2008 State of the University Address

by David J. Skorton, President

As prepared for presentation
October 17, 2008

Thank you, Pete, and thank you, Ronni. It is such an honor and a privilege to serve this great university—to work closely with its remarkable faculty, staff and students, and with alumni, parents and friends like Pete and Ronni, and all of you here today, who give so much time and energy to the university as trustees and members of Council.

I also want to add my thanks to those you’ve heard from Pete and Ronni to Cornell’s Presidents Emeriti who are here today. Dale, Frank, Hunter, Cornell continues to benefit from your leadership. I also want to acknowledge former president Jeff Lehman, who yesterday had a book signing at the Cornell Campus Store in connection with his new book of collected speeches, Optimistic Heart, published by Cornell University Communications.

We come together for this joint annual meeting at a particularly critical time in the history of the university, the nation and the world. The economic crisis has required the largest government intervention in the financial markets since the Great Depression. Some 159,000 jobs were lost in September, the ninth straight month of job decline. The housing market is struggling, with foreclosures and the lack of available credit to fuel new purchases. Last week, according to the Wall Street Journal, “the Dow Jones Industrial Average capped the worst week in its 112-year history with its most volatile day ever,” and the fallout is having substantial impacts on markets in Europe, Asia, and Latin America as well. Here in New York State, we are bracing for additional state budget cuts that are likely to be larger than originally forecast, since Wall Street and the financial industry account for a fifth of Albany’s revenues.

Today I want to emphasize and illuminate two points about the financial health of Cornell University:

1. Cornell is not in a financial crisis.
2. The rapidly changing financial environment requires us to plan differently for the longer term.

Regarding the first point, I want to stress that the Cornell we have come to respect and love—and to which future generations of students, staff and faculty aspire—that Cornell will be here, at least as strong as we are now, as far into the future as we can foresee. Despite the turmoil in world financial markets, despite the state budget cuts, despite the difficult federal budget—thanks to the sustained work of those throughout the institution and, specifically, due to a rich variety of robust revenue streams—the situation is not dire. Cornell is not facing an immediate crisis. But there are serious stresses and strains that deserve our serious attention. I want to thank Paul Gould and the Investment Committee of the Board of Trustees and David Zalaznick and the Finance Committee for their efforts and advice over the last several months, as the dimensions of the financial situation have evolved.

As you’ve heard from Pete, thanks to the leadership of Vice President for Alumni Affairs and Development Charlie Phlegar and his staff, we raised an additional $617 million in cash and pledges during the last fiscal year, including a record-breaking $448 million for the Ithaca campus, and we are now almost to $2.3 billion on our way to our $4-billion campaign goal. You and your colleagues and friends throughout the world continue to be extremely generous to Cornell, with gifts of all sizes, and we are counting on that generosity continuing.

I also want to recognize and thank the senior staff and also Chief Investment Officer James Walsh, Vice President for Financial Affairs and Chief Financial Officer Joanne DeStefano, and Associate Vice President and University Treasurer Pat Johnson for their skillful handling of the university’s finances at such a volatile and challenging time.

The second point is that, although the richness of our revenue streams and the management of that revenue put Cornell in a much more stable situation than the institutions suffering most directly from the current financial dislocation, a combination of other factors compels us to begin a deliberate process of reexamining many aspects of our management of the university in order to preserve and protect our future. Specifically we need to attenuate the rate of rise of current and committed expenditures so that they do not continue to exceed available revenue, because state budget cuts constitute only one part of the divergence between our expenditures and revenues and not the major part.

Am I not giving you two contradictory messages: that we are stable but that we need to make changes? What factors are causing a divergence between our revenue streams and expenditure commitments?

Tuition is a very stable source of revenue, and because of the quality of the institution and its people, we are enjoying an enormous and growing popularity that last year led to 33,000 applications for about 3,050 places in the freshman class that arrived this fall. This is a tribute to the excellence of our faculty and staff and word of mouth from current students and alumni. In the most recent US News & World Report ranking, Cornell was rated 5th by high school counselors and 14th overall. However, despite this popularity and the stability of tuition revenue, it likely will not be possible to sustain the rate of rise of tuition in future decades that we deployed in past decades.

In terms of federal grants and contracts, which also contribute significantly to our revenue stream, our faculty and staff have been enormously competitive. For example, we are #2 in the country in funding from the National Science Foundation. We are the largest university expender of research funds in New York State, with research expenditures exceeding $600 million a year. Although Cornell faculty will remain very competitive for our share of federal research funds, the overall pie is not growing, and likely will not grow in the near future because of the press of other demands on the federal budget, including the wars in Iraq and Afghanistan, health care, and the recently passed governmental intervention to shore up our economy.

