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Convocation Address, 2016

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CONVOCATION ADDRESS
Mayer Theatre, SCU
15 September 2016

Welcome

Thank you for the introduction, Dennis, and welcome again to everyone present, physically or virtually via the internet.  I hope that you have each enjoyed summer breaks and a chance to renew yourselves in preparation for the new academic year.  Vacation allows time to review matters from a distance and to gain perspective. This break is something that we all shall need as we commence a year that will ask much of each and every one of us.

This afternoon I have several announcements before I share a longer topic with you. 

  • First, I wish to welcome the new members of the faculty and staff, whom I wish to invite to stand and to be recognized. Welcome to Santa Clara. Please stand.
  • I would also like to introduce the new Dean of the Jesuit School of Theology, Kevin O’Brien, SJ, who comes to us from Georgetown University, where he was Vice President of Mission and Ministry; and the new Executive Director of the Ignatian Center for Jesuit Education, Dorian Llywelyn, SJ , who departed Heythrop College at the University of London to pitch his tent with us. Please stand so that we can also welcome you both to Santa Clara!
  • The Blue Ribbon Commission on Diversity and Inclusion will soon complete its work and submit its report. I have been impressed with the enthusiasm, passion, and dedication with which the members took their responsibilities. It says a great deal about the Santa Clara community and how seriously we wish to address matters of diversity. My thanks go to the members on the Commission, the Commission chair, Fred Ferrer, executive director of the Health Trust, and to Dr. Lisa Millora, Senior Assistant Provost for Strategic Initiatives, who ably staffed the Commission.
  • With the completion of the Edward M. Dowd Art and Art History building, Dean Debbi Tahmassebi is announcing the Year of the Arts in the College of Arts and Sciences. Celebrations will commence in October, so be sure to look for the announcements of these festivities.
  • This August we broke ground for the new Howard S. and Alida S. Charney Hall for the School of Law.
  • In fundraising, we have had the second-most successful fiscal year, with over $73 million received or pledged. This great achievement came from the hard work of our University Relations team, led by Jim Lyons, and on the generosity of friends, alumni, and several faculty and staff.
  • The Chronicle of Higher Education recently released its Almanac for the new academic year and included the 140 top universities in the United States by endowment holdings for FY 15. Recall that there are over 4,000 institutions of higher learning in this country, and Santa Clara’s endowment ranked at #106.[1]
  • This week US News released its college rankings, and Santa Clara once again was recognized as No. 2 in the western United States, with the highest First-Year Student retention rate in the region, and the highest six-year graduation rate in the region.
  • Finally, Mike Sexton, vice president of enrollment management reports that once again we have reached our undergraduate enrollment target. We have enrolled a broadly diverse first-year class with excellent scores and GPA’s. Congratulations, Mike, Dean of Admissions Eva Blanco Masias, Dean of Financial Aid Nan Merz, and your team.

All this good news reflects the dedication and hard work of all of you in your schools, the college, and in all the offices across campus. We should be proud of these achievements and encouraged by the success of our many endeavors.  We have all labored generously to commence this year from a position of strength. It is in this context that I wish to direct our attention towards a matter of some urgency: our institution’s fiscal health.  Sustainability has been a major theme for my presidency, and it extends from the natural environment to our university’s vitality. As a shared concern, I invite us to direct our focus towards working together to face new realities and challenges we will surely meet.

Changing Landscape in Higher Education

We have in this country changing financial dynamics that, if not addressed, threaten all institutions of higher education, including Santa Clara University. No one is exempt. If I can get Scriptural on you for a moment, recall the Biblical passage, “the rain falls on the just and the unjust alike.” (Matthew 5.45)  In particular, private, not-for-profit colleges and universities are experiencing growing economic strain. You and I are aware of stories in the national media about college affordability, growing student debt, concerns about access to college education, rising costs to operate institutions, diminishing state and federal support of higher education, and questions even about the worth of a college degree, particularly a liberal arts education.[2] 

The signs of the times appear in the data. Let me offer a few statistics to document these issues from across the United States.

  • The cost of private higher education has risen at a rate faster than inflation. From 1995-2015, the average tuition and fees for national private universities have gone up 179%, while inflation has risen 55.1%
  • Student debt has grown. Currently, student loans total $1.3 trillion, with the average for SCU students being $29,000.[3]
  • Family resources have declined or barely kept up with inflation.
  • Moody’s Investor Services predicts an accelerated rate of closures or mergers for smaller colleges, particularly liberal arts institutions.[4]

These menacing developments have coincided with the “amenities race” to provide enhanced facilities to attract students, particularly those excellent students we wish to recruit and graduate -- without staggering debts. The confluence of these and other challenges has created a daunting situation for American higher education, all hitting at the same time.

