to rs to reduce the expenditures proportional to the c r e d it hour de clin e , aggravated the budget s itu a tio n . In f is c a l year 1978-79, Grand Valley S tate Colleges i n tr o ­ duced fo r the f i r s t time the concept o f a base budget. A base budget 99 provided the i n s t i t u t i o n with an awareness o f the ongoing costs incurred by the i n s t i t u t i o n . Base budgeting as a management tool provided the adm inistration with an opportunity to review expected revenues and expenditures. Grand Valley S tate Colleges produced a base budget t h a t Incorporated both revenues and expenditures. S tate appropriations and student t u i t i o n and fee estim ates were the two revenue components t h a t were t ie d to student enrollment fig u res to estim ate to ta l revenue a v a ila b le fo r 1978-79. The expenditure side of the balance sheet included estim ates on salary and nonsalary c o sts. The bottom l i n e , as s ta te d by those interviewed, projected a 1979-80 budget th a t was s i g n if ic a n tly out o f balance. On January 29, 1979, President Arend D. Lubbers estab lish ed the Budget Process Task Force. According to those persons i n t e r ­ viewed, the membership of the task force was as important in the process as was the work o f the task force and the charge to the group. The membership o f the group included the Vice-President fo r Administration as chairperson and nine o th er members representing a c ro ss-se c tio n o f i n s t i t u t io n a l committees and functio n s. The task force included fa c u lty members, a student re p re s e n ta tiv e , and admin­ i s t r a t i v e professional in div id u als. One respondent sta te d th a t The work o f the task force in response to f is c a l stringency was a r e s u l t of the lack of d e lib e ra te action in the mid1970s' The lack o f s p e c ific and s e le c tiv e cuts to budgets as compared to the across-the-board cuts t h a t were standard operating procedure in the mid-1970s p re c ip ita te d the basebudget a ction s taken in 1978-79. The memorandum c re a tin g the task force s ta te d : Our preliminary planning fo r 1979-80 in dicates th a t we have a very serious revenue s h o rtf a ll re s u ltin g from our projected 100 enrollment d e clin e . We must plan fo r a balanced budget which adequately addresses in s t it u t io n a l p r i o r i t i e s in the next year as well as succeeding y e ars. A balanced budget i s not possible without some s ig n i f ic a n t reductions and re a llo c a tio n s of funds. The charge to the ta s k force was to make recommendations concerning the following issu e s: 1. Overal1 approach 2. Timetable 3. Suggested guidelines and c r i t e r i a fo r decision making 4. Governance p a rtic ip a tio n in the process 5. Personnel p o lic ie s t h a t p e rta in to budget management In the i n i t i a l meeting in February 1979, the task force acknowledged t h a t fin an c ia l pressures r e la tin g to i n f l a t i o n , s t a t e appropriations c u rta ilm en t, and enrollment decline had already been f e l t in e a r l i e r y e a rs. The task force acknowledged th a t the fin a n ­ c ia l pressures had been addressed prim arily through minor budget changes, sa la ry savings r e s u ltin g from vacancies, and oth er temporary actions t h a t did not modify the base budget. The committee drafted the following statement: Our preliminary a n aly sis indicated t h a t the magnitude o f the problem f o r 1979-80 and subsequent years is such t h a t more su b sta n tia l changes must be addressed and th a t the base budget must indeed be rearranged. The task force estab lish ed a s e t of assumptions th a t were used to respond to the charge. The assumptions established in February 1979 were as follows: 1. Fall-term headcount would be 6,747 students and the f is c a l year equated students (FYES) would be 5,005. At the 5,005 FYES le v e l, th e enrollment would have dropped 1,475 FYES from the peak of 6,480 in 1975-76. 101 2. Salary increases fo r 1979-80 would equal 7%, the maximum allowed fo r under President C a r te r's guidelines f o r wage in creases. 3. Tuition ra te s would be increased 7.2%, the maximum increase provided fo r under President C a r te r 's p rice Increase guide­ l in e . That the s t a t e appropriation fo r Grand Valley in 1979-80 would equal the Governor's recommendation adjusted to Grand V alley's f i s c a l y ear. 4. Based upon these assumptions and projectio ns o f revenues and expenditures, the task force concluded t h a t the base budget must be reduced a t l e a s t $900,000, but no more than $1,900,000, depending on the resources required fo r new programs and additional a c t i v i t i e s t h a t were under consideration. The task force sta te d t h a t We must acknowledge t h a t t h i s i s not a problem fo r next year alone and t h a t re a llo c a tio n s o r changes in the base budget which are made fo r 1979-80 must be examined in l i g h t o f 1980-81 and subsequent years as w ell. Further, the magnitude o f the problem in d icates the need fo r a to ta l i n s t i t u t i o n a l response. According to those persons interviewed, the task force was to have a short-term and lim ited charge and was s p e c if ic a lly designed not to make budget recommendations, but ra th e r to determine the s e rio u s­ ness o f the problem and to o u tlin e a process fo r dealing with i t within the time c o n s tra in ts . The respondents sta te d t h a t the nature o f the task force allowed the group the freedom to system atically explore various approaches to budgeting. The task force reviewed and debated the advantages and disadvantages o f several budgeting a lte r n a tiv e s and systems. I t estab lish ed a s e t of four guiding p rin c ip le s t h a t were followed in se le c tin g the budgeting a lte r n a tiv e to be used. F i r s t , th ere must be a logical order to the process. Second, i t was not d e sirab le to c re a te a new decision making s tr u c tu r e . Third, the process should be c o n siste n t with Grand V alley's t r a d i ti o n and involve as much p a rtic ip a tio n as p o ssib le . Fourth, the process must r e s u l t in a balanced budget. 102 The task force reviewed and discarded the following budgeting a lte r n a tiv e s . Across-the-board cuts were discarded due to the non- se le c tiv e nature th a t they required and because they did not change the configuration of the budget fo r the fu tu re . Object-code cuts were also discarded because they required s e le c tiv e c u ttin g by expenditure type and usually were lim ited to solving sm all, temporary budget problems. Freezing open positions was not considered an accept­ able solution because i t was also nonselective and could negatively a f f e c t an academic or nonacademic program of highest p r i o r i t y . Zero- base budgeting was reviewed and subsequently discarded due to the timeconsuming nature of reviewing the to ta l budget and p r i o r it i z i n g a l l of the programs. The approach t h a t was recommended to address the immediate problem was a budget re a llo c a tio n process. I t involved the id e n tific a tio n o f the lowest p r i o r i t i e s among programs o r a c t i v i t i e s across the e n tir e i n s t i t u t i o n and the subsequent elim ination of some of these to provide funds fo r higher p r i o r it y new programs or a c t i v i t i e s and to balance the budget. The task force id e n tifie d a th re e -ste p process f o r developing the 1979-80 budget. 1. 2. The establishm ent and implementation o f an interim ta r g e t reduction. The development o f a te n ta tiv e budget plan. 3. The adoption o f a fin a l budget plan. According to those persons interviewed, the response to f is c a l stringency in 1978-79 took a very s p e c ific and s e le c tiv e approach. As a r e s u l t of many meetings and thorough in v estig atio n of the 103 financial problem confronting the i n s t i t u t i o n , the adm inistration made recommendations of proposals to the Board of Control. In response to the a d m in istratio n 's req u e st, the Board of Control declared a s t a t e of financial emergency and charged the admin­ i s t r a t i o n with taking the necessary actions to balance the budget. The s t a t e o f financial emergency was declared by the Board of Control in April 1979 fo r Grand Valley S tate Colleges. As a r e s u l t of th is d e c la ra tio n , the adm inistration took the following actions in the academic areas. 1. The adm inistration recommended the elim ination of Thomas Jefferson College fo r Spring 1981, including the lay o ff o f tenured fa c u lty , adm inistrative professional s t a f f members, c le r ic a l and technical s t a f f members, and the elim ination of budgets fo r supplies and expenses. 2. The adm inistration recommended the reduction o f fa c u lty members in William James College. Both tenured and nontenured were targeted fo r p a rtia l reductions. 3. The adm inistration recommended th a t the School of Business undergraduate portion be merged with the MBA program. This merger was designed to reduce duplication and reduce overhead adm inistrative c o sts. 4. The adm inistration recommended th a t the College of Gradu­ a te Studies, which only taught m aste r's-lev e l courses, be merged with the undergraduate program in the College of Arts and Sciences. The d esire to merge these two programs was to elim inate unnecessary and co stly dup lication . 104 5. The adm inistration recommended the elim ination of the Religious Studies I n s t i t u t e . Low i n s titu tio n a l p r i o r it y and cost savings were the reasons fo r t h i s recommendation. 6. The adm inistration recommended the establishm ent o f the Center fo r Research and Development. The goal o f t h i s new center was to generate additional grant and development a c t i v i t y to augment revenue. The Board o f Control received the a d m in istra tio n 's recommenda­ tio n s and thoroughly reviewed the im plications of actions to be taken. In the April 1979 Board o f Control meeting, the Board accepted a l l of the recommendations except fo r the closure o f Thomas Jefferson College. A strong debate ensued, and the Board held a special hearing to receive strong dialogue concerning the closure o f a sp ecialized c o l­ lege. In May 1979, the Board o f Control voted to close Thomas J e f f e r ­ son College. According to the persons interviewed, the steps taken to respond to f is c a l stringency in Spring 1979 were very s ig n if ic a n t fo r several reasons. 1. The d eclaratio n of fin an cial emergency by the Board of Control was a necessary ste p , which allowed the adm inistration to close academic programs and lay o f f tenured fa c u lty . 2. The process th a t was estab lish ed by the Budget Process Task Force provided an opportunity fo r the education o f a ll sectors of i n s t itu tio n a l leadership as well as e sta b lish in g a formalized vehicle fo r communication and information dissem ination. 105 3. The in te rn al budget re a llo c a tio n of resources t h a t was implemented was the f i r s t time th a t d e lib e ra te s e le c tiv e budget resources decisions had been made. 4. The adm inistrative decision to cut deeper than was imme­ d ia te ly necessary to solve the cu rrent problem allowed fo r increased budget f l e x i b i l i t y fo r r e a llo c a tio n . The re a llo c a tio n occurred with the decrease o f funds from lo w -p rio rity programs, i . e . , Thomas J e f f e r ­ son College, to the provision of funds fo r new programs, i . e . , Center fo r Research and Development. 5. The review of a l l college guid elin es, p o lic ie s , and pro­ cedures t h a t in any way were integrated with the budget/policy-making machinery was a strong step toward e ff e c tiv e i n s t itu tio n a l lea d er­ ship. 6. The an aly sis of revenues, expenditure p a tte rn s , enrollment tren d s, program m ark e ta b ility , and human resources was integ rated fo r the f i r s t time in the i n s t i t u t i o n 's h isto ry . The r e s u l ts o f the adm inistrative actions implemented as a r e s u l t of the Board of Control support were f e l t throughout the in stitu tio n . In the spring of 1979, tenured fa c u lty members were terminated fo r th e f i r s t time in Grand Valley S tate Colleges' h isto ry . Table 18, Spring 1979 Administrative Actions, r e f l e c t s actions taken and an index of the level o f au tho rizations fo r the a ctio n s. The actions taken resu lted in the term ination o f 16 fa c u lty members, prim arily from the Thomas Jefferson College. However, William James College also had a p a rtia l reduction of nontenured fa c u lty Table 1 8 .—Grand V a lle y S ta te C o lle g e s ' S p rin g 1979 a d m in is tr a tiv e a c tio n s . Administrative Recommendation Administrative Action Board Action Declaration o f financial emergency X Establishment of base budget X X Establishment o f budget process task force X X Closing o f Thomas Jefferson College Reduction o f William James College Merger School o f Business with MBA X X X X X X X X X Elimination of Religious Studies I n s t i t u t e X X X X X X X X X X X X X X X X X X X X X X X X X X X Establishment o f Center fo r Research and Development Layoff o f tenured fac u lty Layoff o f nontenured fa c u lty Layoff o f adm inistrativ e s t a f f Layoff o f c le r ic a l/te c h n ic a l s t a f f Reduction in equipment purchases Reduction in supplies expenditures Reduction in lib r a r y a cq u isitio n s Review o f programs fo r c e n t r a l i t y Review o f r o le and mission Planning process e stablished X X 107 members. The term ination of tenured fa c u lty members was the most s ig n if ic a n t action taken in 1979. The adm inistration recommended t h a t the Board of Control declare a s t a te of financial emergency in order to close Thomas Jefferson College and term inate tenured fa c u lty . Grand Valley operated within the framework of an Administra­ t iv e Manual, which s p e c if ic a lly d e ta ile d the process fo r personnel term ination. To terminate tenured f a c u lty , i t was necessary f o r the i n s t i t u t i o n to be operating in a s t a t e o f financial emergency. The second caveat was t h a t program discontinuance must occur in order to term inate tenured fa c u lty within the sp e c ific academic program. The closure of Thomas Jefferson College by the Board o f Con­ t r o l provided a strong statement regarding the adm inistrative d e sire to e f f e c t change. Thomas Jefferson College was designed to provide a lib e r a l a r t s curriculum in an in te r d is c ip lin a r y approach to under­ graduate education. This College embraced the founding f a t h e r s ' concepts; th e re f o re , the discontinuance o f th is college was a very strong ro le and mission statement. The discontinuance schedule was adjusted to allow the students cu rre n tly in the program to complete t h e i r education within the colleg e. Students, however, were strongly encouraged to tr a n s f e r to other colleges within Grand Valley, and a d m inistrativ e e f f o r t s were made to allow fo r a smooth tr a n s f e r . Several consequences occurred as a d ir e c t r e s u l t of the s t a t e mandated c u ts . According to one respondent, a primary consequence was t h a t the f is c a l stringency prevented Grand Valley S tate Colleges from rounding out i t s curriculum o fferin g s and becoming a complete in stitu tio n . "The i n s t i t u t i o n had desired to add professional 108 c areer-o rien ted programs to supplement the w ell-estab lished base of lib e ra l a r t s ; the programs id e n tifie d were physical therapy, a m aster's degree in nursing, and a school o f engineering." The second consequence sta te d by one respondent was th a t services to students had decreased. According to one adminis­ t r a t o r , the i n s t it u t io n a l mandate was to provide a q u a lity educa­ tio n to the stud en ts. Due to the forced reductions, resources to provide the following student services were c u rta ile d : re g istra ­ tio n , fin an cial a id , housing, re c re a tio n , counseling, placement, and other student se rv ic e s. The continued cutback of the personnel performing these services decreased the a b i l i t