Department of Urban and Public Affairs

• PADM 600• PADM 605

NOVEMBER 4, 2013

Dr. James RamseyPresident, University of Louisville

L O U I S V I L L E . E D U2

I don’t get to teach economics anymore, but I did find my notes from Econ 202

My notes from Econ 202

My Dean...

L O U I S V I L L E . E D U3

Some ask me about my leadership style:Heck, I’m just an economist/econometrician “I am what I am”-Popeye

L O U I S V I L L E . E D U4

Still Basic Economic ConceptsImportant as we face University decisions

A. Specialization / division of labor

B. Opportunity costsC. Cost / benefit

analysisD. Risks / return

analysis (risk lovers vs. risk averse)

E. Data / Data / DataSo this is how I think...

L O U I S V I L L E . E D U5

A. Specification/division of labor

L O U I S V I L L E . E D U6

B. Opportunity costs

L O U I S V I L L E . E D U7

C. AND the “ole” T-Charts approach

+ –Pros

BenefitsConsCosts

Quantitative

Qualitative

L O U I S V I L L E . E D U8

D. AND trying the assess “risks”

Is it:80% vs. 20%

OR20% vs. 80%

L O U I S V I L L E . E D U9

E. Data/Data/Data

L O U I S V I L L E . E D U10

With apologies to a Dallas Federal Reserve Economist who I heard 14 years ago

• The Business Cycle Still Exists!

So let’s look at a case study

L O U I S V I L L E . E D U11

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

2.5

The Last Decade or so

The “recession!”

Quarterly Change in GDP (measure of macro economic activity)

L O U I S V I L L E . E D U12

We know that nationally times have been unprecedented…11 post WWII recessions

*Lowest level during the current recession. The next two quarters (2009: III and IV) have been positive.

- http://

books.google.com/books?id=g-L0iLH5u34C&pg=PA408&lpg=PA408&dq=Real+GDP+November+1948&source=bl&ots=1eT_Am6PKI&sig=hkYMPbaa6BWiE92o-tg8Z8DPBI4&hl=en&sa=X&ei=2gEJUrDyE-Hg2AX384DYDQ&ved=0CDcQ6AEwAQ#v=onepage&q=Real%20GDP%20November%201948&f=false

Peak Decline in real GDP

Dec-07 (IV) -5.1%*

Mar-01 (I) -0.5%

Jul-90 (III) -1.3%

Jul-81 (III) -2.9%

Jan-80 (I) -2.2%

Nov-73 (IV) -3.1%

Dec-69 (IV) -0.6%

Apr-60 (II) -1.6%

Aug-57 (III) -1.2%

Jul-53 (II) -2.7%

Nov-48 (IV) -1.7%

L O U I S V I L L E . E D U13

Just when we thought recoverywas taking hold

2011 “Black Swans”• Tsunamis/Nuclear Meltdown

Japan• Civic unrest

Tunisia/Egypt/Libya/Yemen/etc.• Europe Economic Meltdown

Greece/Spain/etc.

2012• “Sandy”• Sequestration

2013• And now shutdown

So, we are recovering – but we are not back! Yet.

L O U I S V I L L E . E D U14

The real problem!

L O U I S V I L L E . E D U15

Slow recovery continued – September 2013

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

Jun-13

Aug-13

Oct-13

Dec-13

-1000

-800

-600

-400

-200

0

200

400

600

-830

148

Net monthly change in nonfarm payrolls, in thousands

L O U I S V I L L E . E D U16

National Employment

136,290,000

US jobsDecember 2007

137,982,000

Jobs lost in the recession

Jobs gained in the

recovery

5.787 million

US jobsSeptember 2013

Still 1.69m fewer people working today

http://beta.bls.gov/dataViewer/view/timeseries/CES0000000001http://www.deptofnumbers.com/employment/us/

7.479 million

L O U I S V I L L E . E D U17

What does all this have to do with UofL, being Prez., etc

Well, Kentucky’s Economy is Dependent on National Economy

L O U I S V I L L E . E D U18

Kentucky’s Economy “A Quick History”

L O U I S V I L L E . E D U19

But since 2000Kentuckians working

1,745.0

1,765.0

1,785.0

1,805.0

1,825.0

1,845.0

1,865.0

1,885.0

1,846.9

1,870.6

1,814.4

1,750.6

August 2013

L O U I S V I L L E . E D U20

But there is more to itKentucky Manufacturing Employment

Why Important? WAGES!

August 2013

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

200.0

220.0

240.0

260.0

280.0

300.0

320.0

225.2

L O U I S V I L L E . E D U21

So, in Kentucky things are better but we are not back yet from the depths of recession

U.S. KY

Jobs Lost 7,500,000 120,000

Jobs Regained 5,787,000 96,300

% of Jobs Regained 77% 80%

L O U I S V I L L E . E D U22

“I am trying to hang with you but work with

me …What’s this have

to do with UofL?”

L O U I S V I L L E . E D U23

We are a “State” Institution!

Kentucky State General Fund

$9.3B 100%

Individual Income Tax $3.7B 40%

State Sales Tax $3.1B 32%

Combined $6.7B 72%

Income Tax/Sales Tax highly correlated with economic activity —i.e. Employment! People working!

