Penn State News

Higher Education in the Twenty-First Century: Issues for the Board

Edward P. Junker III
Chairman, Penn State Board of Trustees

The Penn State Forum
Thursday, January 20, 2000
11:30 a.m., Alumni Ballroom
The Nittany Lion Inn

I am very pleased to join you this afternoon to talk about higher education and issues for the Board of Trustees. I count among my blessings the opportunity to serve the University that means so much to me. It is really very thrilling to share in Penn State's leadership, as a Trustee and in my current role as chairman of the board. And it's a great privilege to be part of a University family that includes all of you here today.

For many people, there is some mystique about what the Board of Trustees does. I hope today to shed some light on our role. I also want to talk about some of the key issues that concern the Board as Penn State enters into the twenty-first century.

Some of you have heard me say on many occasions that the single most important responsibility for the Board is to hire the president . . . and then stay out of his or her way.

By that I mean it is our duty to support the president, particularly when the institution is under the internal or external pressures that inevitably arise for a university as large and diverse as Penn State. The Board also has a responsibility to be respectful of the values and supportive of the resources the president needs to do his job. While we delegate to the president authority for the management and operation of the University, the Trustees have a complementary role to play in advancing the best interests of the institution. Part of that role is enabling the president to lead.

The Board feels very good about Penn State's direction and momentum under the leadership of President Spanier. We believe that the University is entering the new millennium with wonderful strength and with the vision and vigor needed to address the challenges the next years will bring.

Many, if not most, of those challenges stem from the changes taking place in our society. We have been through a sea of change since I first joined the Penn State family forty-five years ago and can only expect more of it and at a swifter pace. I have watched Penn State grow tremendously in size, in scope, and in ambition from an institution that in the 1950s served fewer than 20,000 students statewide and was just emerging in national stature as a research university.

To give you a glimpse of Penn State back then, in the fall of 1955, Ed Hintz, Steve Garban, Al Clemens, and I all were freshmen. We were concerned with getting good grades, having some fun, getting over being homesick . . . those kinds of things. Never did we think about university policy or about where Penn State would be in 45 years. Nor in our wildest imaginations did we expect to be trustees of the university. In contrast, students today are more aware of policy and governance issues and much more concerned with institutional directions.

Reflecting demographic changes and other developments within our society since I was a student, Penn State has opened its doors to a larger and more varied learning community, including more women, members of underrepresented groups, and adult and part-time learners. With the growth of science and technology, the university has offered a broader array of specialized programs. And with the increasing role played by higher education in economic and social progress, Penn State's leadership for Pennsylvania, the nation, and the international community has greatly expanded.

Such changes – and there are many more that could be mentioned – underscore that a successful university continuously responds to the world it serves. To stand still would be to become irrelevant and obsolete. Yet, at the same time, there are some things that must be preserved – for Penn State, our mission of teaching, research, and service, our tradition of access, and our commitment to making a difference for the many communities we share.

The Board of Trustees is really a guardian of these concerns. It is our responsibility to see that on our watch the essence of this university is capitalized on to the fullest and that the quality of the institution is incrementally improved so that Penn State is an even better university in the future. And so we are constantly asking, "what are the key strategic questions that we must answer to accomplish these ends?" Looking to the future, there are a number of such questions currently on my radar screen. These are issues that will affect higher education across the board. We must look at their policy and program implications for Penn State.

Being a banker, I can't help but turn first to the fiscal environment in which Penn State operates. Financial concerns are fundamental to the Board's fiduciary responsibility. Without a sound fiscal position, the future of the institution would obviously be at risk. So we want to keep our eyes on developments that have an impact on Penn State's financial resources and be assured that the university is responding accordingly.

The robust economy that we have been enjoying in this nation has in many ways been a boon to higher education. Healthy state coffers and the strong performance of the stock market have helped to ease some of the funding challenges that prevailed for universities a decade ago. Nationwide for the last five years, state expenditures for higher education have increased by an average of 5.8 percent each year with the largest increase of the decade -- 7 percent -- for the current fiscal year. College endowments have averaged a return of more than 10 percent annually for the last five years. Private giving to higher education also is up across the nation – 15 percent last year compared to the year before, with three consecutive years of double-digit percent increases. Tuition increases this year are the lowest in 12 years and a record amount of financial aid was available last year. Federal funding for research has been rising as well.

Penn State has shared in this good news, with modest increases in the last few years in state funding, a healthy return on endowment, and record breaking fund-raising totals. However, for the fourteen years I have been a member of the Penn State Board – and long before – funding has been a daunting challenge for this university. We all know Penn State could contribute so much more were we not constrained by the availability of resources.