y of the i n s t it u t io n to meet the needs o f the students. The t h ir d consequence sta te d was t h a t the continued budget squeeze on the i n s t i t u t i o n had caused increased a tte n tio n on a ll budget m atters. Proposition 3 The i n s t i t u t i o n will report that, revenue-increasing s tr a te g ie s have been implemented in response to fis c a l stringency. According to those interviewed, th is aspect of in s titu tio n a l management had not been successful. One respondent s t a te d , "In the mid-seventies the i n s t i t u t i o n was s t i l l believing th a t enrollment growth would continue to produce t u it i o n revenue and as a p a ra lle l would come increasing s t a t e appro p riatio n s." According to those interviewed, the decline in student c r e d i t hour production th a t occurred in 1976-77 and 1977-78 was to a c e rta in extent not re fle c te d 109 in a p a ra lle l lo ss of t u itio n revenue fo r two reasons. F i r s t , the tu it i o n and fee ra te increases t h a t occurred o f f s e t the t u it i o n lo ss due to c re d it hour d e clin e s. Second, s t a te appropriations continued to increase in 1976-77 and 1977-78, which buffered the e f f e c t of declining tu it i o n revenue as a function of c r e d i t hour production. Grand Valley stepped up the i n s t i t u t i o n 's lobbying e f f o r ts in the s t a te le g i s l a t u r e with the goal o f increasing s t a t e appropria­ tio n s . This e f f o r t was c arried out by increasing the lia is o n work between the i n s t i t u t i o n and the following s t a t e o f fic e s : the Depart­ ment of Management and Budget, the Bureau o f F a c i l i t i e s , the Senate Fiscal Agency, the House Fiscal Agency, the Senate, the House of Representatives, and the Governor's o f f ic e . One respondent reported t h a t e f f o r t s in t h i s arena were not as f r u i t f u l as was d e sired , and t h a t Grand Valley was s p e c if ic a lly attempting to both increase the percentage o f the s t a t e budget t h a t was spent on higher education and also increase the i n s t i t u t i o n 's share o f any appropriations to higher education. The second sp e c ific program undertaken to augment revenue was to build student enrollment. had mixed r e s u l ts . This program was reported to have From the peak year o f student c re d it hour pro­ duction in 1975-76, student c r e d it hour production ste a d ily declined. The decline in student c r e d it hour production was not p a ra lle le d by a proportional drop in student-headcount fig u re s. The d ifference in these two measures of enrollment was very important to the i n s t i t u ­ t i o n 's budget. The headcount figu res r e fle c te d the actual number of unduplicated students who reg iste re d fo r courses and r e lie d on student 110 se rv ice s. The student c r e d it hour production re fle c te d the r a te a t which students re g is te re d fo r courses. As pointed out by one respond­ e n t, the overhead in s t it u t io n a l co st was linked to the t u i t i o n fee per c r e d it hour, not to head count. The trend a t Grand Valley was a s i g ­ n if ic a n t decrease in the average student c re d it hour load; in 1974-75 the r a t i o o f head-count students to f is c a l year equated students was 1 .1 :1 .0 . By 1978-79 t h a t r a t i o had increased to 1 .3 :1 .0 . This change r e fle c te d an 18 percent decrease in the c r e d it hour load c a rrie d by the average student. The th ir d stra te g y implemented to increase revenue was to a t t r a c t outside grant and research funds. As discussed by those per­ sons interviewed, i t proved d i f f i c u l t to r a is e funds in t h i s area fo r two main reasons. F i r s t , other higher education i n s t it u t io n s in not only Michigan but also in the United States were e stab lish in g develop­ ment and research grant o ffic e s in an e f f o r t to augment general-fund revenue. Second, the ro le and mission o f Grand Valley S tate Colleges was lib e ra l a r t s , which was not an area th a t ty p ic a lly a ttr a c te d heavy grant a c t i v i t y . In Spring 1979, Grand Valley formally e sta b ­ lish ed th e Center fo r Research and Development; t h i s c en ter was designed to support fa c u lty members in t h e i r e f f o r t s to a t t r a c t o u t­ side funding fo r special p ro jec ts. Proposition 4 The i n s t i t u t i o n will repo rt th a t reduction of personnel has been used in response to fis c a l stringency. According to the interview p a r tic ip a n ts , Grand Valley State Colleges did use th is technique to respond to the constrained budget Ill a t th ree s p e c ific times during the period under review. Following the f i r s t Executive Order in December 1974, Executive Order 1974-11, the i n s t i t u t i o n took measures to respond to the reduction. These measures, while designed not to a f f e c t the i n te g r it y of the i n s t i t u t i o n , did e n ta il a ctio ns t h a t re su lte d in reduction in personnel. F irst, actions were taken to freeze open positio ns or positions th a t opened through a t t r i t i o n . This action la s te d through June 1975 and e ffe c ­ tiv e ly reduced the to ta l number o f personnel. The second action was the postponement of new-program development and th ere fo re not hiring new s t a f f . This actio n c u rta ile d fu rth e r program development. Executive Order 1975-12, which occurred in December 1975, caused g re a te r re lia n c e on a reduction in personnel to capture needed d o lla r s . This Executive Order reduced appropriations to Grand Valley by $160,000 f o r fis c a l year 1975-76. The i n s t it u t io n implemented the same basic plan of s tr a te g ie s but also added o th er forms o f personnel reductions. In 1975-76 the academic u n its reorganized and eliminated several top a dm in istrative p o sitio n s. This reorganization a t the top created g re a te r e ffic ie n c y and immediate personnel savings. The second form o f personnel reduction implemented was nons e le c tiv e s t a f f a t t r i t i o n . This method had tremendous lim ita tio n s because s t a f f vacancies occurred randomly and not n ecessarily in a planned fashion. According to one respondent, a t t r i t i o n forced the i n s t it u t io n to accept decreases of s t a f f or fac u lty in areas t h a t were the highest in student demand. The e f f e c t was th a t personnel cost savings could be gained in the sh ort run, but in the long run i t could crip p le the i n s t i t u t i o n 's a b i l i t y to o f f e r c r i t i c a l academic programs. 112 With the d e clara tio n of financial emergency in Spring 1979, Grand Valley moved in to a new f r o n t ie r o f personnel la y o ff. The Board of Control d eclaratio n allowed the adm inistration to lay o f f not only nontenured part-tim e fa c u lty members but also tenured fa c u lty members. Without the Board of Control d e c la ra tio n , the i n s t i t u t i o n would not have been able to take such d r a s tic but necessary a c tio n . According to two o f the respondents, t h i s action was believed beyond a l l realms o f p o s s ib i l i ty by the fa c u lty . As sta te d during the i n t e r ­ views, fac u lty members—both the a ffected and some o f the nonaffected— believed t h a t they were in a t o t a l l y secure and, to some e x te n t, protected profession. The actions taken in Spring 1979 were d r a s tic in order to reduce the base budget by approximately $1,000,000. d ir e c t e ff e c t was a la y o ff o f 16 tenured fac u lty members. The Those fac u lty members terminated were prim arily in the Thomas Jefferson College, a lib e ra l a r t s college t h a t had already experienced dramatic enrollment lo sse s. Throughout the period o f 1974-75 to 1978-79, decreases in student enrollment and small c la ss siz e s meant t h a t p a rttime fa c u lty members were not retained o r were terminated. According to the respondents, the nonacademic side o f the budget received more severe cuts in f is c a l years 1975, 1976, and 1979. To p ro tect the academic programs, the adm inistration turned to the nonacademic se c to r fo r a g re a te r percentage of cuts in both salary and nonsalary budget accounts in the years 1974-75 and 1975-76. cuts were f e l t in two primary fashions: These F i r s t , those persons who were cut were not reh ired ; second, those persons remaining were expected to pick up the level of services provided by the to ta l s t a f f . 113 One respondent s ta te d , "The movement through the seventies was p a ra lle le d by increasing budget d i f f i c u l t i e s and decreasing s t a f f morale." As pointed out 1n the interview , the continuing decline in s t a f f morale was coupled d i r e c tl y to budget uncertainty and adminis­ t r a t i v e a c tio n s . The previously secure environment th a t public higher education offered was becoming a very v o l a t i l e , c yclical environment. I t was becoming increasin gly d i f f i c u l t to a t t r a c t and r e ta in topq u a lity fa c u lty and s t a f f . According to those interviewed, th is was a d i r e c t r e s u l t of personnel actions t h a t had occurred. Proposition 5 The i n s t i t u t i o n w ill rep o rt t h a t the discontinuance of academic programs has been used as one response to fis c a l stringency. At Grand Valley t h i s response did not occur u n til Spring 1979, with the Board o f Control d e clara tio n of a fin ancial emergency. The d eclaratio n was a r e s u l t of the two Executive Order reductions and the a d m in istra tio n 's introduction o f a base budget as a planning to o l. The projected budget fo r f i s c a l year 1979-80 indicated th a t in s t it u t io n a l expenditures would exceed revenues by a t le a s t $900,000. The P r e s i­ dential establishm ent of a Budget Process Task Force to review i n s t i ­ tu tio n a l budget and adm in istrative processes led to a recommendation of budget re a llo c a tio n s and reductions. The academic portion o f the i n s t i t u t i o n 's budget was sla te d fo r reo rg an izatio n , academic-program c o nso lidations, and e lim in ations. The School of Business undergraduate d iv isio n was merged with the M aster's in Business Administration. This program consolidation was 114 executed to reduce ad m inistrative overhead and to promote g rea ter coordination within th e two programs. The undergraduate College of Arts and Sciences was combined with the College of Graduate Studies, a m a ste r's-le v e l l ib e r a l a r t s program. The consolidation o f these two u n its was also based on budget savings through elim ination of p a ra lle l and d u p lic ativ e se rv ice s. According to the respondent, as c la ss siz e s continued to decrease through the mid-1970s, i t became evident to the i n s t i t u t i o n 's executives t h a t d e lib e ra te actions would be required i f the i n s t i t u ­ tio n was to survive continuing changes. The adm inistration recom­ mended to the Board o f Control in April 1979 th a t an e n tir e college within Grand Valley S ta te Colleges be elim inated. Thomas Jefferson College was one of the o rig in al colleges th a t was established and had the ro le to provide a lib e ra l a r t s in te r d is c ip lin a ry education program. According to one respondent, the basic te n e ts o f t h i s college most c lo sely p a ra lle le d the founding f a t h e r s ' b e lie f in the importance of general education as a foundation fo r l i f e . The recommendation to close Thomas Jefferson College was based on the lack o f student demand fo r the curriculum t h a t i t was o fferin g . The lack o f enrollment had driven the cost per cla ss or costs per student c r e d it hour up s te a d ily . The recommendation was strongly opposed by some members of the community, as well as some fac u lty and students. At the May 1979 Board of Control meeting, a vote was sla te d fo r discontinuance. The scheduled discontinuance was phased to allow students to tr a n s fe r to other colleges within the in s t it u t io n or to graduate from Thomas Jefferson College. 115 In addition to t h i s college elim ination , the Religious Studies I n s t i t u t e was elim inated, also because of declining e n ro llment. Proposition 6 The i n s t i t u t i o n will rep ort th a t fac u lty members were involved in developing in s t it u t io n a l responses to fis c a l stringency. According to those persons interviewed, u n til 1979 the only d ir e c t involvement of fa c u lty members was on an informal b a s is . The i n s titu tio n a l actio ns th a t occurred before 1978-79 were lim ited to actions th a t did not re a llo c a te i n s t itu tio n a l resources and were targeted fo r nonacademic a re as. The actions t h a t were taken were lim ited in scope and were directed by the a d m in istrato rs. Therefore, the fa c u lty were not involved in a formalized co n su ltativ e process. In Spring 1979, the establishm ent o f the Budget Process Task Force sig nalled the f i r s t d ir e c t formal involvement of fa c u lty mem­ bers. The Task Force process involved a ll central fa c u lty governing bodies in reviewing and advising on the budget recommendations th a t were being developed. The th ree primary fa c u lty groups t h a t were d ir e c tly involved were the Faculty Salary and Budget Committee, the Executive Committee o f the Faculty Senate, and the All College Academic Senate. The Budget Process Task Force had fa c u lty represen tation and was designed to e l i c i t a c tiv e involvement from a l l fac u lty members. The fa c u lty involvement in the Budget Process Task Force s ta r te d with the formal appointment o f the Task Force members and continued through­ out the duration of the Task Force. As sta te d by one respondent, the 116 fac u lty involvement was both formal and informal: The fac u lty members on the Task Force served as a formal communication lin k with the remaining fa c u lty body, and the informal communication was ongoing. This formal and informal communication network proved to be a strong a s s e t to the Task Force due to the feedback th a t was constantly being received from the fa c u lty . According to those persons interviewed, the involvement o f fac u lty members was believed to be extremely important i f the Task Force and other adm inistrative recommendations were to be accepted on the campus. The communication of a w illingness by the adm inistration to seek fa c u lty input was a necessary ingredient to the success o f the program. The Task-Force-designed budget-reallocation process recommended th a t tenured fa c u lty positions be elim inated fo r the f i r s t time in Grand Valley S tate Colleges' h isto ry . The budget- real location process involved the re d is tr ib u tio n o f funding from academic u n its rated as lower p r i o r it y to academic u n its rated as higher p r i o r i t y . The Spring 1979 budget process ended with the Task Force recommendations and subsequent adm inistrative actions r e a l l o ­ cating funds and tenured fa c u lty positions within academic a f f a i r s . The fa c u lty members were involved in d ir e c tly and d i r e c tl y in the Budget Process Task Force and in the review o f academic programs t h a t were to be phased out or consolidated. According to one respond­ e n t, without the input of the fa c u lty , including a ll the s e n s i t i v i ­ t i e s t h a t p a ra lle l such programmatic recommendations, i t would have been impossible to address a ll the issu e s. 117 Proposition 7 The i n s t i t u t i o n w ill report th a t there has been some b e n efit from the period o f f is c a l stringency. This proposition and the questioning th a t went along with i t in the interviewing stage o f the data c o lle c tio n e l i c i t e d by f a r the stro n g est and most cohesive answers from those persons interviewed a t the i n s t i t u t i o n . The s t a t e o f increasing f is c a l stringency th a t occurred throughout the 1970s was a d e f in ite benefit to the campus. As sta te d by one respondent, "The continued b e lt tightening t h a t occurred was a c tu a lly good f o r the campus. . . . The c rie s t h a t were heard about the t e r r i b l e p lig h t o f Michigan