Good afternoon, and thank you all for being here today, either here in person or joining us on the Longhorn Network.
Each year, around UT's birthday, I have the privilege of reporting on the state of our University. It's a bit like watching our children grow up we might not notice changes from day to day, but when we look back a year, we see the growth. So we gather here today to scroll back through the year, to take stock of how much has changed, and then to fit those changes into our long-range growth. This last step is important, for as C.S. Lewis put it, "Mere change is not growth. Growth is the synthesis of change and continuity, and where there is no continuity there is no growth." So what has changed? What will change further? And what are the strands of continuity that define the essence of who we are as a great teaching and research university?
On several previous occasions I have referred to Plato, Heraclitus, and Zeno to emphasize the importance of focusing on both change andcontinuity. I will remind you again today. Heraclitus had famously said, "You can't step in the same river twice." After all, it's made up of different molecules of water, so it's a different river. This could be seen as denying any continuity. Zeno, and his famous paradox, could be seen as denying that any change actually occurs. Plato set out to explain how change and continuity are both real, and are both important. A critical part of our job is to assess what changes make us better, and what needs to continue to define our essence. Plato got this, and so did C.S. Lewis.
In a few weeks, I'll have the honor of beginning my one-year service as the chairman of the Association of American Universities. The AAU is the premier organization of national research universities, both public and private. There are only 62 current members, and just three are in Texas: Texas AandM, which was admitted in 2001, Rice, which was admitted in 1985, and UT Austin, which I'm proud to say has been a member since 1929. This role will give me a visible platform to share my vision for higher education, some of which I would like to share with you today.
Let me start by doing a little bragging on UT, or, as we call it in Texas, "just telling the truth." As much as anything, my election as chairman of the AAU is a recognition by our peers of the prominence of UT Austin, and this, in turn, is a credit to all of you, the thousands of faculty, staff, students, and alumni who have made this university what it has become a top world university. What began 130 years ago this month as little more than a lofty goal was nurtured year after year and built brick by brick by an audacious breed of people. By the middle of the last century, we had become a fine flagship university for our great state and even a regional leader in selected fields. By the end of the last century we had become a great national university by any measure with top 10 programs in many fields and one of the most recognizable brands in America. As we complete our 13th decade and head into the heart of a new century, we have cast off mere regional aspirations. Indeed, we look beyond even national greatness and aspire to leadership in a rapidly integrating world. UT Austin is now a world university.
And others recognize this fact. Just days after we met here last year, the London-based Times Higher Education listed The University of Texas at Austin as the 25th best university in the world. They wrote that "UT Austin's impressive performance this year sees it enter the top 25 of the world's best universities. Even more remarkably, this jump from 29 to 25 comes amidst an alarming sector-wide decline for the U.S., with 51 institutions falling down the table in the face of mounting competition from heavy-spending Asian nations. UT Austin is one of a minority of American universities resilient to the challenge posed by the East in 2012, and it is rightly rewarded with a place in the world's top 25." Just two months ago, the Riyadh-based Center for World University Rankings, using a different methodology, came to much the same conclusion and listed UT Austin 26th in the world, up four places from just last year.
But let's take a more granulated look at the progress we've made. One of the two major goals of the Commission of 125 was to increase excellence in the departments and in the organized research units. These are the organic units of a university. They are where the widgets are made. They are where the teaching and the research take place. The number of programs ranked in the Top 5 has gone from 16 to 20 in eight years, an increase of 25 percent. Top 5 graduate programs have grown by more than 75 percent in eight years, from 9 to 16. We now have 59 top-10 programs and 111 top-25 programs.
We have progressed as a university because we have progressed at the level of our individual programs.
These rankings are just a reflection of a more important underlying reality. They are the result of the fact that we are actually getting better at what we do. We are teaching better. We are doing deeper and more extensive research. We are engaging our students and the community in richer and more meaningful ways. We are more diverse, both in our student body and in our faculty, and we're fighting to protect that diversity in the Fisher case. Following the advice of the Commission of 125 we have refocused and re-energized our undergraduate experience. We have focused on the cost of a UT degree, and on the time it takes our students to get a degree. We are leading efforts across the state and nation to incorporate new technologies and teaching methods into our curriculum. We have become and are becoming even more efficient in our business practices.