Clinical revenue at Weill Cornell Medical College and our College of Veterinary Medicine is a third revenue stream and a key determinant of the fiscal health of those colleges. Weill Cornell has the leading physician organization in New York, which continues to draw patients, attract new faculty, and negotiate favorable managed care contracts. The physician organization has sustained 7 percent annual revenue growth for the last 5 years, and the college is projecting that it will be able to maintain that growth rate over the long term. Nonetheless, the future of health care coverage is uncertain, and the field is extremely competitive.

Sales and services at the College of Veterinary Medicine, including clinical revenues from the Hospital for Animals and client charges in connection with the Animal Health Diagnostic Center, account for about 20 percent of the college’s revenues or about $24 million per year. These revenues are likely to be flat or decrease. In addition, our clinical revenues do not fully cover the cost of our teaching hospital for animals, because there is no 3rd party payment system, and we treat many agricultural species, where costs are constrained. We rely on SUNY funds to make up the difference.

That brings me to our fourth revenue stream: state funding. I appreciate the state’s long-term support of Cornell, and I believe that the state gets enormous value out of every dollar spent on Cornell. But the state is having its own very substantial and undeniable revenue problems, and we must support our state’s elected leaders in their attempts to prudently balance the state budget. I hope these leaders will heed Hunter Rawlings’s eloquent advice, published in the September 28, 2008 Newsday, to invest in higher education as a cornerstone of the state’s strategy for cultural and economic development.

Our compact with the State of New York is very important to Cornell going forward. We are proud to be the land grant university for the state. Nonetheless the services we deliver to the citizens of the state will necessarily be limited, or reduced, if the state’s ability to support this compact continues to be reduced.

Investments represent a fifth source of revenue. Cornell’s investment portfolio is extremely diversified and designed to withstand the sort of changes in the market we’re experiencing today; even last academic year we had positive returns. Nonetheless our long-term investment pool has recently shrunk due to market conditions. We anticipate that it will grow again, but the timing of that return to growth is uncertain.

Philanthropy represents a sixth source of revenue. I said a few minutes ago that we’re counting on your continuing generosity. Of course, we anticipate that the current economic conditions will substantially affect the income that people can devote to even their most deeply loved organizations and causes. But every gift is important and appreciated. As I mentioned, last year was the largest fundraising year in history for the Ithaca campus. In a few minutes, I am going to ask you to do even more.

Because of pressure on all the revenue streams I’ve just described, we do need to have a fresh look at our institutional fiscal management. In going forward, in dealing with pressures of the moment and the near-term future, we need to approach our challenges as one institution. Despite the tradition of decentralization, we will not leave the contract colleges to deal with the difficult state funding situation on their own. We are prepared to temper the impact on our contract colleges by judicious use of reserves and through other mechanisms.

More broadly, though, we need to ameliorate the divergence between revenues and expenditures that I mentioned a few minutes ago. Several weeks ago, I appointed an ad hoc budget group to advise me on possible processes and strategies to address anticipated reductions in state-funded operating support and other causes of financial constraints on Cornell. I thank Vice Presidents Mary Opperman, Steve Johnson and Paul Streeter for co-convening this process and all members of the ad hoc group for developing an extremely well-conceived and useful set of considerations that will lead to improvements in how we go forward in managing Cornell’s resources.

The first thing the group did was develop a set of principles that will allow us to strengthen Cornell’s financial foundation even in these turbulent times, and I concur fully with those eight principles. Going forward we must:

1. Maintain the university’s standards of excellence in teaching, research, and public service as New York’s land grant university;
2. Maintain the university’s commitment to student access and related financial aid programs;
3. Maintain competitive market-based faculty and staff pay programs;
4. Give priority to programs and activities that are aligned with the university’s strategic objectives, initiatives and mission-related goals;
5. Examine all aspects of the operations of the Ithaca campus, which must continue to progress as a single entity;
6. Scrutinize overall university operations, including Weill Cornell Medical College, for improvements and gains in efficiency;
7. In evaluating specific budgetary proposals, consider their impact on university priorities and the campus community;
8. Communicate plans and changes clearly and openly, with special attention to consistency of messages and transparency of process.