higher education were over-statem ents." The o th er respondents supported th is statement with the q u a li f ie r t h a t the sta te -re q u ire d cuts a c tu a lly allowed the adm inistration to take actions th a t i t would normally not have been able to tak e. The s ta te -is s u e d Executive Orders 1974-11 and 1975-12 provided a backdrop fo r the formal action s taken on campus, including the d e clara tio n of financial emergency in Spring 1979. According to those persons i n t e r ­ viewed, the adm inistration was aware o f the decreasing i n s titu tio n a l budget f l e x i b i l i t y but f e l t t h a t fo r local ( i n s t it u t io n a l ) p o l it i c a l reasons s ig n if ic a n t retrenchment or re a llo c a tio n action could not be taken unless th ere was a backdrop o f required budget c o n stric tio n s by the s t a t e . As sta te d by one respondent, " i t was d i f f i c u l t to take action without formal s t a te action t h a t provided an impetus." With the introduction o f the base-budget concept in Spring 1979 and the 118 issuance of a d eclaratio n of financial emergency came several d ir e c t b e n efits to the campus. F i r s t , the introduction of a base budget estab lish ed the concept of a balanced budget fo r both current and base y e a rs. The fa c t th a t the budget was projected to be out o f balance by an e s t i ­ mated $900,000 required the adm inistration to take d i r e c t action to c o rre ct the s i t u a t i o n . This required budget reduction and fund- re a l! ocati on action s would not have been possible without the f is c a l stringency. Second, the Board o f Control enactment o f the condition of financial emergency mandated an internal re a llo c a tio n process. According to one respondent, the academic community would not accept the p r i o r i t i z a t i o n and c u ttin g of both academic programs and fa c u lty unless i t was forced to do so. The adm inistration believed t h a t i t was not possible or wise to suggest such actions without firm and su b sta n tia ted reasons. For these two reasons, the e x te rn a lly imposed f is c a l stringency provided the adm inistration with not only a reason to take such a c tio n , but a ls o , to some e x te n t, a requirement to take such a ctio n . All those interviewed sta te d t h a t such re a llo c a tio n action was long overdue and d ir e c t b e n e fit to the continuation o f a sound academic program. The th ird sta te d b e n e fit was th a t with the backdrop of fis c a l stringency and the ensuing budget c u ts , the i n s t i t u t i o n 's budget f l e x i b i l i t y increased. According to one respond­ e n t, Grand Valley S ta te Colleges was try in g to do too much and had spread resources over too wide an area. By p r i o r i t i z a t i o n and subse­ quent elim ination o f some programs, more funds became a v a ila b le fo r h ig h -p rio rity items. 119 Proposition 8 The i n s t i t u t i o n w ill rep o rt major problems encountered in the attempt to respond to fis c a l stringency. According to the interview ees, the most s ig n if ic a n t problem encountered was in ternal communication. The respondents c l a r i f i e d by s ta tin g t h a t communication within the i n s t i t u t i o n was t h e i r c h ie f problem. The respondents id e n tifie d th ree sp e c ific subcategories of problems within in ternal communication systems. F i r s t , according to one respondent, "the campus community was unaware and naive of the budgeting process." This naivete increased the d i f f ic u lt y of e sta b lish in g a process to e f f e c t budget r e a llo c a ­ tio n and change. I t was f i r s t necessary to educate the campus regard­ ing budgeting techniques before any communication could occur regarding possible changes within the budget. During t h i s period o f f is c a l stringency th ere was a strong sense of urgency th a t was not d i s s i ­ pated u n til appropriate actions were taken. Attempting to communicate the basics of budgeting during such a period was d i f f i c u l t , a t b e s t, according to one respondent. A second problem area th a t was linked d ir e c tly to communi­ cating the concept of base budgeting during a period o f f is c a l stringency was the need to change past p ra c tic e and a tt i tu d e s toward funding le v e ls . According to those persons interviewed, s t a f f members a t the campus had always operated on the basis th a t once a program was e sta b lis h e d , i t would never be discontinued or reduced; t h i s b e li e f was e sp ec ially strong on the academic side of the i n s t i t u t i o n . This expectation of continuation or momentum of the s ta tu s quo made i t 120 extremely d i f f i c u l t to communicate the need fo r change. As one respondent s ta te d , "the b e lie v a b ility of the need to cut programs and s t a f f was low. I t was necessary to persuade and educate s t a f f members regarding the e rr o r o f past funding p rac tic es before convincing the campus community of the present funding n e c e s s itie s ." The th ir d subpart to t h i s internal communication problem was th a t the communication of the existence o f a budget problem created a "we/they" a t t i t u d e . As sta te d by a respondent, there was a tendency to form immediate lin e s o f separation between the adm inistration and the remainder of the campus community. This a lie n a tio n and formation of opposition groups increased the d i f f i c u l t y of in ternal communica­ tion and th erefo re the a b i l i t y to e f f e c t any change. The b a rrie rs th a t such a campus a t t i tu d e forms were su b stan tial and required even g rea ter amounts of time and resources to erode such a t t i t u d e s . As pointed out by one respondent, th is intern al communication problem was geometrically la rg e r than any problem caused by the external envi­ ronment . Proposition 9 The i n s t i t u t i o n will rep ort successful responses to f is c a l stringency. The response to t h i s proposition by those interviewed f e ll s p e c if ic a lly in to the category of process versus sp e c ific programmatic successes. Those persons interviewed a ll sta te d th a t the success of any i n s t it u t io n a l response to fis c a l stringency was lim ited to the existence of a process t h a t allowed fo r open d e lib era tio n and communi­ cation by a ll campus members. One respondent emphasized th a t i t was 121 impossible to implement i n s t itu tio n a l responses to fis c a l stringency without a d e fin itiv e communication process. The process e stab lish ed by the i n s t i t u t i o n was the Budget Process Task Force appointed by the President in 1979, which formalized the communication and d e lib e ra tio n framework fo r budget responses. According to the interview ees, the period from the middle to the end of the 1970s was increasingly d i f f i ­ c u lt in terms of both decreased budget f l e x i b i l i t y and communication. One respondent s ta te d , "When you know the d o lla r amount to be cut and the need to change, then do i t by moving with d ispatch ." The budget- review process should be followed to allow fo r communication and d e lib ­ e ra tio n , but process time should be compressed. This shorted process was termed the only e ff e c tiv e way to respond to f is c a l stringency. A second successful measure was the a d m in istra tio n 's w illin g ­ ness to provide up-to-date data fo r those involved in the review pro­ cess. Provision and in te r p r e ta tio n of the data helped in communicating the a d m in istra tio n 's in te n tio n to involve the e n tir e campus in a deli berati ve process. Proposition 10 The i n s t i t u t i o n will rep o rt t h a t both operational and s tr a te g ic planning occurred a t the i n s t i t u t i o n during the 1970s. According to those persons interviewed, the i n s t i t u t i o n had undergone a tr a n s it i o n regarding the type of planning t h a t was done. As sta te d by one respondent, "at the s t a r t o f the m id-seventies, the only type of planning th a t was completed was a dm inistrative in nature and was tie d d ir e c tly to the current budgeting process." As i l l u s ­ tr a te d by the type of reductions th a t occurred in the e a rly 1970s and 122 the lack of a base-budget review process, the in s t it u t io n a l planning t h a t occurred was o p e ra tio n a l. The actions in Spring 1979 sig nalled the f i r s t time t h a t the i n s t i t u t i o n provided any s tr a te g ic or longrange planning. According to these interview ees, i t was not u n til the base-budget concept was introduced th a t any planning fo r fu tu re years occurred. The re a liz a tio n of a sizab le d e f i c i t required the i n s t it u t io n to move s w iftly to e sta b lis h an integrated operation (sh ort range) and s t r a te g ic (long range) budget process. Proposition 11 The i n s t i t u t i o n s w ill not vary on the projection of the fu tu re o f higher education. The respondents did not vary in the projected outlook fo r the fu tu re of Michigan higher education and Grand Valley S ta te Colleges. The respondents reported: 1. 2. 3. 4. The fu tu re fo r Michigan higher education w ill be more o f the same in terms of a decreasing proportion of funds coming from the s t a t e . Tuition w ill continue to increase a t a strong pace, in cre as­ ing the d i f f i c u l t y fo r students to attend co llege. I f i n f la tio n continues a t i t s present r a t e , increasing s e le c tiv e program cuts will become necessary a t a l l the in stitu tio n s. Career and professional programs will flo u ris h in the fu tu re as students attempt to lin k education d ir e c tly to c a re e rs. Given the above statem ents, a ll respondents noted th a t Grand Valley S tate Colleges would be smaller but stronger in the fu tu re . One respondent sta te d th a t Grand Valley would improve i t s market share of the college-age students. The concluding remark by one of the respondents was t h a t higher education would receive decreasing support from the pub lic, but th a t i t would survive. 123 Case Study: Oakland University Oakland University i s located in Oakland County in the northern t i e r of suburbs o f the D etroit metropolitan area. The University is situ a te d on 1,500 acres about fiv e miles e ast of Pontiac, fiv e miles west of Rochester, and 28 miles north of D e tro it. Oakland County has one of the highest per c ap ita incomes in the United S ta te s , and there is su b sta n tia l in d u stria l and commercial e n te rp ris e within commuting distance of the campus. The immediate area around the campus is undergoing intense re s id e n tia l and commercial development. Noting t h a t Oakland County was the second most populous county in the s t a t e and p ro jecting su b stan tial growth in the second h a lf of the century, the Oakland County Planning Commission decided in 1955 t h a t an i n s t i t u t i o n of higher education should be located in the county. The Planning Commission convinced Mrs. Matilda R. Wilson t h a t Michigan S tate University would be in te re s te d in developing a new campus on Meadow Brook Farms, some 75 miles from the main campus in East Lansing. A fter s a tis f a c to r y negotiation between Mrs. Wilson and Michigan S tate U niv ersity 's President Hannah and Vice-President Varner, a g i f t from Mrs. Wilson o f the e n tir e e s ta te and $2 m illion was announced publicly on January 3, 1957. On th a t date the Michigan S tate University Board of Trustees accepted the g i f t , and on January 23 and 24, 1957, the Michigan House of Representatives and the Michigan Senate, resp e c tiv e ly , pledged support and earmarked the land to e s ta b lis h an i n s t i t u t i o n o f higher education. The i n i t i a l group of 24 fa c u lty was appointed in e a rly 1959. The f i r s t student c la ss of about 570 stu d en ts, a ll freshmen and 124 e n tir e ly commuters, was admitted and re g is te re d in September 1959. In 1963, the f i r s t graduating c la s s of 146 students received under­ graduate degrees. Also, in 1963 the i n s t i t u t i o n changed i t s name from "Michigan S tate University-Oakland" to "Oakland U niversity." The enrollment and academic program growth t h a t occurred was dramatic, with the adm inistration taking the formal step to obtain the t i t l e of "university" instead of college due to the complexity of programs being o ffered . In 1970, by L egislative Act 35, Public Acts of 1970, Oakland University was e stab lish ed as an independent public u n iv ersity under the a u th o rity of i t s own appointed Board of T rustees. Thus, the 13- year formal asso ciatio n with Michigan S ta te U niversity ended. In 1971, the newly independent Oakland University was the scene of a ten-day fa c u lty s t r i k e . This s t r i k e was the f i r s t in the United S tates by a u n iv e rs ity fa c u lty and led to unionization of a ll fac u lty a t the i n s t i t u t i o n . There were several fa c to rs c o n tribu ting to the environment t h a t fo stered the s t r i k e and subsequent unioniza­ tio n . F i r s t , the s t a t e 's economy was becoming increasingly c y c lic a l, causing uncertainty in revenue generation. This u n certain ty a t the s t a t e level was passed d i r e c tl y to the i n s t i t u t i o n in the form of reduced appropriations. A second con tributing fa c to r was the decline in public support fo r higher education as compared to o th e r s t a t e departments. Not only were the s t a t e expenditures increasing a t a slower r a t e , but also the portion of the funding to higher education 125 was decreasing. The th ir d and perhaps the most s i g n i f ic a n t fa c to r was the larg e s h i f t in student enrollment p a tte rn s . Precipitous drops in teacher-education enrollment threatened the s t a b i l i t y of major areas o f a r t s and sciences and also a s ig n if ic a n t portion of graduate education. These fa c to rs combined to cause a n x ie tie s and uneasiness in the fa c u lty ranks concerning job s e c u r ity , promotional opportunity, work loads, sa lary r a t e s , and p o tential adm in istrativ e actio n . The outcome o f these a n x ie tie s was the fa c u lty s t r i k e and unionization, an unprecedented action taken by any college fa c u lty to date. The responses to the 11 propositions r e f l e c t a compilation of data obtained during interviews with the P residen t, Provost, and VicePresident fo r Business A ffairs a t Oakland U niversity. Proposition 1 The i n s t i t u t i o n will rep ort th a t the period o f f is c a l stringency s ta r te d during the mid-1970s. The persons interviewed sta te d th a t the d e fin itio n of f is c a l stringency as presented during the interview re fle c te d an accurate d e fin itio n o f f is c a l stringency. One respondent c l a r i f i e d the d e f i ­ n itio n by adding t h a t the a b i l i t y of the s t a t e to f u l f i l l the approp­ r ia te d funds was the real question to be addressed. One te n e t of the d e fin itio n was t h a t mid-year reductions in sta te -a p p ro p ria te d funds to the i n s t i t u t i o n forced the i n s t i t u t i o n s in to immediate mid­ year cutbacks. I t was these mid-year cutbacks t h a t were both u n a n tic i­ pated and severe th a t mandated the d r a s tic i n s t it u t io n a l response. 