Put bluntly, we have become more productive at what we do. That is good change. Critically, we measure our success against the criteria of what it means to be a world-class teaching and research university. That is good continuity.
So what explains the success in our departments and organized research units? The main explanation is the talent and hard work of our faculty and staff: the ones who actually do the teaching, do the research, and do the advising. We are a great university because we have great people. I am so proud of what our faculty and staff do. This is true across the entire University, and it is visibly exemplified by the honors our faculty receive.
This year two more faculty members were elected to the National Academy of Engineering: Joe Beaman in Mechanical Engineering and Sharon Wood in Civil, Architectural, and Environmental Engineering. John Goodenough, already a member of the National Academy of Engineering, was elected to the National Academy of Sciences. He and Allen Bard received the National Medal of Science at the White House. Grant Willson in Chemistry and Chemical Engineering won the Japan Prize. Luis Caffarelli in Mathematics won the Solomon Lefshetz Medal. And Dean Young in English was named the 2014 Texas Poet Laureate. And I could go on and on. We have a great faculty, and this explains why our units have flourished.
As we change, and as we move into the future, I am absolutely sure that one strand of continuity will be that great universities will have great faculties. And this highlights a challenge. Our budgetary challenges will affect our ability to recruit and retain our best faculty. Other universities are strengthening their balance sheets as the economy improves. They will be targeting our faculty. Strengthening our own ability to attract and retain faculty in a very competitive world needs to be our highest long-term priority. Our future as a world-class University depends on it. And as we compete for faculty in challenging circumstances, we need to make sure we don't compromise. As I have said on many occasions, B+ is our biggest enemy.
One thing that is likely to change in 21st century universities and at UT is the make-up of the faculty. Taken as a whole, our country needs teaching, and it needs research. Sometimes, these activities occur separately, such as the research that takes place in industry or in our National Laboratories, or the teaching that takes place in small liberal arts colleges, or community colleges. But sometimes teaching does and should take place in the midst of a research environment. That, after all, is the essence of a research university.
There is no intrinsic reason why America's teaching needs will exactly match our research needs. That is why a lot of college teaching (indeed most of college teaching) takes place outside of major research universities. Moreover, Texas and America simply can't afford to have every seat in higher education be at a major research university. But it is equally true that we simply must have some seats in higher education be at major research universities. We can't afford to deprive students who want this type of education the opportunity to learn in this type of environment, and we can't afford to fall behind in basic and applied research.
We will better serve our state and nation if we have a variety of educational institutions. Homogenization always retreats to the mean. An array of diverse institutions serves the needs of a diverse group of students; after all, division of labor and "consumer" choice has been a hallmark of increased productivity all the way back to Adam Smith.
Even on our own campus, we do not need every teacher to be a researcher, or every researcher to be a teacher. We have recognized this for years, and as a consequence, we have developed an extremely robust, talented, and professional cadre of lecturers. Led by Dean Judy Langlois, we established better career tracks for our lecturers. As we move forward, this cadre of teachers will be increasingly important.
I do not know exactly how this will unfold over the next 10 years, but I do believe we need to be purposeful and strategic about it. Matching our workforce to our teaching and research needs is probably the most significant thing we can do to enhance our effectiveness. Where do our departments want to focus our teaching? Where do they want to focus our research? And are we being purposeful in making the right kind of hires to get the best bang for the buck?
I believe we have been purposeful and strategic about this in the past, but we will have to be even more strategic and purposeful as we move forward with limited resources. But what will be constant is that a great university will continue to be judged by the quality of its faculty.
So, for all of our faculty, we need to avoid B+, and we need to have the wherewithal to recruit and retain the very best. That has been a challenge over the past few years. We have had only sporadic raises, and these have not been enough to keep up. That might work in the short term, but it won't work in the long run. We need to rectify it, both by generating resources and by capturing savings elsewhere, and by focusing our existing resources on our talent. We have already done much work on this, and I call on our department chairs, deans, and administrators in the Tower including myself to continue to make this a top priority.
Over the last several minutes, I have focused on our faculty, but the same thing is true about our staff. We simply could not operate without our excellent staff. We are blessed with your talent, dedication, and professionalism. And we are falling behind in our ability to attract and retain our staff as well. So we need to focus our resources to rectify that as well. Let me put it bluntly: we need raises, even if we have to stop doing some other important things to get them.