Yes, the topic is a serious matter; it is not just one thing, it is not short term, and it is not abating.  But I approach this subject with great confidence in our ability once again to adapt and thrive.            These issues can be vexing, but we possess many strengths, particularly our collective dedication to the mission of transforming the world, one student at a time.   As I noted earlier, Santa Clara is fiscally sound, enjoys a healthy endowment, strong undergraduate enrollment, and a wide circle of generous alumni and friends.  To continue providing the excellent education we offer at Santa Clara, we need to strengthen the fiscal health of the school. We need to adapt as we have done repeatedly over 165 years. To that end, we must attend to the University’s long-term financial stability, institutional vitality, and what our colleagues in the Leavey School of Business call “market strength.”

The issues facing higher education have been brewing for several years and now these trends are coalescing with deeper impact. What we may be seeing could well be higher education’s version of the “new normal.” And it will not be pleasant if it is not addressed.

In other words, maintaining the status quo is not an option. We need to look long and hard at how we are going to weather the financial storm battering private higher education. For our response, I am asking you to join the participatory process. I am turning to you to put your best ideas forward, ideas that are creative, sound, and sustainable. All of us are needed for a successful effort that is inclusive, open, and in harmony with our mission and collaborative governance protocols.  If all sectors are not involved, then the results will not be as long standing, so involvement should be as wide and as deep as possible.

Let me first share some data that place our situation in a larger context.   Market and environmental conditions are increasingly affecting institutions of higher education, particularly in the private, not-for-profit sector.[5]  Among rumblings in the distance, The Chronicle of Higher Education continues to report schools that are closing or merging. Nationally, schools are examining their revenue sources, budget expenditures, and short- and long-term plans.[6] Several of our fellow Jesuit institutions are critically impacted and are planning accordingly.

We must be proactive. We cannot be lulled into complacency because of our strong undergraduate enrollment, record fundraising, the success of our graduates, and a major endowment. Are we fiscally strong at Santa Clara? Yes! We are not exempt, however, from the national forces that are coalescing and compounding challenges.

Because annual tuition increases nationally are outpacing the growth in inflation, such cost increases are unsustainable.

A recent survey of university presidents inquiring into the reasons of cost increases provides enlightening observations.[7]  These presidents gave numerous causes for the rise of expenses, and several are instructive for us today.

  • Many students and their families have rising expectations of college services and facilities. This consumer demand has led to an “amenities race” among institutions in order to remain competitive.
  • A weak relationship exists between what it costs to educate a student and the price that a student actually pays. At Santa Clara, tuition and fees cover only 80% of what is needed to instruct each student. As our dean of business, Caryn Beck-Dudley might say, “just do the math.”[8]
  • Demographic decline in the number of college-age students in the northeastern United States has driven universities and colleges in that region to expand the reach of their recruiting. They are paying more attention to the West Coast and the Southwest, traditional areas from which Santa Clara recruits. If some of my friends in the Northeast call it “wider recruiting,” I say it sounds like Eastern aggression!
  • The rising costs of health care places additional burdens on the benefits that universities pay their employees. We are all familiar with escalating health costs as each of our households confronts medical expenses.
  • Administrative costs for compliance regulations are extremely expensive. The dramatic rise in federal and state regulations in recent years has forced schools to spend increasingly large numbers of dollars to handle issues of compliance (for Financial Aid, Human Resources, etc). I should add that NCAA requirements are another expense that hits the budget of our athletic program.[9]
  • Expanded student services to provide the quality of education we seek adds further costs in personnel and in programs. Here I would note the increasing demand in recent years for student mental health services. Overall, we are finding that students need more support.
  • Maintaining and improving the physical plant, the university infrastructure, and technology further impact the operating budget with rising expenses. When students arrive at the Jesuit University of Silicon Valley, they expect the latest in information technology. With a plant that is over 160 years old, maintenance cannot be deferred.

None of these trends are getting better, and some are getting much worse.  At the same time, schools across the nation are struggling to respond to demands to make higher education more affordable.  Here at Santa Clara, we face rising numbers of families with unmet financial need, not less. We want to meet more of the financial need that families have.  We want to maintain the economic diversity among our students. We do not have sufficient scholarships to meet the full needs of families, as this slide illustrates.

Here we see the growth over a decade of the unmet need of SCU students and their families. This hits home in the messages I receive from parents pleading for more aid, asking for relief. One such message:

“…I [have] been borrowing from the Department of Education to be able to pay [my son’s] tuition. But this year our situation is very complicated because I had to borrow money from my retirement program to pay my other son’s tuition, and the situation has become very stressful. I am the only one who can bring [in] income…my wife’s health is not good and that is why I am crying for help.”