126 The sp e c ific year t h a t was id e n tifie d by the respondents as the s t a r t o f fis c a l stringency fo r Oakland University was the 1975 academic year. According to one respondent, the actual s t a r t of the "financial pinch" was in the 1974 academic year. But the e f f e c t was minimal in terms of sp e c ific in s t it u t io n a l responses. As sta te d by t h a t respondent, 1974 was the year in which the i n s t i t u t i o n 's admin­ i s t r a t i o n began to focus on the continual loss of i n s t it u t io n a l budget fle x ib ility . The enrollment s h i f t from the lib e r a l a r t s areas to the professional-career-1 inked d is c ip lin e s was c ite d as a strong con­ tr ib u tin g fa c to r to the loss o f an i n s t itu tio n a l budget f l e x i b i l i t y in academic year 1974-75. Executive Order 1974-11 was issu ed, which reduced the s t a t e appropriations to Oakland University by $190,597. This Executive Order was issued on December 16, 1974, a f u ll six months into the in s t itu tio n a l f is c a l y e ar. As explained by one respondent, in order to reclaim funds o f t h a t magnitude in mid-year, i t was necessary to take sw ift and, a t tim es, heavy c u ts . This unanticipated cut required th a t the budget reductions occurred in any area where i t was possible to i n s t i t u t e savings. In 1976 another Executive Order was issu ed , which affected Michigan higher education and Oakland University. received a cut o f $250,000. Oakland University Again, t h i s mid-year reduction n e ce ssi­ ta te d reductions to programs, s t a f f , and nonsalary items. As one respondent noted, the years 1975 and 1976 were d i f f i c u l t tr a n s it i o n years fo r Oakland University. 127 Table 19 l i s t s the enrollment, expenditure, and s t a te appropriation trend a t Oakland University fo r the years 1974-75 to 1978-79. The areas o f s t a te appropriations column 2 and expenditures columns 3 and 4 r e f l e c t the slow but steady increase in cu rren t d ol­ lars. The column on f is c a l year equated students r e f l e c t s the general growth p a ttern of the i n s t i t u t i o n . The year 1976-77 represented the only year in which the student enrollment a c tu a lly declined. A review of the data supported the f a c t th a t t h i s one-year flu c tu a tio n was an abnormality as contrasted to the usual slow-growth mode o f Oakland University. Table 20 presents the e f f e c ts o f i n f la ti o n and enrollment on the current d o lla r s . The d o lla r figures in Table 20 have been divided by the fis c a l year equated students and deflated by the Higher Education Price Index. The d e fla tio n o f cu rren t d o lla rs by the Higher Education Price Index discounts the e f f e c t o f in f la tio n and presents the c o n stan t-d o lla r fig u re t h a t Oakland had to expend. As noted by one respondent, the constant d o lla rs per student declined throughout the period under examination. Proposition 2 The i n s t it u t io n s will rep o rt t h a t cost-saving s tr a te g ie s were implemented in the in stru c tio n a l program in response to f is c a l stringency. According to those persons interviewed, Oakland U n iv ersity's response to fis c a l stringency was both cumbersome and complex. The i n i t i a l response was caused by Executive Order 1974-11, which occurred in December 1974. This mid-year cutback required the i n s t i t u t i o n to take immediate and, according to one respondent, severe a ctio n s. Table 1 9 .— Oakland U n iv e r s ity i n s t it u t i o n a l d a ta . Year 1974-75 1975-76 1976-77 1977-78 1978-79 S tate Appropriations I n s titu tio n a l Expenditures In stru ctio n al Expenditures Fiscal Year Equated Students $12,515,903 13,243,095 13,802,802 15,301,400 17,498,475 $19,300,427 20,088,590 21,342,657 23,126,327 25,876,696 $ 8,884,118 9,335,710 9,752,992 10,611,730 11,988,101 8,537 8,612 8,493 8,825 8,873 Table 20. —Oakland University calcu lated d ata. Year Hi gher Education Price Index Constant Dollars S ta te Appropria­ tio n s per FYES Constant Dollars Total Expenditures per FYES Constant Dollars In stru ctio n Expendi tu re s per FYES 1974-75 1975-76 1976-77 1977-78 1978-79 166.2 177.2 188.7 201.3 217.1 $882 868 861 861 908 $1,360 1,316 1,332 1,302 1,343 $626 612 608 597 622 129 The following was the reported sequence of events t h a t occurred a t Oakland University as a r e s u l t o f the mid-year reduction in s t a t e approp riations. The P resident, the Vice-President fo r Business, and the Budget D irector met to determine the se v e rity o f the budget problem. A fter i t was determined th a t the i n s t i t u t i o n did not have enough fund reserves to solve the problem, a decision was made to make fund reductions. The President in January 1975 gave each executive o f f i c e r a ta r g e t cut fig u re based on the percentage of the to ta l general fund budget t h a t each area held. Each executive o f f i c e r was to prepare itemized accounts to be cut within t h e i r respective areas. Using p resid en tia l d is c r e tio n , the President then determined where the cuts were to occur. An in s t it u t io n a l policy was e stab lish ed th a t the in stru c tio n a l program should be protected as much as p o ssib le . Due to the con­ tra c tu a l agreement with the f a c u lty , academic cuts were lim ited i n i t i a l l y to nontenured positions and nonsalary accounts with the aim o f preventing fac u lty lay o ff. According to one respondent, the p rotection of the academic budget required t h a t a la rg e r proportion o f the cut must occur in the nonacademic budget. The following actions occurred in the nonacademic budget area: 1. 2. 3. 4. S ta ff lay o ff occurred—61 p o sition s were affe cte d e ith e r through elim ination o r reduction in hours. A ttr itio n o f vacancies and delayed f i l l i n g o f vacancies was implemented. Equipment purchases and re p a ir was elim inated except in emergency s itu a tio n s . Routine maintenance was c u rta ile d and special remodeling was temporari ly elimi nated . 130 5. S ta ff trav e l budgets were frozen. 6. Office and normal operating supply accounts were frozen. The Provost took the following actions to accumulate the academic proportion of the c u ts : 1. Library a c q u isitio n s were c u rta ile d . 2. Academic lab and classroom remodeling was delayed. 3. 4. A reduction in support s t a f f occurred, a ffe c tin g 18 p o sitio n s . Nonsalary accounts were sc ru tin iz e d , but reduction was lim ited due to the f a c t t h a t nonsalary accounts contained only 8% o f the academic budget. 5. Part-tim e and nontenure-track fa c u lty members were n o tifie d t h a t due to budget c o n s tr a in ts , no commitment could be made regarding fu tu re employment. Student employment was reduced, a ffe c tin g fin a n c ia l-a id programs. 6. The second Executive Order 1975-12 occurred in December 1975, exactly six months in to th e academic year 1975-76. The state-mandated cut o f $250,000 from Oakland U n iv e rsity 's budget caused a more severe rea ctio n s. According to two of those persons interviewed, the reduction in 1975 was softened by the f a c t th a t some fund reserves ex isted th a t could be used to reduce the amounts of actual cuts necessary. However, with the enactment of Executive Order 1975-12, i t became apparent to the i n s t it u t io n a l leaders t h a t a more severe budget problem e x is te d . The same sequence occurred in response to the second Executive Order. However, according to one respondent, the budget cuts on the nonacademic budgets were beginning to a f f e c t "the q u a lity o f work life ." The issue of s t a f f morale was raised as an in calculab le prob­ lem a ffe c tin g the i n s t i t u t i o n . Not only were there s t a f f reductio ns, but also th e work load increased without appropriate compensation 131 adjustments. In addition to the six responses th a t occurred in 1975, several o th er programs were i n s t it u t e d . 1. 2. 3. Telephone budgets were cut severely in both the academic and nonacademic budgets. Telephones were allo cated a t the ra te of th ree or four s t a f f members per telephone, as compared to the previous one per phone. Planned compensation increases were reduced fo r s t a f f members, and those with reduced appointments o r lay o ff s ta tu s remained unchanged. A management-by-objective budgeting tool was focused on, with r e s u lts expected from each u n it. P r io r ity s e ttin g within programs occurred, with th e lowest item targ eted fo r severe reductions. E .g ., ro u tin e grounds and garden maintenance were a lower p r i o r i t y than building maintenance; th e r e f o re , grounds and garden maintenance received a g re a te r percentage of c u ts . In response to Executive Order 1975-12, the academic portion of th e budget took unprecedented a c tio n s. 1. A p o s i t io n - s h if t - l a y o f f was implemented, a ffe c tin g 18 p o si­ tio n s and p re c ip ita tin g a two-day fa c u lty s t r i k e . 2. Academic program suspension occurred with the suspension of seven programs. Seventeen nontenured fa c u lty received lay o ff n o t if i c a t io n s . 3. 4. 5. 6. 7. Student labor received severe c u ts , which d ir e c tly a ffected the f in a n c ia l-a id program. For the f i r s t time, meal, mileage, and travel guidelines were exacted and s tr in g e n tly enforced. Library a c q u isitio n s were frozen, and periodical subscriptions were maintained but not expanded. Instructional-equipm ent budgets were frozen, with the funds rea llo c ate d into oth er budget areas. According to those interviewed, the fis c a l years 1977, 1978, and 1979 were ty p ifie d as years o f increased planning and slow, d e lib e ra te re a llo c a tio n and re s to ra tio n o f budget le v e ls . 132 Proposition 3 The i n s t i t u t i o n w ill rep o rt th a t revenue-augmentation s tr a te g ie s were implemented in response to f i s c a l stringency. This area was highlighted by the respondents due to the unique programs th a t were implemented by Oakland U niversity. There were several areas id e n tifie d by the respondents as standard responses to increase revenue: maintenance or increased student enrollment, increased t u i t i o n r a t e s , increased student re sid e n t r a t e s , and increased development a c t i v i t i e s . The student enrollment a t Oakland University since i t s s t a r t had been on a slow-growth curve. One respondent noted t h a t t h i s slow but constant enrollment and th erefo re revenue increase was budgeted as an incremental revenue source. The additional student enrollment and c r e d i t hour production was a strong a sse t in the f is c a l years 1974-75 and 1975-76 when the i n s t i t u t i o n received sta te -a p p ro p ria tio n cuts amounting to $440,597. The growth o f academic-program o fferin g s was c u rta ile d in 1975-76 and 1976-77 due to the budget s i t u a t i o n . The lack of a v aila b le funds necessary as s ta r t- u p funds fo r new pro­ grams prevented the i n s t i t u t i o n from expanding program curriculum. According to one respondent, the decline of 119 f is c a l year equated students in 1976-77 was seen as a d i r e c t consequence o f the fis c a l stringency. The i n a b i l i t y o f the i n s t i t u t i o n to r e ta in fa c u lty mem­ bers and the i n a b i l i t y to e s ta b lis h new programs d i r e c tl y co rre lated with the decline in enrollment. The area o f s t a t e lobbying received in te n s if ic a tio n during t h i s period. John DeCarlo, Vice-President fo r S tate R elations, was 133 directed to spend 20 percent of his time in the s t a t e c a p i ta l . He spent increased time lobbying the o ffic e s of the Governor, l e g i s ­ la t i v e o f f i c e s , Management and Budget o f f i c e s , and any o th er o ffic e connected with the appropriations process. The in s t it u t io n a l e f f o r t also included the encouragement o f gubernatorial-appointed Board members to lobby id e n tifie d o f f i c e s , including giving testimony a t appropriation hearings. The respondents id e n tifie d the following programs as unique revenue-augmentation programs: 1. 2. 3. An assessment per student per term fo r lib r a r y a c q u isitio n s . This program was reviewed and supported by the student gov­ ernment in 1975-76 as a means of preventing su b stan tial e ro ­ sion to the lib r a r y periodical budget and augmenting the a c q u isitio n fund. The 1976 s e llin g of a piece of University commercial property fo r $300,000 to use fo r the a cq u isitio n of in stru c tio n a l equipment. The adm inistration approached the Oakland Foundation to take over funding of c e rta in general fund items. These items included p a rtia l funding of the Meadowbrook Theatre, Meadowbrook Mansion, and associated maintenance c o sts. Previous year funding le v e ls had allowed fo r general fund payments fo r use o f these f a c i l i t i e s ; however, a t no time had the general fund been t o t a l l y responsible f o r these items. Oakland University also stepped up i t s e f f o r t s to acquire o u t­ side funding through the federal government, foundations, o r industry. The o ffic e fo r fa c u lty research received additional a tte n tio n and support with the d ire c tio n to increase the proportion of funded a c tiv itie s. The respondents sta te d th a t the years 1974-75 and 1975-76 were the years th a t received the g re a te s t focus on developing revenue sources due to the r e a liz a tio n t h a t t h i s portion of the revenue 134 budget would have to increase to o f f s e t the continued erosion of the s t a te approp riation s. The years 1976-77, 1977-78, and 1978-79 were le ss intense; however, th is area continued to receive top p r i o r i t y , according to one respondent. Proposition 4 The i n s t i t u t i o n w ill report t h a t reduction of personnel was used in response to f is c a l stringency. According to those persons interviewed, reduction o f i n s t i t u ­ tion al personnel was used in both 1974-75 and 1975-76. The remainder of the 1977-78 and 1978-79 period did not have sp e cific personnelreduction actions implemented, as reported to the researcher. The f i r s t reduction in personnel occurred d ir e c tly as a r e s u l t of Executive Order 1974-11 and prim arily a ffected the nonacademic area. In response to the budget reduction, 61 p o sitio ns were affected in the nonacademic area in f is c a l year 1974-75. The reduction in these positions re fle c te d a v a rie ty o f personnel a c tio n s , including reduction in hours, reduction of appointment, elim ination of position with lay o ff of the incumbent, elim ination o f position due to a t t r i ­ t io n , and not f i l l i n g or delayed f i l l i n g of an open p o sitio n . Accord­ ing to one respondent, these reductions were more severe in the nonacademic sector because of the i n a b i l i t y to make sw ift changes in the academic se c to r. One respondent s ta te d : "The reduction of s t a f f in the nonacademic se cto r had a negative impact on the in s titu tio n a l environment and the q u a lity o f student l i f e . " The mid-year curtailm ent of funding t h a t occurred in 1974-75 also affected the academic se cto r. N otificatio n was given to part-tim e 135 and nontenure fa c u lty members t h a t no commitment fo r employment could be made. As reported by one respondent, 18 academ ic-support-staff positions were also a ffe c te d . The su p p o rt-sta ff-re d u ctio n a c t i v i t i e s included reduction in appointment, reduction in hours, and a t t r i t i o n of vacant po sitio n s. Executive Order 1975-12, which occurred in December 1975, had a much g rea ter e f f e c t on the academic se c to r. According to one respondent, the personnel actions t h a t occurred in 1975-76 were unprecedented and s ig n if ic a n tly affected the i n s t i t u t i o n . As explained by one respondent, Oakland University has had a contractual agreement with the fa c u lty since 1971. This fa c u lty agreement s p e c if ic a lly defined and outlined a l l possible adm inistra­ tiv e actions regarding fa c u lty . The fa c u lty agreement outlined p o l i ­ cies governing the appointment, compensation, re te n tio n , promotion, d is c ip lin e , lay o ff and rec all rig h ts of f a c u lty , as well as o ther p e rtin en t a r t i c l e s . This all-encompassing agreement was id e n tifie d by one respondent as providing the necessary tool to respond to Executive Order 1975-12. In Spring 1976, Oakland University used A rtic le V III, Section 39, of the fa c u lty agreement and enacted a p o s itio n - s h if tlay o ff. Under the c o n tra c t, the i n s t i t u t i o n was obligated to main­ ta in a stu d e n t-fa cu lty r a t i o of 20.7 students to one fa c u lty member. As long as t h i s r a t i o is not negatively a ffe c te d , the management of the i n s t it u t io n has th e r ig h t to tr a n s fe r fa c u lty appointments from areas of low p r i o r it y to areas of higher p r i o r it y . The co n tract also s ta te s th a t the i n s t i t u t i o n does not have to be in a s t a te of 136 financial emergency to a c tiv a te A rtic le V III, Section 39. The f o l ­ lowing items were the actions taken: 1. 