And it is not just salaries. We are in a very competitive business. We need to make UT the most attractive place for our faculty and staff to choose to make a career. And this includes all of the conditions and consequences of working at UT, and it includes the benefits we give to all of our employees.
So the most important reason for UT's rise has been the quality, hard work, and talent of our faculty and staff. But I think the success of our departmental units has been enhanced by a second factor. We have a philosophy on this campus of pushing authority down into the units that actually have the responsibility of getting the job done. Then we ask these units to think strategically about how to use their limited resources. This is a philosophy of decentralization, and, as I have described it on many occasions, it is the philosophy of Moneyball. And this was the insight of the Commission of 125.
Put simply, central planning has its limits. The Tower does not know what is best for the department of physics or philosophy. Too heavy of a central hand actually stifles innovation and reform. It homogenizes outcomes and retreats to the mean. By empowering our departments, we energize them to lift up their own prominence, and by doing so they lift up the entire University. By empowering departments and then holding them accountable, we unlock the power of decentralized responsibility and of ownership.
So I congratulate our departments and organized research units for this success. And I make note that, in my strong opinion, this will be a prominent feature of successful universities in the 21st century. There will be changes in the way we deliver courses. There will be changes in funding models and business models. But great universities will flourish and innovate and reform when they empower their academic departments and faculties.
Another place we will see both continuity and change is in our physical facilities. As enrollments grow in Texas we will need additional facilities across the state. Although our own campus is not growing significantly, our buildings are aging. And we need different kinds of buildings. The feast-or-famine approach we currently have in Texas for funding capital projects makes it difficult to plan, and it is not keeping up with the state's needs. It needs to be reformed to establish the infrastructure across the state we will need in 2025. The need for capital projects will continue long into the future.
But the nature of our capital projects will likely change. We do research differently, so we need more interdisciplinary research space, and more flexible space where we can collaborate with industry. We teach differently, with more emphasis on teamwork and projects, and less on lectures and information. We still don't know the full impact technology will have on our teaching, and therefore on our facilities. So we need to look into the future to ensure that we are designing buildings for the next century, not the last one. But major research universities such as UT will remain largely residential educational experiences, and in my strong opinion they should. Put another way, reports of the death of major residential research universities are greatly exaggerated. We will need to plan for a somewhat different array of facilities, but we must attend to our future capital needs.
We have much to be proud of here. Last year we dedicated three gems of a 21st century campus. We opened UT's magnificent new Liberal Arts Building. Dean Randy Diehl's vision and his team's creative approach to planning and financing this project allowed the building to be completed $15 million under budget.
Bill Gates visited the campus to dedicate the Gates Computer Science Complex and Dell Computer Science Hall, made possible by a $30 million grant from the Bill and Melinda Gates Foundation and $10 million from the Michael and Susan Dell Foundation.
And we opened the Belo Center for New Media, providing interactive classrooms and meeting space for more than 4,600 students in the College of Communication and KUT Public Media Studios. This project would not have been possible without generous gifts from The Belo Foundation, Maureen and Robert Decherd, and the Moroney family.
Not every landmark dedication was for a building. In March we dedicated Stampede, our newest supercomputer. It's capable of processing nearly 10 quadrillion mathematical computations per second. Stampede is currently the largest system available to scientists across the United States, thousands of whom will use it to conduct scientific research and make discoveries. To build Stampede, UT Austin won a national competition for a $51.5 million grant from the National Science Foundation.
We also renamed our Department of Chemical Engineering for John McKetta, three-time head of that department, former dean of the now-Cockrell School of Engineering, and at 97 one of the most beloved figures on our campus. Johnnie, I know you're watching on Longhorn Network. God bless you!
Although our economy is doing better, we still face serious budget challenges. The legislature increased our funding by approximately $25 million over the next two years. This was a very positive step, and I deeply appreciated it. But it must also be seen against the backdrop of the $92 million decrease in state funding we absorbed over the previous two years. We are still dealing with the consequences of that decrease. Furthermore, a large portion of new state revenue must be used to pay for increases in the cost of employee benefits and other requirements. Meanwhile, our tuition revenue is largely flat.