We are now translating the ad hoc group’s principles and recommendations into action and have assigned senior staff, working with collegiate deans and other leaders, to oversee efforts in each of these areas. General approaches going forward include revenue enhancement—from tuition, endowment, research support, gift revenue, and entrepreneurial activity— and also cost containment and cost reduction considerations. We will be looking at a range of options, again with leadership from the senior staff and deans, including delays in capital construction and a variety of programs to encourage personnel and non-personnel savings. We need to review our operations and propose ways to streamline them in a meaningful way. I plan to provide the campus with a progress report in mid-November that will not only capture what has been done but what is proposed.

Like all research universities, the bulk of our budget—as much as two-thirds—is personnel. Therefore any serious attempt at cost containment will necessarily include adjustments to staffing, which may include how operations are organized and how work is carried out and may mean ending some work. Unfortunately layoffs have already occurred where funding has been lost, and future budget cuts may necessitate additional changes. I want to reiterate that by managing as a single institution, we will look creatively and aggressively for opportunities to function more effectively and efficiently, which will mean that changes may occur across the entire university—in New York City and Ithaca. But I believe that these changes will, in the long run, serve the university well if we approach this challenging period with a focus on improvement and with an ear to the staff in units throughout the university, who know how improvements can best be made.

We have taken advantage of many opportunities to enhance the excellence of the faculty, to bring faculty salaries up to an appropriate market position, and to realize a very aggressive capital development program that has resulted in the extraordinary built environment of today’s and tomorrow’s Cornell. These decisions and opportunities were very important, and the current excellence of the university attests to the rightness of those decisions.

However, escalating costs for salaries, faculty start-up, construction costs, and many other factors have combined with the pressures on the revenue streams that I mentioned. These escalating costs and revenue constraints make it clear that we will only be able to ensure that future leaders of Cornell have the flexibility for similarly bold initiatives if we act judiciously and promptly to put ourselves on a more prudent trajectory for the future. In addition to workforce changes and operational adjustments, delays in specific capital construction projects whose revenue sources have not been completely identified, and a very careful reassessment of the university’s debt capacity will be necessary, and we will look to the campus community to help us identify other non-personnel opportunities for savings. Cornell has been recognized in many ways as a progressive employer for the benefits and programs we offer. In times of challenge, our commitment to progressive workplace practices becomes even more important, and my expectation that leaders will lead with care, honesty, and calm foresight and planning becomes even stronger. These times test our mettle, and we will succeed.

Even as we deal forcefully with the current economic challenges and plan for the university’s long-term strength, it is important to remind ourselves of our current excellence and the essential qualities and core aspects of our mission that will define our priorities going forward. We are one of the world’s great universities. We have much to be proud of and a clear sense of the role we must now play in the world. We need to keep our vision on the future even as we deal effectively with the current challenges. We will meet these challenges based on our people and our leadership.

We began the academic year with several new deans in place: Joe Thomas, Anne and Elmer Lindseth Dean of the Johnson Graduate School of Management; Alan Mathios, Rebecca Q. and James C. Morgan Dean of the College of Human Ecology; Kent Kleinman, Gale and Ira Drukier Dean of the College of Architecture, Art and Planning; and Bill Fry, dean of the University Faculty.

This morning I want to acknowledge our colleague and friend Biddy Martin, now chancellor of the University of Wisconsin, Madison, for her more than 8 years of distinguished leadership as Cornell’s provost, and I want to thank Deputy Provost David Harris for serving so effectively as interim provost during the past several months. During these months we have conducted a careful and consultative search for a new provost, and I want to thank the search committee chaired by Martha Haynes, Goldwin Smith Professor of Astronomy, for moving the process forward so quickly and skillfully.

This morning, I am pleased to introduce to you and to the entire Cornell community our new provost. Please join me in recognizing our new provost, Kent Fuchs. Kent brings to this post great knowledge of Cornell, strong leadership abilities, and a clear vision for the future.

The faculty remain the heart of our great university. Continuing Cornell’s strong representation in the distinguished national academies, five members of our faculty were elected to membership this year. Cornell now has nearly 190 current and emeritus members of the faculty represented in the National Academy of Sciences, the National Academy of Engineering, the Institute of Medicine, the American Academy of Arts and Sciences, and the American Philosophical Society.

The strength of our faculty was also confirmed last fall when Weill Cornell Medical College received a $49-million federal grant, the largest in its history, as the lead institution in a new National Institutes of Health Clinical and Translational Science Center. The center is creating a network for biomedical collaboration that includes our partner institutions on the Upper East Side of Manhattan, as well as the College of Human Ecology and Cornell Cooperative Extension-New York City, with the intention of translating medical research into practical and accessible treatment.