State Funded?OR

State assisted?FY 13

L O U I S V I L L E . E D U24

Year ($000,000) % Change2005 7,645 9.56%2006 8,376 9.56%2007 8,573 2.35%2008 8,664 1.06%2009 8,426 -2.75%2010 8,225 -2.39%2011 8,759 6.49%2012 9,026 3.05%2013 9,348 3.44%2014 9,578 2.4%*

* Forecasted

Recessionaryyears

Modestrecovery

KY General Fund

http://www.osbd.ky.gov/NR/rdonlyres/1ADF4A09-F159-40BE-9DD0-2156ACCD0276/0/1214BOCBudInBrief.pdf

Legislative (budget) Session

L O U I S V I L L E . E D U25

State Revenue Growth

Public Pensions Medicaid Debt Service Corrections/Adult Prisons

K-12 Base Higher Ed-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

10.0%

63.5%

41.9%

32.8%

15.3%

-1.0%

-14.0%

http://www.ksba.org/protected/PrintArticle.aspx?iid=50GAYB&dasi=3UBI

So, While Modest Economic Recovery, State Budget (2008-14) Continues To Be Ugly Because of Expenditure Side of Budget

L O U I S V I L L E . E D U26

So as a result of the national economic activity and its impact on Kentucky

and Kentucky’s budget issues, we are a very different institution

…

L O U I S V I L L E . E D U27

Budget: UofL Revenues

$ %

FY 1997-98 FY 2012-13

State Funds 126.5 M 141.2 M 12%

Tuition and Fees 63.3 271.0 328%

“Other” General Funds 37.2 62.1 67%

Clinical/Research Income

127.3 509.1 300%

Philanthropy 22.1 142.6 545%

Athletic Association, Inc.

17.6 77.2 339%

“Pass Throughs” 37.8 33.3 —

TOTAL 431.8 1,236.5 186%

L O U I S V I L L E . E D U28

Fiscal Year 1997-98

UofL Net State Ap-propriation

29.3%

UofL Tuition and Fees

14.7%

UofL Other General Funds8.6%

UofL Re-search

Foundation, Inc.

29.5%

UofL Founda-tion, Inc.

5.1%

UofL Athletic Association,

Inc. 4.1%

QCCT1.7%

UofL Medical School Fund,

Inc.0.7%

State Supported QCCT, Debt Serv.6.4%

UofL Net State Appropriation11.4%UofL Tuition

and Fees21.9%

UofL Other General Funds5.0%

UofL Re-search

Foundation, Inc.

41.2%

UofL Founda-tion, Inc.11.5%

UofL Athletic Association, Inc. 6.2%

QCCT0.6% UofL Medical School Fund, Inc.

0.3% State Supported QCCT, Debt Serv.1.8%

Fiscal Year 2013-14

L O U I S V I L L E . E D U

29

1. Continuing re-engineering of processes and expense management

2. Aggressively improving balance sheet management, with an emphasis on converting underperforming assets3. Increasing clinical income to support education and research4. Increasing contract research and commercialization income5. Creating private sector partnerships6. Being creative in expanding the research mission through innovative financing tools like the tax increment financing plan7. Enhancing fund raising

What we have been out doing to move forward “Our Seven Strategies”

L O U I S V I L L E . E D U

30

Strategy one –“Pick low hanging fruit.”$114.8M in cost efficiencies

L O U I S V I L L E . E D U

31

Strategy two –Taking “underperforming assets and making them perform.”

L O U I S V I L L E . E D U

32

Strategy three –Increasing value from our research/IP

L O U I S V I L L E . E D U

33

Strategy four –Use private sector to do what we are not good at

L O U I S V I L L E . E D U

34

Strategy five –Generate clinical income to support teaching/academics

L O U I S V I L L E . E D U

35

$5.5 M

Strategy six –Being creative and clever,what no other universities do

L O U I S V I L L E . E D U

36

And biggest yet

Belknap Research Park

L O U I S V I L L E . E D U

37

An aside

Oh, by the way, Manoj Shanker says that in 2013 UofL

contributed $1.7 billion to state budget and is responsible for 20,000 jobs

L O U I S V I L L E . E D U

38

$600 M$750 M

$940 M$1B

Strategy seven –You – our friends/alums/donors – increase philanthropic support

“Hot shot” consultant

2010Our BOT

Today June 30 2014

L O U I S V I L L E . E D U

39

So – we must do more –

“The University of the 21st

Century”

L O U I S V I L L E . E D U40

But now, in addition to fiscal challenges, we face• Market challenges• Questions about

efficiency/effectiveness of education delivery models

• Pricing issues• Integrity issues

L O U I S V I L L E . E D U41

So – we must do more –

“University of the 21st Century”

L O U I S V I L L E . E D U42

Our trajectory

1. Continue on our trajectory – 2020 Plan

2. Trajectory slows down – push out date in 2020

Plan

3. We accept where we are – flatline

4. The “unthinkable.”

Possible Paths of Future

L O U I S V I L L E . E D U43

Second – Next step in campus discussions of “University of 21st Century”

1. “Clusters” of excellence

2. Reviewing education delivery models that are student

centered

3. Look at organization/structural/financial processes

4. Build culture of excellence

L O U I S V I L L E . E D U44

So againI say that despite my Dean not letting me

teach...

I really am still an economist

L O U I S V I L L E . E D U45

Thank you

Questions?