The bottom line is that we continue to operate on a very thin budget. Of the 14 public research universities in our peer comparison group, we have the lowest per student, per year support from tuition, general revenue, and the Available University Fund combined. It would take $26 million per year to tie for 13th; $136 million to be at the median; and $572 million to match The University of North Carolina at Chapel Hill at the top.
This poses a challenge when we compete with more robustly funded universities, but we should also keep in mind that this means we are one of the most, if not the most, efficient universities in the country. It also means that the Legislature's $297 million per year investment in 2011-12 was leveraged by a factor of 21 times to create a $2.8 billion university. That is a tremendous bargain for the state, unmatched anywhere else. We should be very proud of that. It is why Kiplinger's ranks us a best value.
But we need to focus on a continuing effort to be even more efficient, and to be even more mindful of costs. One reason is so that we can free up money for other critical purposes, such as competitive salaries I have already mentioned. Another is we need to be ever mindful of cost and affordability for our students and their families.
Just last month, the White House published its College Scorecard, an interactive tool families can use to evaluate college options. I'm happy to report that UT Austin fares well on the scorecard, with our "cost" needle pointing nearly to the "low" section and our graduation rate pointing to the high. President Obama has called on universities to control their costs. And at UT, we are doing that.
But the responsibility for the cost of public higher education also rests on the public. We cannot continue to decrease public funding across the nation and then express shock when the price to students goes up or we fall behind our competitors around the world. In the last 25 years, student enrollment at state universities across America has grown by 62 percent, while total funding has increased by only 2 percent. Consequently, funding per student has dropped by 30 percent in those 25 years. State support per $1,000 of personal income has dropped nationally by 37 percent.
We are witnessing a massive, historic public disinvestment in higher education. In spite of that, higher education is still doing amazing things. I already mentioned the 21-to-1 return on investment that UT Austin yields to the state of Texas. Education is the best investment of public dollars a state or a nation can make. Just as our university advances when our departments advance, our nation would advance when our state governments across the country invest in their universities. America did it with the Morrill Act, creating land grant colleges after the Civil War. America did it again with the G.I. Bill after World War II. America needs to do it yet again if we are to retain our leading role in the world.
Last year at this time I noted the work being done by the outside blue-ribbon panel we called the Committee on Business Productivity. The committee analyzed a number of our operations, from how we organize our internal computing networks to our parking and student housing systems. I presented their recommendations to the campus in January of this year, and I appointed Kevin Hegarty, vice president and chief financial officer, to lead the campus effort of considering and implementing the recommendations.
Currently, Kevin and his team are in the process of finalizing their campus recommendations on transforming our administrative services and systems. Their recommendations will call for the creation of a "shared services" center, where similar business processes that occur across our colleges, schools, and units such as human resources or finance procedures will be relocated to serve the entire University. In the coming months, the campus will have an opportunity to digest these recommendations and provide feedback. I want to thank Kevin and his team for all of their hard work. I also want to thank our Staff Council and its leaders for their very constructive approach to this effort.
The Committee also provided recommendations on commercializing technology and better utilizing campus assets, such as our utilities, food, parking, and housing. Both our technology commercialization and asset utilization committees will spend the fall talking with staff to gather input.
Not all aspects of this transformative project will be easy. But I believe that our university is open to change. Moreover, any changes we make will be in the service of our core academic mission of teaching and research and in the spirit of making UT Austin the best public university in the nation.
The most important way we can work to make college more affordable is to entice, encourage, cajole, coerce, and do everything in our power to help our undergraduate students to graduate in four years. We also need to help our graduate students graduate in a timely fashion. Many of you know that we are in the midst of an intensive campaign to raise our four-year graduation rate to 70 percent. David Laude, our senior vice provost for enrollment and graduation management, and his team are doing a great job. Out of the more than 8,000 full-time, first-time freshmen who entered in fall 2012, 98.6 percent continued into the spring. This is a notable improvement over previous years. The fall semester course failure rate, which was already low in 2009, has been cut to almost half of what it was then. On average these students are taking more hours than past freshmen. Grades of first-year students in their first semester are improving, and the percent of freshmen who receive a failing grade is falling. We have significant work left to do, but we are moving the needle.