2. Careful adherence to a ll gu idelines. Management p r i o r i t i z a t i o n of academic programs. 3. Layoff of any fa c u lty member, not c o n tra ctu ally covered, in the ta rg e te d program before implementation of the p o s itio n - s h if t- la y o f f . Total involvement of fa c u lty positions to be s h if te d . 4. 5. 6. 7. Id e n tif ic a tio n o f sp e c ific fa c u lty p o sitio ns to be s h if te d . Proper n o tif ic a tio n of lay o ff and re c a ll r i g h t s , including 18-month continuation o f appointment. Assurance t h a t remaining fa c u lty in the affected program were capable o f work. As reported by the respondents, even though the p o s i t io n - s h if t - lay o ff was an e f f e c tiv e tool to r e d ir e c t academic resources, i t nega­ t iv e l y affe cte d the i n s t i t u t i o n in the short run. As a consequence of the ad m inistrative a c tio n , Oakland University had a two-day fa c u lty s t r i k e in 1976 to p r o te s t the a c tio n s. The adm inistration had c a re ­ f u l ly adhered to a ll te n e ts of the fa c u lty agreement, with adminis­ t r a t i v e presentations to fa c u lty governing groups to ensure communication. Proposition 5 The i n s t i t u t i o n will rep o rt t h a t the discontinuance of academic programs was used as one response to f is c a l stringency. I t was agreed by a ll persons interviewed t h a t t h i s response to f is c a l stringency was the most severe action t h a t an i n s t i t u t i o n could implement. Oakland University used the discontinuance o f aca­ demic programs in 1976 and in no other year under study. 137 In conjunction with the p o s itio n - s h if t- la y o f f t h a t occurred in 1976, seven academic programs were suspended. According to two of the interview ees, the programs were suspended fo r a combination of reasons: low i n s t it u t io n a l p r i o r i t y , low student enrollm ent, high co st per stu d e n t, and lack o f fa c u lty c re d e n tia ls . The following four-year academic programs were suspended in 1976: Bachelor of Arts (B.A.) Studio Art Classical C iv iliz a tio n C lassical Languages Latin Speech Communications Latin—Secondary Education In a d d itio n , the Academy of Dramatic Arts Programs, a two-year academic program, was suspended. As sta te d by one respondent: The suspension of any academic program a t the University undermined the in s t it u t io n a l re s p o n s ib ility to provide pro­ grammatic depth and breadth fo r the stud ents. The cu rren t suspensions would not have occurred during times o f budget adequacy. As reported by one respondent, a c o ro llary to the suspension o f academic programs was the absence o f new program s t a r t s . Funds were not a v a ila b le fo r the up-front costs associated with s t a r ti n g a program, including fa c u lty recruitm ent, equipment a c q u is itio n , and other associated c o s ts . As noted, the fa c u lty p o l it i c a l arena would l ik e l y not support a new program s ta r t-u p a t the co sts o f a current program. An additional f a c t presented was t h a t during t h i s period the S tate of Michigan L egislature was sc ru tin iz in g new programs c are ­ f u l ly before funding recognition. 138 P ro p o s itio n 6 The i n s t i t u t i o n w ill re p o rt t h a t fa c u lty members were involved in developing in s t it u t io n a l responses to f is c a l stringency. According to one respondent, the involvement o f the fac u lty was a crucial element in the a b i l i t y of Oakland University to respond to f is c a l stringency. In January 1975, the President assigned ta r g e t cuts fo r the i n s t i t u t i o n in response to Executive Order 1974-11. As p a rt of the academic-sector response, the Provost worked on a con­ s u lta tiv e basis with two p a ra lle l fa c u lty groups: Senate and the Faculty Agreement Committee. the Faculty Each group was involved in th e process to ensure th a t a l l fa c u lty members were informed con­ cerning a d m inistrative a ctio n s. The involvement o f the fa c u lty in te n s if ie d a f t e r the February 1975 assignment o f targeted cuts to the budget centers within academic a f f a i r s . The negotiation process continued, with fa c u lty members recommending areas f o r budget reduc­ tio n and aiding in the p r i o r i t i z a t i o n of programs. Executive Order 1975-12, which occurred in December 1975, sig n alled the s t a r t o f another period of intense fa c u lty involvement in developing i n s t it u t io n a l responses to f is c a l stringency. The la y o ff could not have been an e ff e c tiv e program without the support of the fa c u lty . Even though a s t r i k e occurred, th ere was recogni­ tio n by th e fa c u lty t h a t the adm inistration had the r ig h t to a llo c a te resources as necessary. The f a c u lty involvement consisted of a pro­ grammatic review committee, a budget review committee, and a c o n tra cti n te r p r e ta tio n committee. All committees performed the informal ro le of communication and the formal ro le of reviewing suggested i n s titu tio n a l a ctio n s. 139 According to those persons interviewed, fa c u lty involvement in in s t it u t io n a l planning was formalized with the appointment of the University Planning Committee in 1976. Impetus fo r the establishm ent o f the cormrittee came from a desire to expand the planning program, from renewed fac u lty in te r e s t in planning trig g ered by suspension of the c la s s ic s major and the Academy o f Dramatic Art in 1976, and from con­ cern about the fu tu re because o f the rapidly changing s t a te demographic p a tte rn s . The University President selected University Planning Committee members from nominees submitted by several rep re se n ta tiv e bodies. Six fa c u lty , th ree stu d e n ts, and two adm inistrative professional s t a f f were named to the committee through the nomination process, and several academic adm inistrators were also appointed to the committee. One respondent sta te d th a t the involvement of the fa c u lty was not j u s t in the area of developing in s t it u t io n a l responses to f is c a l stringency, but also e n ta ile d a c o n su lta tiv e network advising the i n s t i t u t i o n 's adm inistration on a ll areas of importance. The fac u lty involvement continued on both the formal and informal lev e ls throughout the period under examination. Proposition 7 The i n s t i t u t i o n will rep o rt th a t th ere were some b e n efits from the period of f is c a l stringency. The immediate reply by one respondent was, "An adm in istrato r would have to be a masochist to s t a t e th a t fis c a l stringency was a b e n e fit." This same respondent c l a r i f i e d f u r th e r , s ta tin g th a t "All i n s t it u t io n s over time develop i n e f f ic ie n c ie s , cumbersome organiza­ t io n s , f a t , redundancies, and unnecessary d u p lic atio n s, which deserve focus in times of fis c a l stringency." The formal actions taken by the S tate of Michigan in the form of Executive Orders 1974-11 and 1975-12 provided a framework fo r the 140 adm inistration to a c t. The e x te rn ally imposed reductions p re c ip ita te d intern al organizational changes and, as a consequence, improvement in e ffic ie n c y and communication. One respondent sta te d t h a t a sp e c ific b en efit to the campus was th a t communication improved with the desire of a ll groups to be involved in the i n s t itu tio n a l changes. The respondents generally agreed th a t the required cuts forced the adm inistration to p r i o r i t i z e programs and budgets. This exercise would not have been completed as quickly or comprehensively without budget r e s t r a i n t s . Proposition 8 The i n s t i t u t i o n w ill repo rt major problems encountered in the attempt to respond to f is c a l stringency. According to those persons interviewed, the la r g e s t problem encountered was in te rn al procedural hurdles. S p e c ific a lly id e n tifie d was the fa c u lty agreement, which made i t d i f f i c u l t to achieve imme­ d ia te savings. One respondent sta te d th a t The formal fa c u lty agreement provided a framework fo r the management of fa c u lty members. Yet, a t the same time, the bureaucracy th a t i t e stablished prevented sw ift adm inistrative a c tio n , which was the purpose o f the agreement anyway. The mid-year Executive Orders 1974-11 and 1975-12 t h a t required a to ta l reduction of $440,597 from the general fund account forced co st savings to be implemented with minimum planning. This, accord­ ing to one respondent, was a conceptual problem fo r the i n s t i t u t i o n 's management. The i n s t it u t io n a l budget was c a re fu lly constructed each year a f t e r the review of campus a c t i v i t i e s and programs, without p rio ritiz a tio n . Within each executive o f f i c e r 's budget, s p e c ific 141 programs were recommended and designated expenditures assigned to th a t u n it. In 1974-75 and 1975-76, the budget-building exercise was prim arily the re s p o n s ib ility of the P resid en t, the Vice-President fo r Business A ffa irs , and the Budget O fficer. These individuals were responsible fo r reviewing the input from a ll se cto rs and boiling i t in to an i n s t it u t io n a l budget. One respondent sta te d t h a t : Mid-year cutbacks caused a conceptual problem due to the fa c t t h a t there was minimal time to e f f e c t r e l a ti v e ly major co st savings—the im plication was th a t planning was not recognized as important—the opposite o f what the budget-building p ro je c t was a ll about. The immediacy of the cutbacks caused not only a conceptual problem, but also an implementation problem. As noted in the quotation from one respondent, t h a t fa c u lty agreement specified a ctio n s th a t must occur in order to e f f e c t change. This agreement, in e f f e c t , protected the academic secto r from s i g n i f i ­ cant cuts during 1974-75 and sh ifte d the re s p o n s ib ility f o r cuts to the nonacademic side. The implementation o f academic-side cutbacks was resolved to be d e lib e r a te , cumbersome, and slow, due to s tru c tu re . According to one respondent, an e a rly ad m inistrative determination was made regarding the suspension of academic programs. The imple­ mentation o f a p o s itio n - s h if t- la y o f f was s ig n if ic a n tly delayed due to fac u lty governance and the fa c u lty agreement. The respondents agreed t h a t , in re tro s p e c t, the implementation of cutbacks could have been minimized i f th ere had been advance warning of the mid-year cuts and therefore more planning time. The key e l e ­ ment of the implementation stage was the requirement fo r involvement and communication with a ll se cto rs o f the u n iv ersity community. 142 P ro p o s itio n 9 The i n s t i t u t i o n will report successful responses to f i s c a l stringency. The respondents agreed t h a t the p o s i t io n - s h if t - l a y o f f imple­ mented in Spring 1976 was by f a r the most e ff e c tiv e single response. One respondent commented th a t : "Even though the p o s itio n - s h if t- la y o f f was e ff e c tiv e and le g a l, i t was a cumbersome and traum atic experience f o r the i n s t i t u t i o n to go through—i t was outrageous to lay o f f te n ­ ured fa c u lty ." A successful outgrowth of the dramatic actions taken in 1974-75 and 1975-76 was an increased i n te r e s t in campus communication and involvement. The success of Oakland's response to f is c a l stringency was tie d to the a b i l i t y o f the key a cto rs to communicate adequately the need fo r change and to e l i c i t the input from those a ffe c te d . A second successful response id e n tifie d by one respondent was the i n s t it u t io n a l commitment to p ro te c t the academic se cto r a t the costs of the nonacademic se c to r. Even though a p o s i t io n - s h if t - la y o ff occurred, the academic sector did not s u ffe r the cutbacks th a t occurred in personnel, se rv ic e s, and programs th a t were implemented on the nonacademic side o f the budget. This commitment was e s ta b ­ lished in January 1975 by Oakland's President as a means to p ro tec t the key mandate o f the u n iv e rs ity —in s tru c tio n . This response to f is c a l stringency prevented the erosion of academic q u a lity and helped to counter concerns by fa c u lty members about the fu tu re . 143 P ro p o s itio n 10 The i n s t i t u t i o n will rep o rt t h a t both operational and s t r a te g ic planning occurred a t the i n s t i t u t i o n during the 1970s. According to those persons interviewed, th ere was a s i g n i f i ­ cant change in the type o f planning th a t occurred a t the i n s t i t u t i o n . In the f is c a l years o f 1974-75 and 1975-76, the planning was current year in nature. This operational planning was based on the f a c t t h a t adequate funds were a v a ila b le fo r programs. The primary individuals involved in planning in 1974-75 and 1975-76 were the P resid en t, the V ice-President fo r Business A ffa irs , and the Budget O ffice r. As sta te d by two respondents, these th ree ind ividuals reviewed proposals and implemented budgets. There was not the involvement in an organ­ ized formal network o f a ll campus se c to rs. The Executive Orders t h a t occurred in December 1974 and 1975 d i r e c tl y a ffected the type of planning t h a t occurred a t Oakland. According to one respondent, " i t was only a f t e r the second Executive Order t h a t we re a liz e d how vulnerable the i n s t i t u t i o n was without s ig n if ic a n t planning." The appointment of the University Planning Committee by the President in Spring 1976 sig n alled the formalized s t a r t o f s tr a te g ic long-range planning a t Oakland U niversity. The charge to the commit­ tee was to complete planning fo r the future o f the U niversity (5 to 15 y e a rs). The committee was composed o f six f a c u lty , three stu d e n ts, two adm in istrativ e-professio nal s t a f f , and several academic adminis­ trato rs. According to one respondent, t h i s s ig n if ic a n t step by the adm inistration encouraged increased dialogue and formal communication 144 a t the i n s t i t u t i o n than had previously e x iste d . The i n i t i a l report of t h i s committee was presented to the President in September 1978 and consisted of 36 pages of c a r e fu lly reviewed proposals. This s tr a te g ic plan included recommendations fo r the 1978-1993 periods, fiv e-y ear University goals and o b je c tiv e s , academic and budget pro­ je c tio n s , and a n aly sis o f the 15-year p ro jec tio n s. The planning document provided ta r g e t fig u res fo r fund le v e ls , physical-plant siz e , and student enrollment. Guidelines were presented fo r public- service programs, academic-support se rv ic e s, student l i f e , curriculum, and fac u lty a d m inistrativ e le v e ls . In addition to the appointment of the University Planning Committee in 1976, the President e stab lish ed the University Budget Committee in Spring 1977. One interviewee noted th a t the form aliza­ tio n of the budget planning was recognition th a t g re a te r i n s t i t u ­ tion al involvement was necessary than was apparent in 1974-75 and 1975-76. The membership of t h i s committee consisted of the P resident, the Vice-President fo r Business A ffa irs , the Academic Deans, and the Budget O fficer. The inclusion o f budget planning in to the s tr a te g ic planning network was aimed a t providing g re a te r lead time and increased budget f l e x i b i l i t y i f i t was necessary to respond to additional c u t­ backs. Proposition 11 The i n s t i t u t i o n w ill not vary on the projection of the future of higher education. There was general agreement among the interviewees regarding what the future fo r Oakland University would be. Each respondent 145 predicted th a t there would be a continued erosion o f the s t a t e appropriation percentage of the budget, which would cause a d ir e c t increase