Cornell’s faculty excellence was on display yesterday, when we dedicated Joan and Sanford I. Weill Hall and the Joan and Sanford I. Weill Institute of Cell and Molecular Biology. Sandy and Joan had to leave last evening, but I’m delighted that Richard Meier, who designed the building, is with us this morning. During yesterday’s faculty panel, Professors Carlos Bustamante, Scott Emr, and Claudia Fischbach-Teschl, from the Ithaca campus, and Professor Anne Moscona from Weill Cornell Medical College enlightened us about the promise of the life sciences to contribute to basic and applied knowledge in one of the most fertile and potentially transformative areas of 21st century research. They also shared the reasons that they have chosen to make Cornell their academic home, and it is important that we continue to provide that kind of environment to our faculty.

Attracting and keeping distinguished faculty members at Cornell—and providing recognition and broad support for their work—are essential to Cornell’s continuing strength in the current era of intense competition for talent. I want to extend a special thanks to Cornell Trustee Andrew Tisch and his wife, Ann Tisch, for recognizing this priority and acting upon it. As we very recently announced, Andrew and Ann have committed $35 million to create the Tisch University Professorships, a distinct new class of professorships that will allow the university to honor its most prominent—and promising—faculty members university-wide at mid-career and to support their scholarship and research appropriately. Thanks to Andrew’s and Ann’s support, Cornell will preserve its excellence in research in the life and physical sciences; in the arts, humanities, and social sciences; and in their application in ways that directly affect people’s lives.

Our students, graduate and undergraduate, continue to distinguish themselves academically and in their wider contribution and service. During the past year, Cornell students won, among many other honors, a Marshall Scholarship, two Goldwater Scholarships, three Udall Scholarships, and the Howard Swearer Student Humanitarian Award from the Campus Compact. I am pleased to note that our athletic teams, particularly football, are enjoying substantial success, and this year, the fourth West Campus residential house, the William Keeton House, is open and offering full programming, under the direction of ILR Professor Jeff Cowie, house professor and dean. The fifth house is also complete and will begin full programming next fall as the Flora Rose House, named in honor of one of the founders of the College of Human Ecology.

This morning, I am pleased to announce that Cornell’s commitment to putting knowledge to use in the service of humanity and our commitment to need-based student financial aid will now experience a tremendous boost thanks to a new endowment from the Tata Education and Development Trust, which has come to Cornell through the good offices of our alumnus and member of our Board of Trustees, Ratan Tata. This is one of the most generous endowments ever received from an international benefactor by an American university.

The Tata Trust’s endowment is $50 million. It includes two groundbreaking components of $25 million each and addresses two of our very highest priorities: Cornell’s function as land-grant university to the world, and inclusiveness and access to Cornell.

First, the Tata-Cornell Initiative in Agriculture and Nutrition will expand and deepen the university’s connection to India, with the ultimate goal of improving, even transforming, the lives of the rural poor in India. The rural poor in India experience the greatest incidence of malnutrition in the world. Leading-edge research in agriculture and nutrition, and the application of that research, are among our best means to combat this challenge. The Tata-Cornell Initiative will focus on the reduction of chronic poverty and malnutrition by creating strong research collaborations among Indian students and faculty and their Cornell counterparts, tackling persistent agricultural and nutritional problems, and strengthening the educational and research capacity of Indian institutions. The initiative represents a truly unique and historic partnership, one that will draw upon Cornell’s experience of over a half-century of working with institutions throughout India, and its leadership in the wide range of relevant academic disciplines, from agriculture and plant science to nutrition, economics, and public policy.

The Tata-Cornell Initiative in Agriculture and Nutrition expands upon our already significant presence overseas, including efforts to build human and institutional capacity in the developing world. These efforts involve the Weill Cornell Medical College, our College of Agriculture and Life Sciences, and several other colleges on the Ithaca campus and have as their goal a coherent “Education for Development” program in Africa and South Asia.

The second part of the Tata Education and Development Trust’s endowment—also for $25 million—establishes the Tata Scholarship Fund for Students from India. In creating the Tata Scholarship Fund, the Tata Trust opens the university’s doors to deserving students from India who might not otherwise have the means to attend Cornell. For years, applications for admission from Indian students have continued to rise, but enrollments have remained only steady due, in large part, to the lack of financial aid for needy students. The Tata Scholarship Fund will support as many as 25 scholars at any given time and will ensure that the very best Indian students have access to Cornell, regardless of their financial means.

We are proud of the diversity of our student body—in keeping with Ezra Cornell’s vision—and, we are pleased that Cornell ranked 4th in economic diversity in its peer group of national universities, according to US News & World Report. You will have an opportunity to meet many of these talented students tonight at the 31st Annual Scholarship Reception. The Tata Trust’s endowment extends Ezra Cornell’s promise beyond the U.S. and magnifies the impact of our university in the world.