Lurking behind some of these issues affordability, four-year graduation rates, and student success is the technological revolution in course delivery systems. Surely technology will change the way we teach. Indeed, it already has. But here too, I am quite sure there will be critical strands of continuity. To illustrate this, let me tell a story. I have told it before, but it is worth repeating.
Nowhere has the technology of delivery systems had a bigger impact than in the print media. Venerable publications like Newsweek no longer even exist in printed form. Major newspapers struggle to make ends meet. Last year I heard an executive from the Wall Street Journal talk about their approach, which has been one of the most successful in the country. His message was simple. Media that focus only on the new technology lose their way. The Wall Street Journal, on the other hand, focused on its core competency, financial reporting and analysis that is, it kept its focus on the content. It then used new platforms to deliver this "traditional" content. And the Wall Street Journal has thrived.
Our core competence is research and teaching critical thinking and analysis. That will be the strand of continuity. But new technologies can help us deliver that content. We should use those opportunities. We have used these opportunities, indeed, UT is seen as a leader in this field.
In 2010, I began organizing the Public Flagship Network, a group of leaders from 10 public AAU universities, to collaborate on these issues, and we followed up with a collaborative Texas network of universities and community colleges. We are developing collaborative ways to use technology to embrace our students' education. We are developing curriculum for high schools and "on ramp" courses to help college readiness. Our professors use new technology to "flip" large classrooms, that is, reverse the traditional order of learning so that students use web resources like video lectures to absorb the content first and then use the classroom to discuss what it means and to solve problems. We're building massive open online courses and a new educational delivery and research platform called edX with Harvard, MIT, UC-Berkeley, and other major research universities. I want to thank David Laude and Harrison Keller for leading our efforts.
For a long time, the debate was whether a traditional course works better than a technology-enhanced course. We need to go beyond that. The real question is what does each do well, and what combination of experiences best serves our students over a four-year residential experience. Indeed, I would include in this a whole array of experiences, including internships, study abroad, TA and RA experiences, and student activities.
When we look at individual courses we look through the wrong end of the telescope. We should ask what traits we want our graduates to have, and then reverse engineer our curriculum that is the totality of experiences our students have to create those traits. It is not just the individual course that counts; it is the ecosystem of courses and experiences working together. I am absolutely convinced that, for our students, we need a very heavy dose of face-to-face, residential experiences as the core of that ecosystem. But within this mix, there is still substantial room to expand our online offerings. For a significant part of our students' experience, technology gives us a great opportunity to enrich the curriculum.
Sometimes the offerings will simply help our students schedule classes in a way to stay on track for timely graduation. Sometimes they will allow students to take specific skills courses more efficiently. Sometimes they offer more interactive and analytical and therefore pedagogically better alternatives to large passive lectures. Sometimes they can fill specific gaps in our students' high school preparation. And sometimes they can allow our students to take a special course from another university that we might not otherwise be able to offer. And when we get the business model right which right now is a challenge they can help lower the cost of a degree. All of this is an opportunity, even in a curriculum that will and should be predominately residential and face-to-face.
I'm especially proud of our faculty pioneers in blended and online learning, pioneers like Jeff Hellmer, who is teaching an edX course in jazz appreciation; David Vanden Bout and Cynthia LaBrake, who are teaching a hybrid course in chemistry; and Jamie Pennebaker and Sam Gosling, who are pioneering the concept of synchronized massive online courses that teach classroom students and remote students at the same time.
We are now at a stage where we need to establish some parameters. I recently stated my views about principles that should guide us going forward. (1) The faculty and academic units should control the curriculum and keep standards high. (2) We need to support and reward faculty and their departments for innovation, and also implement a new infrastructure to support this innovation. (3) Our efforts must, in the end, be financially sustainable. (4) We need to get to a place where some faculty are using materials developed by others, just as we now do with textbooks. (5) We need to continue to innovate over a long period of time.
But these are just my contributions to the effort. Ultimately, the faculty needs to decide about the curriculum, just as it did with our curriculum reform following the Commission of 125. With authority over the curriculum comes the responsibility to make progress on these issues, and so these issues should be a central part of the Faculty Council's work this year. I am very happy to say that the outgoing and incoming chairs of Faculty Council Martha Hilley and Hillary Hart have established committees to focus on this work.