in the portion o f the budget supported by tu it i o n revenues. The erosion of s t a te support could not be o f f s e t by t u itio n increases; th erefore fu rth e r cutbacks are surely to continue. A mutual concern was expressed by the interviewees th a t con­ tinued s ig n if ic a n t curtailm ent of s ta te spending in Michigan higher education would cause i t to lose in national prominence. This would d i r e c tl y a f f e c t Oakland's a b i l i t y to a t t r a c t and re ta in outstanding students and fa c u lty members. The a v a i l a b i l i t y of funds would also have a d ir e c t e f f e c t on the a b i l i t y of fa c u lty members to a t t r a c t outside grant a c t i v i t y . Case Study: University o f Michigan The University o f Michigan was founded in 1817 in the f r o n t ie r town of D etroit as "Michigania," an i n s t i t u t i o n chartered by the T e r r ito r ia l L egislatu re. The i n s t i t u t i o n accepted a g i f t of 40 acres in Ann Arbor, Michigan, and subsequently reorganized and relocated to Ann Arbor in 1837. The f i r s t college c la s s was admitted in 1841, when the f i r s t buildings were constructed. The c o n stitu tio n of 1850 made the University o f Michigan unique among s t a te u n iv e r s itie s by providing fo r the guarantee of autonomy by mandating the public ele c tio n of a Board o f Regents. This s t i l l stands as one of the unique c h a r a c te r is tic s of the University o f Michigan, which has allowed fo r some p o l it i c a l in su la tio n . The autonomous p rin c ip le was reaffirmed by the c o n s titu tio n s of 1908 and 1963. As recently as 1978, the Michigan L egislature reviewed mandating t h a t a ll Boards of 146 Control fo r higher education i n s t it u t io n s should be appointed by the Governor of Michigan. The U niversity o f Michigan is located in the heart o f the c it y of Ann Arbor, which has a population of 107,000 people. Nearly 200 major buildings on the Ann Arbor campus of 2,608 acres house 35 l i b r a r i e s with nearly six m illion volumes, 9 museums, several h o s p ita ls , and hundreds o f la b o ra to rie s . These research and teaching lab ora­ to r ie s are i n te r n a lly renowned in many f i e l d s , receiving annual awards and numerous research p ro je c ts . Within the un iv ersity s t r u c tu r e , an academic program i s evaluated based p a r t i a l l y on the outside research p ro jec ts th a t i t i s performing. The University of Michigan fac u lty rank within the top fiv e of American i n s t it u t io n s of higher education. These rankings are impor­ ta n t not only fo r outside press but also fo r in ternal budget and space a llo c a tio n . Each program competes strongly with world-renowned dep art­ ments in t h e i r attempts to a t t r a c t and r e ta in top fa c u lty and stu dents. The fac u lty r a t i o of 12 students to one fa c u lty member i s presented as a mark of the u n i v e r s it y 's commitment to students. The University of Michigan has taken d e lib e ra te action to begin to down-size. This action was based on the expected continuation of funding d i f f i c u l t i e s , as well as the decreasing pool of high school sen io rs. The u n iv e rsity has made i t a sp e c ific policy not to a l t e r academic standards in order to a t t r a c t a c e rta in freshman-class s iz e . 147 P ro p o s itio n 1 The i n s t i t u t i o n will repo rt th a t the period of fis c a l stringency s ta r te d during the mid-1970s. There was agreement among those persons interviewed t h a t f i s ­ cal stringency s ta r te d with Executive Order 1974-11, which occurred in December 1974. The d e fin itio n of fis c a l stringency as a condition of lim ited s t a t e revenue and e sca latin g costs which n e ce ssitated the mid-year curtailm ent or elim ination o f planned or e x istin g programs was sta te d as an accurate d escriptio n of the condition th a t the Uni­ v e rs ity o f Michigan faced in 1974-75. Executive Order 1975-12, which occurred in December 1975, was the second forced reduction within a 12-month period and also occurred mid-year. According to one respondent, mid-year s t a t e reductions were o f much g re a te r se v e rity than f i r s t - q u a r t e r reductions or decreased i n i t i a l appropriations. The l a t e r in the f is c a l year th a t a s t a t e reduction was imposed, the le s s time was a v a ila b le to plan, implement, and capture unexpended funds. The fis c a l stringency occurred because the mid-year cuts magnified the actual d o lla r amount th a t was c u t. As sta te d by one respondent, in 1974-75 and 1975-76 the Executive Orders th a t occurred were perceived as the r e s u l t of a sh o rt-liv e d s t a te f is c a l problem. I t was not u n til additional econ­ omic research was conducted a t the U niversity of Michigan on the S tate of Michigan's fin an cial positio n t h a t the probable permanence o f the f is c a l-s trin g e n c y condition was recognized. The Executive Orders 1974-11 and 1975-12 were perceived as an external symptom of a long-range economic problem. 148 There was general agreement among those interviewed t h a t the period from July 1976 through June 1979 represented an improvement in the s t a te financial condition and the p a ra lle l s t a t e appropriations to the University o f Michigan. Even though the improvement occurred, i t did not o f f s e t the damage t h a t the u n iv e rsity incurred as a r e s u lt of Executive Orders 1974-11 and 1975-12. The i n s t i t u t i o n 's budget f l e x i b i l i t y had been the streng th of the i n s t i t u t i o n fo r decades. The s t a r t of fis c a l stringency reduced budget f l e x i b i l i t y and cu r­ t a i l e d the q u a lity of the u n iv e r s ity , according to one respondent. Throughout the period under examination, the i n s t i t u t i o n was involved in programs designed to re a llo c a te in te rn al budgets and prevent whole­ sale reductions in the general-fund portion of the u n iv e rs ity . Table 21 presents the raw data f o r the University o f Michigan on s t a te app ro p riatio n s, i n s t i t u t io n a l expenditures, in s tru c tio n a l expenditures from the general fund, and f is c a l year equated students. Throughout the period under examination, the u n iv e rs ity had a slow and steady decline in f is c a l year equated students. This decline was planned and re fle c te d the d e sire of the University of Michigan to begin a slow down-sizing o f the i n s t i t u t i o n . A s ig n if ic a n t statement was r e fle c te d in the data on in stru c tio n a l d o lla rs expended during th is period of f is c a l stringency and declining s t a te ap propriatio ns. Table 21, column 4, r e f l e c t s t h i s information. Also during t h i s time, constant d o lla rs expended in in stru c tio n re fle c te d the a b i l i t y to tr a n s fe r funds from other budget areas to the in stru c tio n a l program. This is re fle c te d in the fig u re presented in Table 22, column 5, consant d o lla r in s tru c tio n a l expenditures per f is c a l year equated Table 2 1 .—'The U n iv e r s ity o f M ichigan i n s t it u t i o n a l d a ta . Year 1974-75 1975-76 1976-77 1977-78 1978-79 State Appropriations I n s titu tio n a l Expenditures In stru ctio n al Expenditures $ 95,681,000 98.316.000 99.934.000 109.937.000 130.760.000 $157,622,000 165.749.000 173.838.000 187.475.000 216.350.000 $ 75,453,000 79.493.000 85.648.000 93.388.000 106,993,000 Fiscal Year Equated Students 37,471 37,469 36,658 35,613 35,197 Table 2 2 .—The U niversity o f Michigan c alcu late d data. Year Higher Education Price Index 1974-75 1975-76 1976-77 1977-78 1978-79 166.2 177.2 188.7 201.3 217.1 Constant Dollars S ta te Appropria­ tio n s per FYES $1,536 1,481 1,445 1,534 1,711 Constant Dollars Total Expenditures per FYES Constant Dollars In stru c tio n Expenditures per FYES $2,531 2,496 2,513 2,615 2,831 $1,212 1,197 1,238 1,303 1,400 150 student. In 1974-75 the u n iv ersity expended $1,212 constant d o lla rs per fis c a l year equated stu d en t, and in 1978-79 the u n iv ersity expended $1,400 constant d o lla rs per fis c a l year equated stu d en t, a 15.5 percent increase. The increase was a r e s u l t o f d e lib e ra te i n s t i ­ tu tio n a l a c tio n , including internal re a llo c a tio n o f funds and decreas­ ing student enrollm ent, according to those interviewed. Proposition 2 The i n s t i t u t i o n will rep o rt t h a t cost-saving s tr a te g ie s were implemented in the in stru c tio n a l program in response to f i s ­ cal stringency. According to those persons interviewed, s p e c ific responses a t the in stru c tio n a l level did not occur in the years 1974-75 and 1975-76. The i n s t i t u t i o n responded to Executive Order 1974-11 and 1975-12 through the use o f non-general-fund-account balances versus d ir e c t cuts to the general fund. One respondent id e n tifie d the sources fo r the funds used to respond to the Executive Orders: the residual b a l­ ance from the in d ire c t cost recovery fund, the designated fund, and the undesignated endowment fund. The in d ir e c t co st recovery fund was e sta b lish e d to recover in d ir e c t overhead co sts associated with prim arily outside research gran ts. The in d ire c t co sts charged to granting agencies included f a c i l i t y and laboratory r e n t, u t i l i t i e s , c le r ic a l and a d m inistrative support, and research charges. The funds a v a ila b le f o r re d ire c tio n from the designated fund consisted of i n te r e s t accumulated on working c a p i ta l . The funds a v a ila b le fo r re a llo c a tio n from the undesignated endowment fund were the accumula­ tio n o f small g i f t s . These three funds were h i s t o r i c a l l y used fo r one-time, nonreoccurring p ro je c ts , such as research-1aboratory 151 renovation, s p e c ific research or instructional-equipm ent a c q u is itio n , major renovation or maintenance p ro je c ts , lib r a r y a c q u isitio n and augmentation, nonreoccurring alumni or development a c t i v i t i e s , and capital-improvement a c t i v i t i e s . The use o f these funds to respond to Executive Orders 1974-11 and 1975-12 was deemed an appropriate response a t the time, according to one respondent. "However, the use of funds, previously budgeted fo r nonreoccurring sp e c ific p r o je c ts , to d ir e c tly augment ongoing and reoccurring general-fund a c t i v i t i e s was, in hindsight, a questionable a c t i v i t y , " sta te d one respondent. Account centers th a t were a ffected by the 1975-76 Executive Order were nonsalary in stru c tio n a l accounts. The two account centers th a t received the la r g e s t reductions were supplies and equipment. The data presented in Table 23 c le a r ly i l l u s t r a t e the dramatic decrease in the instructional-equipm ent budget from $287,764 in 1974-75 to $93,969 in 1975-76. This reduction was a budgetary decision and not due to the f a c t th a t equipment a c q u isitio n was not required t h a t year. One respondent noted th a t the same magnitude cut was taken in the in s tru c tio n a l-s u p p lie s account, with a decrease of $770,863. Table 2 3 .—The University of Michigan general-fund expenditures in in s tru c tio n a l u n its (in thousands). Equipment Supplies 1974-75 1975-76 1976-77 1977-78 1978-79 $ $ $ 384 $ 275 $ 3,856 5,036 288 4,477 94 3,706 215 5,214 152 According to those persons interviewed, the most s ig n if ic a n t d e lib e ra te action taken by the i n s t i t u t i o n was the implementation of the p r i o r it y fund in 1977-78. The p r i o r it y fund was estab lish ed by the i n s t i t u t i o n to provide increased budget f l e x i b i l i t y through r e a l ­ lo catio n. 1. 2. 3. 4. 5. 6. 7. Stated below a re the basic guidelines: Academic u n its were to turn back .5 to .66 percent o f the a llo ca ted general-fund budget to the p r i o r it y fund each year fo r three y ears. Nonacademic u n its were to turn back 1 percent o f the a l l o ­ cated general-fund budget to the p r i o r i t y fund each year fo r three years. Each u n it had the option o f proposing programs fo r funding from the p r i o r i t y fund. Each u n it in the i n s t it u t io n was in competition fo r the p rio rity -fu n d a llo c a tio n . All proposals fo r funding were reviewed by the Vice-President fo r Academic A ffa irs , the Dean's Council, and the Budget P r io r ity Committee. Final authorizatio n to a llo c a te funds from the p r i o r i t y fund was given by the Vice-President f o r Academic A ffa irs . The p r i o r it y fund was estab lish ed as a management tool with open access fo r i n s t it u t io n a l groups. According to one respondent, the p r i o r i t y fund served as an e ffe c tiv e vehicle fo r re a llo c a tin g funds from the noninstructional u n its to the in stru c tio n a l u n its . I t also served the purpose of re a llo c a tin g funds from lo w e r-p rio rity in s tru c tio n a l u n its to in s tr u c ­ tional u nits with higher p r i o r it y . In 1977-78 and 1978-79, the i n s t i t u t i o n implemented an a l t e r a ­ tio n to the annual compensation plan. One respondent sta te d th a t : In 1977-78 and ensuing years the adm inistration implemented a salary increase plan th a t caused u n its to p a r t i a l l y fund pay increases from u n it budgets. A fter the announced compensation plan o f an 8 percent increase fo r 1977-78 the u n its were a l l o ­ cated a 7 percent increase and were required to accumulate the additional 1 percent from internal salary cannibalization with­ out touching the nonsalary accounts. 153 The u n its were fu rth e r r e s t r i c te d because the minimum announced pay package must be met. In addition to the compensation plan j u s t reviewed, the i n s t i t u t i o n implemented two programs designed to ensure th a t the u n iv ersity would remain competitive in the marketplace. According to one respondent, a f t e r study o f n a tio n a l, s t a t e , and local job-market s t a t i s t i c s , in 1977 i t was determined th a t the u n iv ersity was not providing enough f l e x i b i l i t y in i t s compensation program. This caused the i n s t i t u t i o n to f a l l from competition on s a l a r i e s . The i n a b i l i t y of a u n it to compensate a talen te d individual and th e re ­ fore r e ta in the individual was causing a loss of key personnel. The u n iv e rsity implemented a le s s r ig id plan on annual compensation in 1977-78. This revised plan allowed a u n it to give additional annual adjustments to recognize m erit or marketplace fa c to rs . The second plan implemented in conjunction with the reduced r i g i d i t y on annual compensation plan was a mandated annual increase in minimum compen­ sa tio n . This second plan was designed prim arily to a f f e c t the lower c le r ic a l c la s s if i c a t io n s as i t was documented th a t the u n iv e rsity was paying le s s than the local labor market, and u n its were experiencing high turnover in these p o sitio n s. One respondent sta te d th a t the University o f Michigan was a "dynamic organism constantly changing, re a llo c a tin g , reducing, and expanding." I t was pointed out t h a t while th ere were program con­ so lid atio n s during the period under examination, i t could not be docu­ mented th a t the consolidations occurred because o f f is c a l stringency. Throughout the long h isto ry of the University of Michigan, the 154 i n s t i t u t i o n has reduced, consolidated, and eliminated programs even during times o f plenty. The respondents agreed t h a t i t would be an e r r o r to rep o rt t h a t major steps were taken in the in stru c tio n a l u n its to e f f e c t dramatic cost-saving s tr a te g ie s during t h i s sh o rt period o f time under study. Proposition 3 The i n s t i t u t i o n w ill report th a t revenue-augmentation s t r a t e ­ g ies were implemented in response to f is c a l stringency. The respondents during the interview sta te d t h a t revenue augmentation had always been an area of top p r i o r i t y fo r the University of Michigan. The U niversity Offices fo r Development and S tate Rela­ tio n s are both v ic e -p re sid e n tia l levels on the u n iv e rs ity c ab in et. The two resp ective o ffic e s have complete s t a f f s and had been a c tiv e ly involved in direct-revenue-generating a c t i v i t i e s fo r decades. Accord­ ing to one respondent, the Executive Orders 1974-11 and 1975-12 did not cause the i n s t i t u t i o n to implement immediate changes. "The Uni­ v e rs ity o f Michigan has been through many c y clic al periods with the s t a te budget, and the i n s t it u t io n never responded to f lu c tu a tio n s by dramatic a c tio n s ." A c tiv itie s t h a t did occur a t the i n s t i t u t i o n during t h i s time period included t u i t i o n - r a t e in creases, a lt e r a t io n o f student-enrollm ent mix, and increased aggressiveness toward acquiring research g ra n ts. sta te d by one respondent, "The budgetary requirement to continue ra is in g tu it i o n le v e ls was not adequate to charge students more, but in stea d , a function o f the economy." The s t a te and national economic As 155 figures documented the f a c t th a t I n f la tio n continued to increase a t a high r a te between 1974-75 and 1978-79. A guideline t h a t had been used fo r research purposes was the Higher Education Price Index by Kent Halstead (Table 24). This index re f le c te d the co sts of items used s p e c if ic a lly in higher education, as compared to the consumer price index. According to one respondent, th ere were two actions th a t were occurring between 1974-75 and 1978-79. The r a te o f the S tate of Michigan's economic growth was slowing, and the r a te of in f la tio n was increasing. This meant th a t the co st of doing business was increasing a t the same time th a t the funds provided to the University of Michigan were increasing a t a slower r a t e . Table 2 4 .