Testimony for the Senate Finance Committee

February 14, 2011

The following are President Khator's remarks as prepared.

Introductory Remarks

Good afternoon, Chairman Ogden and members of the Finance Committee, I am Renu Khator, and I serve as Chancellor of the UH System and President of the University of Houston.

First and foremost, thank you for all the work you do on our behalf.  The last legislative session was my first in Texas, and I was very impressed by your commitment to making Texas a better state and for your support of higher education.  It is gratifying to know that the state’s universities are such a high priority.

With me today is Board Chair of the UH System Regents, Carroll Robertson Ray.  Like you, we hold a deep commitment to the future of higher education in Texas and ensuring that the resources entrusted to us are used as effectively as possible.

I would like to introduce our two new presidents at the UH System – Dr. William Flores, President of UH-Downtown, and Dr. Don Smith, President of UH-Victoria.  Both are bringing tremendous energy and leadership to their institutions.

Overview of the UH System

Since I last made this presentation two years ago, great things have happened at the UH System.  During the current biennium:

  • System-wide enrollment has exceeded 63,000 students and research has surpassed $124 million for the very first time;
  • The University of Houston has been recognized by the Carnegie Foundation for its very high level of research activity, placing it among the top tier of universities nationally;
  • In pursuit of its goal to become a destination university, UH-Victoria welcomed its first freshman class this fall, offering UHS students a residential option outside of Houston; and
  • UH-Clear Lake has opened a brand new campus in Pearland, while UH-Downtown and UH have opened a new campus in Northwest Houston – both high growth parts of the region.  In doing so, our universities are expanding access to higher education while maintaining their strong commitment to diversity.

Quite simply, our four universities and five off-campus teaching centers do more to enroll and graduate students and produce cutting edge research than any other university in the Houston area, which is why the budget reductions contemplated in Senate Bill 1 present such a challenge – state resources have been critical to our success, and their potential loss threatens to slow the progress our universities have made in serving the needs of the region and state.

Impact of Budget Reductions

With that said, I want to acknowledge the unprecedented financial crisis facing the State of Texas.  We at the UH System understand you will have to make some very difficult decisions with respect to the state budget, and we are prepared to address any financial hardships that our current economic circumstances demand.

Under the introduced version of Senate Bill 1, the UH System’s general revenue appropriation would be reduced by $81 million (16%) for the biennium. It is not an exaggeration to say that cuts of this magnitude would severely limit our ability to achieve our goals.  In fact, we would not be able to support the students we currently enroll, much less accommodate forecast enrollment increases in the coming years.  The impact of the proposed cuts on the UH System can be equated to:

  • 9,300 students lost, or
  • 1,220 courses eliminated, or
  • 300 faculty lost.

The UH System understands that all components of state government must do their part in addressing the state’s financial crisis, but the higher education reductions in Senate Bill 1 would risk the long-term economic future of Texas.  To ensure that we keep moving forward, we have identified four priorities regarding state appropriations:

  1. Base formula funding, incentive funding and financial aid – As the demands on our universities grow, it is imperative that we provide adequate resources for basic educational services through the formulas. The 5% reduction of formula funding in Senate Bill 1, plus the elimination of the $80 million in incentive funding, will severely compromise our operations at a time when there is very high and growing demand for our services.  In addition, state resources for student financial aid are essential if Texas is to expand access to higher education and facilitate student graduation.
  2. Proportionality in budget reductions – In Senate Bill 1, appropriations to the state’s higher education institutions will be reduced by 11.9%, whereas state agencies as a whole will be reduced by 10.1%.  Given the importance of higher education to the state, we believe there should be greater proportionality among state agencies in sharing the budget reductions during the upcoming biennium.
  3. Greater management flexibility – Negotiating the budget cuts for the upcoming biennium will require difficult choices about how to invest remaining resources.  For this reason, we are proposing greater flexibility in two areas.  First is a reduction in state reporting requirements.  The current level of reporting requires an extraordinary amount of staff time and resources that would be better placed toward the priorities of the institution.  Second, we would like to reconfigure special items into broad research categories such as energy and health, which would allow us to target promising programs in emerging research areas, rather than be locked into narrow funding strategies that may diminish over time in productivity and relevance.
  4. Funding for Tier One universities – Maintaining appropriations for the Research Development Fund, Competitive Knowledge Fund, and Texas Research Incentive Program is essential to building research capacity at the University of Houston.  In addition, developing a distribution methodology for NRUF during the session must also be a priority, so that eligible universities, once they qualify, will have access to these funds as soon as possible.