These messages are heartbreaking to receive – they show the depths at which families are struggling. These messages are also heartbreaking to answer – we just do not have enough financial aid available.

In summary, the traditional financial model to support higher education is suffering from challenges that include: tuition discounting, rising student debt, lower family incomes, and decreased state and federal aid.[10]

While striving to retain long-term financial stability and institutional vitality, we must not lose sight of our mission. We must remain dedicated to our belief that the world needs Santa Clara and its graduates to create an ever-more just, humane, and sustainable world. Society relies upon faculty research and creative works inspired by the humanistic tradition descended from Ignatius Loyola and the first Jesuits. We remain committed to the belief that colleges and universities exist to serve the public good of society through the students we educate. Our alumna, Janet Napolitano, president of the University of California system, exhibited her Santa Clara University education when she argued, "'We are not degree factories. Our business...is to transform individual lives and to transport new knowledge into the world... This is our grand challenge."[11]

“Our grand challenge” is not simply about finances in one year; no, we must face head on these trends in higher education. We face the perils that confront all American private higher education. But we confront these worrisome trends from a position of strength, with a record of pulling together when threatened, and with a mission and strategic plan worth fighting for once again. We are robust, and we possess assets that are the envy of our peers.  We must utilize our advantages of strength in new ways to confront the coalescing economic threats.

Campus Initiative

This Fall Quarter, I am inviting you to join me in an exercise to strengthen the long-term fiscal health of the University.  This project requires wide participation so that we can come up with plans in which people have a voice, feel ownership, and are willing to carry through.  Consider how families face a financial issue. I recall Vice President Joe Biden’s image how family members sit down at the kitchen table, review the facts and figures, brainstorm together, and set then a course of action in which each member plays a part.

I am inviting you to join me and sit down at the kitchen table for Santa Clara.  We ask ourselves: how can we thrive long-term instead of just sustaining over the short term? Because we all care about this place, we all should understand the question; we should all participate, and we should all contribute our best ideas. Together we will end up with a better plan that any one of us can create; and we will all be invested and willing to see our endeavor through to successful completion. This campus-wide undertaking will engage the full community in a strategic effort to achieve sustained excellence.

Here is how it will work.

First, for the Leadership Committee, I shall ask two people to serve as co-chairs: one member of the faculty and one member from the Administration or staff. I am turning to you to suggest names to me so that I can appoint up to 8 additional members to this leadership team.

The Leadership Committee will oversee the research and analysis undertaken by the working groups, each comprised of between 8 and 10 members.  The working groups will propose efficiencies, suggest revenue enhancing measures, and identify redundancies in operations.  They will seek out suggestions from across campus. And remember, our project is as much about adding revenue as it is about reducing our expenses.  Faculty, staff, and students will serve on the working groups, which will address the following areas of the university:

  • Facilities Utilization, Management, Operations
  • Campus Services and Procurement
  • Non-Academic Administrative Structure
  • Academic Administrative Structure and Support
  • Non-Degree Academic Programming
  • Benefits
  • Institutional Advancement and Community Engagement

The Leadership Committee will receive and review all proposals from the working groups, as they are drafted.  If a particular proposal intersects with the work of a University Policy Committee, the Leadership Committee will ask the UPC to make a formal recommendation on the proposal. The Committee will also post updates on its progress on the project website, which is being developed. From material submitted by the working groups, the Leadership Committee will present a list of recommended proposals to the president to consider.  After I have consulted with various parties, I shall then make decisions and communicate these to the campus community.

In a communication to you I shall provide more details of this significant undertaking. In that email to you, I shall be asking you to nominate outstanding individuals who could make contributions as Co-Chairs, as members of the Leadership Committee or one of the working groups.  Also, I shall introduce an outside adviser who will assist us, someone who has engaged in similar processes at over 100 other universities and colleges. Mr. Howard Teibel will be sharing his advice and expertise as we advance on this collaborative process of such importance. We shall commence our effort in November, and I look forward to your participation.

Conclusion 

            Santa Clara University has overcome many challenges since 1851.  Our predecessors repeatedly faced difficulties and navigated changes, all for the good of the institution.  Back in 1960, our president then, Patrick Donohoe, SJ surveyed the national trends of coeducation that were beginning to alter the composition of university student populations. He knew that Santa Clara would improve academically and financially if it admitted women as students to the all-male student body.  Alumni howled, students protested, and Jesuits harrumphed - but the Trustees concurred.  Fr. Donohoe did not flinch.