—Higher Education Price Index. Year Price Index 166.2 177.2 188.7 201.3 217.1 1974-75 1975-76 1976-77 1977-78 1978-79 Note: Halstead analyzed the co sts of items consumer prim arily by in s t it u t io n s o f higher education to develop t h i s p rice index. One r e s u l t was the increased t u i t i o n ra te s fo r students. During th is time period, undergraduate t u it i o n r a te s increased from $852 per semester to $1,170 per semester—a 37 percent increase fo r i n - s t a t e students. Graduate-level tu it i o n increased 53 percent. These t u i t i o n - r a t e increases d i r e c tl y a ffe c te d the increase in tu it i o n revenue fo r the U niversity o f Michigan. In 1974-75, the u n iv ersity 156 c o llected $48,033,000 in tu it i o n and fee revenue, and in 1978-79 the same revenue account generated $66,791 ,941—a 39 percent increase. (See Table 25.} Table 2 5 .—The University of Michigan t u it i o n and fee revenues. Year Tuition and Fee Revenue 1974-75 1975-76 1976-77 1977-78 1978-79 $48,033,000 53,055,079 57,427,260 60,595,412 66,791 ,941 One respondent sta te d th a t the increase in tu it i o n and fee revenue was d i r e c tl y r e la te d to the mix in student enrollment. The University of Michigan had the reputation as a n a tio n a lly and i n t e r ­ n a tio n a lly recognized research i n s t i t u t i o n t h a t could e a s i l y admit additional o u t - o f - s t a t e and foreign stud ents. The s ig n ific a n t fa c ­ t o r was th a t o u t- o f - s ta te students paid much higher t u it i o n r a t e s — a r a t i o of 3:1 as compared to i n - s t a t e coun terparts. (See Table 26, columns 1 through 4 .) Table 26.—The U niversity o f Michigan tu it i o n r a te s . Year In-S tate Undergraduate O ut-of-State Undergraduate In -S tate Graduate O ut-of-State Graduate 1974-75 1975-76 1976-77 1977-78 1978-79 $ 852 904 980 1,078 1,170 $2,700 2,862 3,134 3,350 3,530 $1,096 1,160 1,272 1,440 1,690 $2,840 3,008 3,300 3,552 3,800 157 The Increase in tu it i o n and fee revenue occurred even though th ere was a decline in student c r e d i t hour production during the time period under discussion. In 1974-75 the to ta l student c r e d i t hour production was 1,029,564; by 1978-79 th a t fig u re had decreased to 1,001,449—a 2.7 percent decline. The decline in student c re d it hours fo r the i n s t i t u t i o n was centered a t the undergraduate le v e l. In 1974-75 the undergraduate student c re d it hour production was 775,707; in 1978-79 t h a t fig ure had decreased to 662,503 student c re d it hour production, as reported to the S tate of Michigan. At the same time t h i s decrease was occurring in undergraduate education, graduate education experienced a 34 percent growth from 253,857 student c re d it hours in 1974-75 to 338,946 student c re d it hours in 1978-79. This s h i f t from undergraduate to graduate- level enrollment was a d ir e c t b e n efit to the t u it i o n and fee revenue account. The l a s t area o f revenue-augmentation a c t i v i t i e s addressed by the respondents was o u tsid e-g ran t a c t i v i t y . In 1977 the u n iv e rsity e stab lish ed an incentive plan fo r fa c u lty members and u n its th a t suc­ c e s s fu lly acquired outside research o r other grant a c t i v i t i e s . The procurement and retainment of research d o lla rs was used as an element in reviewing a fa c u lty member's performance f o r annual r a i s e s , tenuretrack a c t i v i t y , and general review concerning promotion. The level of outside grants was also used as a c r ite r io n in the evaluation of an academic u n i t 's m erit. The revenue-augmentation a c t i v i t i e s continued throughout the period under examination as the i n s t itu tio n a l executive o f f ic e r s 158 rea liz ed th a t these funds were necessary to supplant the declining s t a te portion o f the budget. Proposition 4 The I n s t i tu t i o n w ill rep ort t h a t reduction o f personnel was used in response to f is c a l stringency. There was very emphatic agreement from a l l persons questioned a t the i n s t it u t io n t h a t th ere was no c en tra liz e d implementation of an in s tr u c tio n a l-u n it reduction in personnel. The 1974-75 and 1975-76 Executive Orders were responded to out o f c en tra liz e d in s t it u t io n a l fund accounts and did not require sp e c ific u n it personnel a c tio n s. However, i t was noted by one respondent th a t throughout the period under examination, personnel flu c tu a tio n s did occur. The academic deans a t the University of Michigan had a degree of autonomy th a t allowed fo r nonreappointment and appointment o f nontenure-track fac u lty members. During th is time period there was an increase in turnover a t the u n it l e v e l , but s p e c if ic a lly not c e n tr a lly c o ntro lled or coordinated. Regarding appointment a c t i v i t i e s fo r tenured fa c u lty members, one respondent sta te d th a t: The University of Michigan has not and w ill not consider the lay o ff of tenured fa c u lty members. The damage by such an action would be indeterminant in the lo ss o f in s t it u t io n a l q u a lity due to the foreseeable i n a b i l i t y to a t t r a c t and r e ta in q u a lity students and fa c u lty . In the noninstructional a re a , u n it consolidation occurred with the merger of the U niversity A rchitects O ffice, the University Planner O ffice, and the Plant Extension Office in to one adm inistrative u n it in 1978-79. According to one respondent, t h i s action was taken to 159 elim inate duplication o f ad m inistrative overhead and improve e f f i ­ ciency in the delivery of service to the campus. The noninstructional areas experienced increased pressure due to the emphasis placed on protecting the in stru c tio n a l u n its from fis c a l s t r e s s . Proposition 5 The i n s t i t u t i o n will repo rt t h a t the discontinuance of aca­ demic programs was used as one response to f is c a l stringency. According to those persons interviewed, the University of Michigan did not use discontinuance o f academic programs as a d ir e c t response to f is c a l stringency. During the time period under examina­ t io n , th ere were several actions taken within the academic se c to r. However, as noted by one respondent, the changes t h a t did occur would have occurred in a tim ely manner anyway. In 1976-77 one aspect of the speech pathology program in the School of Public Health was tra n s fe rre d in to the School of Education under the special education program. The tr a n s f e r was designed to improve the delivery o f in stru c tio n and to elim inate some costs due to d u p lic atio n . lay o ff. Faculty and s t a f f members received tr a n s fe r without The Bachelor o f Science, School of Pharmacy, was also t a r ­ geted fo r phase-out as i t was determined th a t g re a te r emphasis should be placed on graduate education. The one program th a t was terminated was the Population Planning Program. This program in the School of Public Health was phased out due to low i n s t itu tio n a l p r i o r it y and high c o sts. According to one respondent, the University of Michigan did note th a t program discontinuance could be a s ig n ific a n t problem fo r 160 the i n s t i t u t i o n . In 1976-77, as a consequence, the u n iv e rs ity under­ took a study to e s ta b lis h appropriate guidelines fo r the d iscontin u­ ance o f academic programs. Proposition 6 The i n s t i t u t i o n will rep ort th a t fa c u lty members were involved in developing i n s t it u t io n a l responses to f is c a l stringency. There was general agreement among those persons interviewed regarding the h i s t o r i c a l l y a ctiv e involvement of the fa c u lty a t the in stitu tio n . In response to both Executive Orders, 1974-11 and 1975-12, the University of Michigan met the obligated fund cut by tr a n s fe r rin g funds from non-general-fund accounts. There was minimal involvement of fa c u lty members except in the review by the Budget P r io r ity Com­ m ittee of the action t h a t the adm inistration was taking. The Budget P r io r ity Committee consisted of rep re se n ta tiv e fa c u lty members involved in the review and th ere fo re advisory ro le regarding ad m inistrative decisions. As one respondent noted: The reputation o f t h i s i n s t i t u t i o n was b u i lt on the t a le n ts and rep utation s o f the fa c u lty members. I t has been t h e i r d i r e c t involvement in th is i n s t i t u t i o n th a t has allowed the repu tation to grow. Faculty involvement a t the U niversity was expected in a ll a re a s , including the review o f nonacademic u n i ts ' performance and recommended changes. With the establishm ent of the p r i o r i t y fund in 1977-78, the involvement o f the fa c u lty members increased. Faculty involvement a t the academic-unit level consisted of the documentation o f funding proposals t h a t were presented to the p r i o r i t y fund fo r review. The fa c u lty members were involved in the review o f a ll funding proposals 161 through the Budget P r io r ity Committee, which reviewed and made recom­ mendations on funding to the Vice-President fo r Academic A ffa irs . The p r i o r i t y fund was e stab lish ed to re a llo c a te funds from areas of low p r i o r i t y to areas o f high p r i o r i t y , which increased budget f l e x i b i l i t y . Throughout the remainder of the time period under research, fac u lty involvement maintained a key ro le in i n s t it u t io n a l decision making— a ro le not lik e ly to diminish, according to one respondent. Proposition 7 The i n s t i t u t i o n will rep o rt t h a t there were some b enefits from the period of f is c a l stringency. The interviewees agreed th a t the only b e n efits to the i n s t i t u ­ tio n were sp in -o ff b e n e fits . The f is c a l stringency increased the review and an aly sis o f each u n i t 's performance. The b e n e fit to the i n s t i t u t i o n was th a t the additio nal sc ru tin y focused on areas where co st savings were implementable and b e n e fic ia l. The in stitu tio n -w id e review, which became more acute as a r e s u l t o f the p r i o r i t y fund, led to increased budget f l e x i b i l i t y . As one respondent noted, "The new­ found budget f l e x i b i l i t y s t i l l did not match the budget f l e x i b i l i t y th a t ex isted p rio r to Executive Order 1974-11." According to one interview ee, the b e n efits t h a t occurred because of f is c a l stringency could have been surpassed without f is c a l stringency. Proposition 8 The i n s t i t u t i o n will rep o rt major problems encountered in the attempt to respond to f is c a l stringency. As reported by the interview ees, the major problem encountered was i n s t it u t io n a l budget i n f l e x i b i l i t y . The in s t it u t io n a l response to 162 Executive Orders 1974-11 and 1975-12 had, to some e x te n t, contributed to the decrease in budget f l e x i b i l i t y . The use of funds from the designated fund i n t e r e s t , residual amounts in the in d ir e c t- c o s ts recovery fund, and funds from the undesignated-endowment fund eroded the a b i l i t y o f the i n s t i t u t i o n to use those funds fo r normal purposes. At the end of f is c a l year 1975-76, two years a f t e r the s t a r t o f f is c a l stringency, no hard decisions to p r i o r i t i z e funding had occurred, according to one respondent. Proposition 9 The i n s t i t u t i o n will rep ort successful responses to fis c a l stringency. There was unanimous agreement among the respondents th a t the most successful response was the p r i o r it y fund e stablish ed in 1977-78. The p r i o r i t y fund was e stab lish ed by the i n s t i t u t i o n to provide increased budget f l e x i b i l i t y through in te rn al budget re a llo c a tio n s . The design of the program allowed fo r movement of funds, based on p r i o r i t i z a t i o n of the funding proposals. Academic u n its were required to turn back between .5 and .66 percent o f the allo ca ted general-fund budget to the central p r i o r i t y fund. Nonacademic u n its were required to turn back 1 percent of the a llo c a te d budget to the p r i o r i t y fund. The p r i o r i t y fund was a management tool t h a t received broad p u b lic ity , broad p a r tic ip a tio n , and broad acceptance. According to one respond­ e n t, i t was an e x c e lle n t mechanism t h a t achieved success due to i t s announced o b je c tiv e s, openness o f p a rt i c i p a ti o n , and, of course, time­ lin e s s . There were, however, two c ritic is m s o f the fund: f i r s t , th a t 163 i t was not s ta r te d sooner and second, th a t i t should have been fo r a la rg e r percentage. A second successful response to f is c a l stringency was the w illingness of a ll i n s t i t u t io n a l fac tio n s to p a r tic ip a te in i n s t i t u ­ tio n al dialogue. According to one respondent, up to and including the years 1974-75 and 1975-76, the campus dialogue ty p ic a lly focused on narrow issu e s. However, with the re a liz a tio n of the permanence of the condition o f f i s c a l stringency, more a tte n tio n was focused on the broad issue o f i n s t i t u t io n a l q u a lity . The goal of an informed i n s t i t u t i o n , through communication, was in i t s e l f a successful a t t a i n ­ ment. Proposition 10 The i n s t i t u t i o n w ill rep o rt t h a t both operational and s t r a ­ te g ic planning occurred a t the i n s t i t u t i o n during the 1970s. The interviewees agreed th a t there was a d e f in ite change in the type of planning th a t was completed a t the i n s t i t u t i o n during t h i s time. In the e a rly years of the period under examination, the planning t h a t was completed was lim ited to cu rrent-year budgeting based on h is to r ic a l trends and accounting f o r present demands. The procedure t h a t was followed during 1974-75 and 1975-76 was prim arily incremental budgeting. The University of Michigan had grown accustomed to increased t u it i o n revenues based on enrollment growth, increased s t a te a p p ro p ria tio n s, and an increased endowment fund. The need fo r the d i f f i c u l t task of program p r i o r i t i z a t i o n had not ex isted as strongly before the two Executive Orders occurred. The in s t it u t io n a l 164 adm inistrators rea liz ed the importance o f long-range s tr a te g ic plan­ ning once the