University of Houston – An Emerged Research University

As you know, my top priority for the University of Houston is that it continues to emerge as a research university of national prominence.  Much has been achieved on this front.

Last year, total research awards were $115 million; total research expenditures were $96 million; and federal research expenditures were $50 million – all of which were record highs for the university.

Equally important, UH was recently classified among the most productive research universities in the nation by the Carnegie Foundation for the Advancement of Teaching, a nationally recognized policy and research center that evaluates and classifies universities based on empirical data every five years.  UH has now become the third public university in Texas in Carnegie’s top-tier group, joining the University of Texas at Austin and Texas A&M University.

In building a nationally competitive university, I have always considered student success to be of equal importance to research.  There is not a single Tier One university in the nation that doesn’t also possess an outstanding student body.  The University of Houston is making much progress in this area, as well.  Not only are we enrolling more students on campus, we are increasing their success in terms of both degree production and graduation rates.  This past fall and last year, UH posted a record high enrollment of 38,752 students, record high degrees awarded of 7,230, and a record high six-year graduation rate 45.7%, which was a 10% increase over the previous year alone.

In addition to building a larger student body, we are building one that is more academically accomplished.  Last year, through a $7 million gift that the university matches dollar for dollar, we created the Tier One Scholars program to recruit promising freshmen seeking a top-tier education. To be eligible, students must graduate in the top 10% of their high school class and score at least a 1300 on the SAT.  This fall,  39 Tier One Scholars enrolled at the University of Houston.  With an average SAT score of 1440, they are among the finest students in the nation.

Similarly, this fall the University of Houston received a $5 million grant from the Houston Endowment to increase the number and quality of doctoral students on campus.  This is a grant that was leveraged through anticipated state support from TRIP.  Undoubtedly, these resources will help us bring some of the finest young minds to Texas and will also aid in faculty recruitment and research productivity.

Conclusion – Moving Forward with Reduced State Appropriations

None of the University of Houston’s accomplishments over the past several years would have been possible without strong support from the state through the formulas, financial aid, and the Tier One funding programs, as well as public policy that values higher education.  Under Senate Bill 1, the University of Houston stands to lose $54 million over the biennium.  Even under such circumstances, however, we are determined to move forward on our strategic goals.  We realize that we have very high ambitions that cannot be funded by the state and students alone – we must be an equal partner in moving the university forward.  To that end, we are taking numerous steps to increase the resources we have available to invest in institutional priorities:

  • First, we are stepping up fundraising efforts and posting significant gains.  Three years ago annual giving to UH was $49 million.  Today it exceeds $100 million.  One of the fundraising initiatives we are most proud of is our drive to raise $100 million for undergraduate scholarships and programs.  To date we have raised $63 million.
  • Second, we are reallocating university resources from low priority areas to high priority areas.  In addition to the state budget reduction we absorbed for the current biennium, UH has reallocated an additional $16.5 million through reductions in travel, communications expense, information technology, and staff positions to invest in its top priorities.
  • Third, as we consider potential cuts for the upcoming biennium, we are examining our instructional delivery model to ensure that we optimize enrollment and revenue generation relative to instructional costs.  Issues we are considering include faculty workload, class size and class scheduling.

Texas universities earn the support of the legislature and the public only to the extent that they can demonstrate that the resources entrusted to them are used effectively.  We believe the achievements of the University of Houston justify not only public trust but real excitement for what is happening at the UH System’s flagship institution.

Much of the credit for our success in recent years is attributable to the support we receive from the Texas Legislature.  Even in the midst of unprecedented financial challenges we hope that you will remain strong in this commitment.  Higher education has proven to be a good investment.