            Three decades later, as you may have heard, President Fr. Paul Locatelli, SJ tackled the issue of inter-collegiate football.  Attendance at Santa Clara’s games was minimal, expenses were significant, and it was increasingly difficult to find opponents to play. Paul terminated the football program in 1993 and redirected funds to enhance the academic stature of the university. Certain alumni were outraged, and some remain bitter to this day. Santa Clara, however, has soared in academic reputation because Father Locatelli faced the issue and invested in a plan to secure the university financially.

Lastly, recall the Great Recession of 2008-09.  Over 200 students were threatened with having to drop out of school because of dramatically collapsing family finances.  Colleges and corporations were slashing their expenses,  cancelling construction, and firing staff or instituting work furloughs to balance their budgets,. The shaky national economy posed many threats to Santa Clara – and we rose to the challenge. With your input, we trimmed budgets strategically, eliminated merit raises for one year, postponed new construction, and sent out an appeal to alumni and friends to rally round with increased donations.  We achieved dramatic success: no student had to drop out of Santa Clara because of financial need; no staff were let go; and a year later we reinstated merit increases. We pulled together and weathered the crisis.    

Today we face a different storm; in fact, several storms are rising at the same time.  There are those who feel we do not need to build STEM facilities; I have heard those complaints. There are others who balk at the emphasis on diversity and inclusion; I have listened to those remarks. Some of you may feel that donations made for campus beautification could have been directed elsewhere.  I disagree, but we shall always have matters about which there can be differences of opinion.

Where there is no division, however, is in our love for our students. We are united in our dedication to changing the world, one student at a time. We are committed to the power of education at this place with its vision of humanistic values, and we are resolved to build the common good through social justice.  As the storms of financial challenge rise, as the tempests of change assail us, we are equal to the task of navigating a path forward.  We will debate and discuss, but we shall work together, as we have done before. We can - and will - strengthen Santa Clara University and weather yet another threat to our vitality.

As I have said more than once, the world needs Santa Clara. Society needs our graduates, our research and creative works, our service to those in greatest need. Yes, the world needs Santa Clara, and at this moment, Santa Clara needs you as we face this great challenge together.

Thank you. God bless you in this new academic year.

Michael E. Engh, S.J.
President

___________________________________ 

 Notes:

[1] Almanac 2016-17, The Chronicle of Higher Education (August 19, 2016), vol. 62, p. 54.

[2] Mark Toner, “The Highly Endangered Business Model (and How to Fix It),” The Presidency: the American Council on Higher Education’s Magazine for Higher Education Leaders, (Summer 2015), 12-17; “The View From the Top: What Presidents Think About Financial Sustainability, Student Outcomes, and the Future of Higher Education,” The Chronicle of Higher Education (2015), 4-12; Stephen G. Pelletier, “Stress Testing: How Can You Insure Your Institution’s Financial Health?,” Trusteeship: Association of Governing Boards of Universities and Colleges (September/October 2015), 8-13; and John Etchemendy, “Are Our Colleges and Universities Failing Us?,” Carnegie Reporter (Winter 2014), 42-56.

[3] Student Debt: Myths and Facts, The Council of Independent Colleges (August 2016), 3rd edition.

[4] Kellie Woodhouse, “Moody’s Predicts College Closures to Triple by 2017,” Inside Higher Ed (September 28, 2015), https://www.insidehighered.com

[5] Rick Seltzer, “Spending Rose Across Categories, Fed Report Says,” Inside Higher Education, https://www.insidehighered.com/quicktakes/2016/09/15/, accessed 15 September 2016.

[6] “The Business Model,” Top Strategic Issues for Board: 2016-17,” (Washington DC: Association of Governing Boards of Universities and Colleges, 2016), 4-7; and “Reasons to Update Strategic Financial Analysis,” in Strategic Financial Analysis for Higher Education: Identifying, Measuring & Reporting Financial Risks, by Phil Tahey, Ron Salluzzo, Fred Prager, Lou Mezzina, and Chris Cowen, (n.p.: KPMG LLP and Prager, Sealy & Company, LLC, 2010), 7th ed., 1-4.

[7] See Davis Educational Foundation, "An Inquiry into the Rising Cost of Higher Education," (November 2012), i; downloaded from www.davisfoundations.org

[8] Kellie Woodhouse, “Tuition Discounting Grows at Private Colleges and Universities, Inside Higher Ed (August 25, 2015), https:/www.insidehighered.com

[9] Arthur R. Kirk, Jr., “Think College Costs Too Much? Thank the Government,” Chronicle of Higher Education, (May 23, 2014), A34-35.

[10] See Mark Toner," The Highly Endangered Business Model (and how to fix it),' The Presidency, the American Council on Education Magazine for Higher Education Leaders (Summer, 2015), 12-17.

[11] Quoted in Carole Schweitzer, "How Did We Get Here?," Business Officer, National Association of College and University Business Officers, (July/August, 2016), 20.