economic p ictu re o f the s t a te was presented. The type of planning th a t began to occur in 1976-77 and con­ tinued through the remainder o f the period under examination was long range. As pointed out by one respondent, the use of computer modeling provided the i n s t it u t io n a l managers with a tool to begin reviewing possible a lte r n a tiv e s and consequences o f p o ten tial adm inistrative a ctio n s. Of key importance to the modeling e f f o r t was the use of m ulti-year raw data as compared to the e a r l i e r relian ce on only p r io r year data. The modeling of the i n s t it u t io n a l budget was extended to fiv e-y e ar p ro je c tio n s, which allowed key adm inistrators to see the long-range e ff e c t of sa lary packages, u t i l i t y c o s ts , s t a te appropria­ tio n le v e ls , and o th er budget elements. The so p h istica tio n of the modeling allowed fo r a tr ia l- a n d - e r r o r approach to long-range planning without the consequences of real budgeting. According to one respond­ e n t, the f is c a l stringency th a t occurred forced the i n s t i t u t i o n to begin looking a t budget a lte r n a tiv e s t h a t may never have been con­ sidered without the f is c a l stringency. Proposition 11 The i n s t i t u t i o n s will not vary on the projection o f the fu tu re of higher education. There was t o ta l agreement among those interviewed t h a t the future of public higher education in Michigan was one o f continued fis c a l stringency. basic nature. The University of Michigan will not change i t s The i n te g r it y of the i n s t i t u t i o n will be maintained 165 and possibly enhanced. One respondent re p lie d to a question about the u n iv ersity plan to become smaller and b e tte r by s t a ti n g , "There i s nothing good about being sm aller, only th a t i t i s a stra te g y to enhance the overall q u a lity of the i n s t i t u t i o n . " CHAPTER V SUMMARY AND IMPLICATIONS Summary of the Study The fiv e -y e a r period from 1974-75 to 1978-79 was a c r i t i c a l period for Michigan i n s t i t u t i o n s o f higher education. During th is sh ort period the i n s t i t u t i o n s were responding to dramatic reductions in financial resources. On December 16, 1974, Executive Order 1974-11 was signed in to law by Governor William G. M illiken, reducing s t a te appropriations to Michigan public four-year higher education i n s t i ­ tu tio n s by $6,419,117. This s p e c ific a c t p re c ip ita te d the s t a r t of fis c a l stringency fo r the i n s t i t u t i o n s . On December 9, 1975, Execu­ tiv e Order 1975-12 was signed into law by Governor M illiken, reducing s t a te appropriations to Michigan's public four-year i n s t it u t io n s by $7,510,250. These two actio n s reduced funds a v a ila b le to the i n s t i ­ tu tio n s by $13.9 m illio n . Following the two years with these Executive Order reduction s, the public four-year i n s t i t u t i o n s o f higher education were expending fewer constant d o lla rs per student than in f is c a l year 1973-74. In fisc a l year 1973-74, the i n s t i t u t i o n s spent an average o f $1,935 per fis c a l year equated studen t. dropped to $1,864 per student. continued to drop to $1,781. In f is c a l year 1974-75, th a t fig ure In f is c a l year 1975-76, th a t figure I t was not u n til f is c a l year 1978-79, 166 167 fiv e years l a t e r , t h a t the constant d o lla rs expended per student surpassed the f is c a l year 1973-74 expenditure year le v e l. The sequence o f events t h a t occurred a t the s t a te level and consequently a t the i n s t it u t io n a l level r e fle c te d increasing costs and decreasing revenue. The essence of the problem was th a t costs and income were both r i s i n g , but co sts were r is in g a t a steady or a slowly growing r a t e , whereas income was growing a t a declining r a te . (Cheit, 1973) The i n s t i t u t i o n s were faced with a mid-year dilemma of responding to unanticipated reductions o f appropriated s t a t e funds in December 1974. As a r e s u l t of the S ta te o f Michigan Executive Orders 1974-11 and 1975-12, the i n s t i t u t i o n s o f higher education "entered a period of profound fis c a l stringency" (Hechinger, 1972). The studies previously conducted on a national l e v e l , as reported in Chapter I I , researched in s t it u t io n a l fin an cial condi­ tio n s , cost-reduction programs, and revenue-increasing programs. The findings and recommendations did not s p e c if ic a lly address the State of Michigan's financial s itu a tio n . The researcher studied three higher education i n s t i t u t i o n s in Michigan to observe and rep o rt i n s t i ­ tu tio n a l responses to f is c a l stringency during the period o f 1974-75 to 1978-79. The researcher used a d e sc rip tiv e methodology, including as d a ta -c o lle c tio n techniques (a) the c o lle c tio n , review, and a n alysis o f i n s t it u t io n a l data reported to the S tate o f Michigan, Department o f Management and Budget, Education Division; (b) the c o lle c tio n and review of in stitu tio n -p u b lish e d documents, including fin ancial 168 statem ents, Board minutes, and in te rn al planning documents; and (c) sem i-structured interviews with ad m in istrativ e s t a f f members, which were used to obtain increased in s ig h t in to the i n s t i t u t i o n s ' responses. The interview segment of the data c o lle c tio n represented the major source of d e ta ile d information obtained from the i n s t i t u ­ tio n s . The sem i-structured interviews were constructed to obtain information in response to 11 pro position s. The propositions were not hypotheses to be t e s te d , but central themes t h a t reoccurred throughout the l i t e r a t u r e and topics judged p e rtin e n t by the researcher. The 11 propositions included id en tify in g and reporting the following areas: the s t a r t o f f i s c a l stringency, the cost-saving s tr a te g ie s implemented in the in stru c tio n a l program, the revenue-augmentation s tr a te g ie s implemented, the reduction o f personnel, programs imple­ mented, the discontinuance of academic programs implemented, the involvement of fa c u lty members in developing i n s t it u t io n a l responses, the b e n efits of f is c a l stringency, the major problems encountered in attempts to respond, successful programs implemented, the type of planning during the fiv e -y e a r period, and pred ictio n s fo r the fu tu re condition of higher education. The purpose o f t h i s study was to obtain information regarding in s t it u t io n a l s tr a te g ie s th a t were implemented in response to condi­ tio n s o f f i s c a l stringency during the period of 1974-75 to 1978-79. The research was lim ited to three public four-year higher education i n s t it u t io n s in Michigan. The interview segment of the data c o lle c tio n represented the most f r u i t f u l source of the d e ta ile d information supplied by the 169 in stitu tio n s . The information obtained during the d a ta -c o lle c tio n portion of the p ro ject was compiled following the descrip tiv e-stu d y format. The findings f o r each case study, however, are combined into major findings fo r the research study and reported under six major headings and eigh t subheadings. Major Findings The S ta r t o f Fiscal Stringency The findings in t h i s area are reported under two subheadings: the p re c ip ita tin g f a c to r and the general f is c a l trend . The p r e c ip ita tin g f a c t o r . —There was unanimous agreement among a ll those interviewed a t the th re e i n s t i t u t i o n s th a t the sin g le most id e n tifia b le p re c ip ita tin g f a c to r was the S tate of Michigan's is s u ­ ance of Executive Order 1974-11 on December 16, 1974. Executive Order 1974-11 reduced the appropriations to public four-year higher education i n s t it u t io n s by $6,419,117. There were several d ir e c t e ffe c ts a t the i n s t it u t io n a l level due to t h i s s t a te reduction. The four-year i n s t it u t io n s operated on a f i s c a l- y e a r basis t h a t s ta rte d in July and ended in June o f the following calendar y e ar. The timing of a mid-year cutback was such th a t the i n s t it u t io n a l budget was based on regular equal appropriations and expenditures and one-half the f is c a l year was complete. The r e s u lta n t e f f e c t was to double the necessary in s t it u t io n a l cutback in order to e f f e c t the state-mandated c u t. The unanticipated reductions required sw ift and d i r e c t i n s t i t u ­ tio n al a ctio n s. The rip p le e f f e c t on public four-year education was dramatic and signaled the progressive decline in s t a te funding. 170 The $6,419,117 mid-year reduction in s t a te appropriations re s u lte d in fewer constant d o lla rs appropriated and expended per f is c a l year equated student in 1974-75 as compared to 1973-74. This reduction was the f i r s t a l t e r a t io n o f the s te a d ily increasing expen­ d itu re trend th a t occurred in Michigan higher education throughout the previous decade. The general f is c a l tre n d . —The issuance of Executive Order 1974-11 signaled the s t a r t of fis c a l stringency in 1974-75. The general trend fo r the S tate o f Michigan budget included increased demands placed on a revenue base t h a t did not grow as expected. consequences of t h i s f a c to r were twofold. The F i r s t , the S tate o f Michi­ gan was forced to c u rta il mid-year approp riations; second, the s t a te used appropriation s h i f t s between u n its of government to respond to s t a te needs. In f is c a l year 1974-75 the S tate o f Michigan to ta l gen­ eral fund/general purpose expenditures were $2,729 b i l l i o n ; in 1978-79 the expenditures had increased to $4,237 b i l l i o n , or an increase of 55 percent during the fiv e-y e ar period. In 1974-75 Michigan public four-year i n s t i t u t i o n s received $422.6 m illion of s t a te funds, or 15.5 percent of the s t a t e budget. In 1978-79 the public four-year i n s t it u t io n s received $576.6 m illio n , or 13.6 percent o f the s t a te budget. The public four-year increase over t h i s fiv e-y e ar period represented a growth o f 36 percent, while the s t a te budget grew 55 percent. I f the public four-year i n s t it u t io n s had received in 1978-79 the same proportion o f the s t a te budget as 1974-75, the appropriations would have been $656.7 m illion or $80.15 m illion more than was received. (See Table 8, Chapter I I . ) The decreasing percentage of 171 funding to higher education was d i r e c tl y linked to the increasing s t a te expenditures in s t a te mental h e alth , social se rv ic e s , and the criminal j u s t i c e system. As stated by one respondent, the State of Michigan chose to place a decreasing p r i o r i t y on Michigan higher education. The slowed growth in s t a te a p prop riation s, combined with the rapid growth of i n f l a t i o n , caused the i n s t it u t io n s to e n te r a pro­ longed period o f decreasing budget f l e x i b i l i t y . A s ig n if ic a n t fa c to r th a t constrained budget f l e x i b i l i t y was the large portion of i n s t i t u ­ tio n al budgets tie d d i r e c tl y to s a l a r i e s . Higher education has been a lab o r-in te n siv e organization since i t s beginning (Mortimer & Tierney, 1979, p. 19). Therefore, to e f f e c t any s ig n ific a n t cost savings, i t was necessary to c u rta il s a l a r i e s . The h isto ry of Ameri­ can higher education included the development and entrenchment of tenure as a r e a l i s t i c and permanent f ix tu r e within the system. The linkage of tenure to sa lary decreased the f le x ib le portion of the i n s t itu tio n a l budget. Cost-Reduction Programs The three i n s t it u t io n s studied in t h i s research p ro je c t imple­ mented various cost-reduction programs and revenue-generating programs. The major findings f o r t h i s topic are reported in two subparts: personnel reductions and programmatic reductions. Personnel red u ctio n s. —All three i n s t it u t io n s reported th a t personnel-reduction programs were implemented e i t h e r d i r e c tl y or in d ir e c tly during t h i s period. The period o f f is c a l stringency caused 172 the i n s t it u t io n s to take unprecedented personnel a c tio n s , actio ns t h a t required e x e c u tiv e -o ffic e r approval and board approval in some cases. As reported by a l l th ree i n s t i t u t i o n s , the curtailm ent of funding fo r personnel was a d r a s tic and severe action required by the d i f f i ­ c u lt financial s itu a tio n . There was also a concurrence among the respondents th a t in order to e f f e c t any s ig n if ic a n t budget reduction i t was necessary to reduce personnel c o sts. The personnel-reduction programs implemented represented a wide v a rie ty of cost-saving s t r a te g ie s . As reported by the i n s t i t u ­ tio n s involved in the study, the implementation o f personnel-reduction programs s ta r te d immediately a f t e r the issuance o f Executive Order 1974-11 and in te n s if ie d throughout the period researched. A varying degree of reduction control was rep o rted , ranging from c e n tr a lly imposed cuts to suggested salary g uidelines. There was, however, agreement by a ll th ree i n s t i t u t i o n s t h a t the academic se cto r o f the budget was protected as much as p o ssib le . Due to the d e sire to i s o ­ l a t e the academic se c to r from reduction, the nonacademic se c to r was responsible fo r absorbing a la r g e r portion of the reductions. Throughout the period under examination, various s tr a te g ie s were proposed and implemented a t each of the i n s t i t u t i o n s . A common element th a t emerged was the d e sire by a l l respondents to avoid any action th a t would l im it i n s t it u t io n a l f l e x i b i l i t y . The i n s t i t u t i o n adm inistrators generally concurred on the sequence of personnel actions t h a t were taken. Tables 27, 28, and 29 present the actions th a t were reported by each i n s t i t u t i o n during t h i s study. The action s reported do not 173 n e ce ssa rily r e f l e c t a c e n tralize d approach to a reduction action but may r e f l e c t a ctio n s t h a t occurred a t the u n it l e v e l. At each in s t i t u t i o n u n it le v e l, d isc re tio n was given to implement c o s treduction a c tio n s . The i n s t it u t io n s d iffe re d in the amount o f d ir e c ­ tio n and d isc re tio n t h a t was given from a central le v e l. The lower numbered a ction s r e f l e c t action s t h a t were Implemented in d ir e c t response to the issuance o f Executive Orders 1974-11 and 1975-12. Table 27.—Grand Valley S tate Colleges' personnel co st-redu ctio n s t r a te g ie s . Action Freeze on hiring Freeze on promotion Reduction in hours Freeze on t r a v e l , memberships A ttr itio n o f p o sitio n s Layoff of teaching a s s i s t a n ts Layoff o f nontenured fa c u lty Termination of nontenured fa c u lty Layoff o f tenured fa c u lty Termination o f tenured fa c u lty Early retirem en t—fa c u lty Declaration o f fin an c ia l emergency 197475 197576 X X X X X X X X X X X X X X X X X X 197677 197778 197879 X X X X X X X X X X X X X X X X X X X X X X X X As the period of f is c a l stringency continued and budget f l e x i b i l i t y decreased, additional action s were taken, including the term ination o f tenured fa c u lty . As sta te d by one respondent, "The term ination of tenured f a c u lty , although legal and necessary, was a tra v e sty fo r higher education to endure." 174 Table 2 8 .—Oakland U n iv e rsity 's personnel cost-reduction s t r a te g ie s . ArHon ACtl0n Freeze on hiring Freeze on promotion Reduction in appointment Freeze on t r a v e l , memberships A t t r it i o n of p o sitio n Layoff o f teaching a s s i s t a n ts Reduction of student position s P o s itio n -sh ift-1 a y o ff Layoff of contingency fac u lty Layoff of tenured fa c u lty 197475 197576 x x x x x x x x x x 197778 197879 x x x x x x X X X x x x x x x 197677 x X Table 2 9 .—The University of Michigan's personnel cost-reduction s t r a te g ie s . «rl.