Going forward, though, one of the things that I’m most concerned about is the danger that American and international families in the middle class and with less financial capability will not even consider an education at a school like Cornell. As we enter a new era of prudence, we cannot and will not retreat from our long-standing commitment to need-based student financial aid.

Let me remind you of how we are keeping our commitment to students from low- and middle-income families. Cornell’s new financial aid program, announced last winter, is designed to keep Cornell affordable to talented students from all backgrounds. When fully implemented next year, it will eliminate need-based debt for students whose families make under $75,000 per year and limit need-based loans to $3,000/year for mid-income students, whose families earn between $75,000 and $120,000 per year.

Keeping Cornell affordable to talented students from all backgrounds is more important than ever, given the economic hardships facing many families. In keeping with the vision of our founder and acknowledging the histories of many first-generation college students like myself, whose aspirations for higher education could not have been realized without scholarships and loans, we need to develop an even more robust revenue stream for financial aid.

Because of the urgent need to keep the doors of Cornell wide open to students from all parts of the socioeconomic spectrum and all parts of the world—and building on Ratan Tata’s outstanding leadership and example—I commit today to raise an additional $125 million for undergraduate financial aid, and I ask for your support. We have a wonderful Cornell legacy of access, and we need to join forces, with gifts large and small, to keep that legacy alive for our students far into the future.

Today we face significant challenges to our ability to fulfill our promise of need-blind admissions, yet the need for Cornell to step up to the vision and promise of our founders has never been greater. Our students are showing increasing financial need. Many of our peers have recently implemented significant changes in how they assess financial need. They are now able to require significantly less parental contribution than can schools like Cornell that have less wealth and large numbers of needy students, and they have eliminated debt requirements for students entirely. Growing concerns about inequities implicit in our exclusion of international students from our need-based aid commitment compel us to make more money available for international need-based aid. By increasing our campaign goal for undergraduate scholarships from $225 million to $350 million, we can ensure that students have the freedom to pursue their academic dreams. I realize that this is one of several priorities in the Far Above campaign, but it is the one that, with your help, I intend to make a hallmark of my presidency.

We will do everything we can to attract and support students who can contribute most significantly to the unique character of Cornell—and to the quality of the Cornell experience—within our overall commitment to need-based student aid. And we will continue to ensure that our students have a distinctive student experience rooted in academic excellence and engaged citizenship and contribution that encompasses all dimensions of their life at Cornell.

Even in tight economic times—especially in tight economic times—great universities need to safeguard and enhance their human capacity. I want to recognize and thank Joan and Sandy Weill for their remarkable philanthropy and for their vision in bringing together the creativity and intellectual power of the Ithaca campus and the Weill Cornell Medical campus, which we celebrated yesterday at the dedication of Weill Hall and Weill Institute. I want to thank Andrew and Ann Tisch once again for their efforts to support our most talented mid-career faculty members and help us recruit other faculty stars through the Tisch University Professorships.

I pledge to continue to work with Provost Kent Fuchs, senior staff, and academic deans to make sure faculty salaries are competitive; that faculty are supported in their work—and to make the case to potential donors to develop the resources we need to be successful.

Similarly, for staff, we face difficult choices, but our goal is to continue to be an employer of choice, recognized nationally, as we were recently by AARP, Working Mother magazine and others, as among the best places in the nation to work. We will continue to reward and develop talented employees, utilize their skills in ways that are personally satisfying, professionally rewarding and that effectively and efficiently advance the mission of the university.

For students, on whose intellectual and ethical development our collective future depends, I’m asking you to join with Ratan Tata and with me to make Cornell as open as possible to talented students of all backgrounds, all regions of the world.

Universities, at their core, are institutions based on hope and institutions which must be led with hope. Now, when so much has been accomplished, but so much more is at stake, I hope you will join us—not simply to meet the challenges of the immediate crisis, but to safeguard and extend Cornell’s excellence far into the future.

Indian poet, playwright and novelist Rabindranath Tagore, who won the Nobel Prize in literature in 1913, had a bold aspiration for his country. He dreamed it could be a place…

Where the mind is without fear and the head is held high
Where knowledge is free
Where the world has not been broken up into fragments
By narrow domestic walls
Where words come out from the depth of truth
Where tireless striving stretches its arms towards perfection
Where the clear stream of reason has not lost its way…

Let us translate those noble sentiments into our aspirations for our university…for our Cornell. Thank you.