And in our work to develop and innovate, we must never forget to include our students, who are, in one sense, the experts. Students will simply expect that their education will be high-tech as well as high-touch. Students will be our partners, and we will leverage their native-user sensibilities to continuously improve their education.
Another major accomplishment this past year, and a central focus in the year to come, is the medical school. This is one of the most important and exciting developments in the history of our university.
It's been quite a year. In November, the voters of Central Texas authorized a tax for the hospital district that makes a medical school possible. In January, two of the best friends the University has ever had, Michael and Susan Dell, pledged $50 million through their foundation, and we named the school in their honor. In May, we reached a major milestone when the Board of Regents approved the site plan for the medical complex that will house the school's main components: a new teaching hospital, a medical office building, and a parking garage. The plan will provide more than half a million square-feet in which to learn, do research, and treat patients. This approval was a critical step toward achieving our goal of admitting our first class of 50 medical students in the fall of 2016 and becoming the first major research university in more than 35 years to open a medical school.
A steering committee has been meeting since January, and subcommittees are selecting a new dean and developing the curriculum that will lead to accreditation. Committees also have tackled the challenge of keeping key community groups engaged in this process.
We have wonderful partners in Seton and Central Health. And we owe a great debt of gratitude to Senator Kirk Watson for his dogged leadership. To all of you, thank you!
Though these are major developments, they are just the beginning of what will be a torrent of activity over the next three years to make UT's Dell Medical School a reality.
Finally, I'd like to mention one last change in the higher education landscape that is affecting us now and will affect us for years to come. Higher education, even public higher education, and particularly UT, is increasingly dependent on philanthropy. As state funding continues its decades-long decline as a share of our budget, and as we focus on keeping tuition affordable, we need to cultivate new streams of funding to close the gap and to raise the bar of excellence. Only through philanthropy will we be able to realize our founders' vision for national and world-class greatness.
To achieve this vision, seven years ago we launched the Campaign for Texas. We set a goal three times larger than anything attempted before $3 billion. Almost immediately, the economy crashed, but we kept our heading and forged ahead, and we now have raised two and a quarter billion dollars.
Alumni, friends, foundations, and corporations, are rising to support our vision for a flagship university in Texas second to none in the nation. Last month, UT broke its all-time record for philanthropy, with projections of more than $453 million in a single year, crushing the previous record of $366 million by 23 percent. This figure counts the wonderful gift from Michael and Susan Dell, but we still have some accounting work to determine whether their gift counts in 2013 or 2014. But either way, it was a record year.
These record-level gifts will directly benefit our students, support game-changing research, and help us make UT Austin the top public research university in the nation.
Large gifts have made a huge difference, and we are extremely grateful for them. But more than 90 percent of gifts have been for less than $1,000. In addition, we've had a record number individuals include a gift in their estate plans, for a total of $76 million, the highest annual amount during the current campaign and the second-highest annual amount in UT history.
While we all should be immensely proud of this accomplishment, and what it says about the direction in which we're going, it's not time to celebrate yet. The fact is, we need one more record year. We are within striking distance of our goal, but before we can claim victory we will need one more extraordinary year, an effort that dwarfs anything we have seen so far. I know this is possible, and I ask every alumnus, friend, and fan of The University of Texas to be a part of this effort.
If you have given before, thank you. Please give again! If you haven't given yet, join the team and be a part of this historic effort. Pledging to leave a gift in your will counts toward the campaign total. Kim and I have done this ourselves, and I encourage every one of you to leave something to UT in your will. Or if you already have, tell us about it. Contact us to make this happen as soon as possible. Search on "Campaign for Texas," and make a gift in any amount today. We can do this.
And finally, to Steve Leslie, thank you! Thank you for your extraordinary service as executive vice president and provost for the last six years. I can't imagine these last six years without your support, leadership, and friendship. No words of thanks are enough for what you've done. And to Greg Fenves: Thank you for accepting this challenging assignment. You are the perfect person to become the University's next chief academic officer.
So the University is changing, and it has critical strands of continuity we need to maintain. Mainly, the state of the University is strong. I know you all each in your own way will help us make it even stronger. Thank you all for what you do, and Hook 'em Horns!