Now, if I could tell you how long the current economy will last, I'd have a new career and never have a free moment on my schedule. However, I do know that no trend lasts forever and that Penn State needs to be prepared to respond to the next economic cycle when it occurs, whether it is a slowdown or a sharp downturn.

There are many who believe that right now is about as good as it's going to get for higher education in this nation.

One recent report looked at state tax revenues and concluded that four out of five states will have deficits by the year 2008. The report noted that, at the same time, state support for higher education will have to increase by an average of 6 percent a year to maintain current services over the next decade. Another report suggests that even if current funding patterns hold, in 15 years, colleges and universities in this country will face a $38 billion shortfall as a result of such factors as projected enrollment growth and rising educational costs.

In good times and in bad, the Board needs to be satisfied that the university is operating as efficiently as possible and also be sure that resources are used prudently and productively. But the financial outlook for the next years adds a number of issues for the trustees.

We need to be prepared to support the hard choices that must be made in leaner times.

We have to be especially sensitive to Penn State's tradition of access to higher education, keeping in mind the pressures rising tuition places on students and their families. At the same time, we also need to be open to new revenue streams – for example, corporate relationships that, when appropriately executed, can provide important support for scholarships and other activities.

The Board also must advocate even more forcefully for public priority and policy that recognize the value of educational opportunity in our state and nation, and that support the mission of public higher education. An important part of that effort is assuring that our institution does indeed add value for its stakeholders including the Commonwealth whose investment is essential. Penn State's commitment to Pennsylvania remains at the center of our mission. There needs to be close communication and collaboration between the university and the state to align Penn State's continuing contributions to Pennsylvania's progress with Commonwealth priorities.

None of these issues is new for Penn State. We are one of the most efficient public research universities in the nation, and at the same time, one of the very best. I believe Penn State is as well equipped as any to take on whatever financial challenges the future will bring.

Market Issues

While finance most certainly will test us, the changing market for higher education will bring both challenges and opportunities.

Demographically, the market for higher education in the United States is both expanding and diversifying. If current participation rates continue, there will be about 4 million more students by the year 2015 resulting from population growth alone. These will be traditionally aged college students, in contrast to the older students who constituted the fastest growing segment of enrollments over the last two decades and who now comprise more than 40 percent of all college enrollments nationwide. At the same time, the racial and ethnic composition of the nation will continue to change as the growth rate for minority populations exceeds that for the majority. Yet the college-going rate for African Americans and Hispanics continues to trail that for whites. The participation of low income individuals regardless of race or ethnicity lags behind.

Even this broad-brush picture is enough to suggest that institutions of higher education will have their hands full in the coming years -- on the one hand, with an abundance of students and on the other, with a growing need to serve diverse populations.

Colleges and universities, individually and collectively and in concert with public policy makers, will need to consider how growth is best accommodated. Do we need more institutions or increased capacity at existing ones? How much capacity can be added through virtual time and space? Could increased demand make a university like Penn State so selective that our commitment to educational opportunity is compromised? How do we do a better job of including groups that have been historically underrepresented in higher education? How do we serve learners from different age groups and individual circumstances and with diverse learning needs? Will the surge in traditionally aged college students mean business as usual in resident education or will new models for serving these students evolve?

I certainly don't have all the answers, but I am sure these are questions Penn State will be wrestling with for years to come. I want to add that, in my view, one of the most important issues for the future will be how effectively we provide access for a broad cross-section of the population. If the many benefits of higher learning are not broadly distributed throughout our society, there promises to be a significant price to pay in the quality of life enjoyed by all.

This brings me to another dimension of change in the market for higher education and that is the emergence of the knowledge economy. Whereas in the past business and industry have depended to a large extent on natural resources, their most important resource for the future will be knowledge. Consider some of the parameters of our economy today:

€Time to market is critical. In 1990, it took an average of 35.5 months to complete new U.S. products; five years later, the average was about 23 months. The rapid pace of new product development has been especially evident in the information technology area where computing power has been doubling every 18 months.

€Looking at employment, almost half the private workforce in the United States by 2006 will be in industries that are either major producers or intensive users of information technology products and services.

€Nearly three-quarters of all jobs in 2008 will be in the service producing sector. Some of the largest job growth between now and then is projected to occur in the business services, health services, and engineering and management services industries.

€40 percent of all jobs created between 1998 and 2008 will require at least an associate degree, compared to one-fourth of existing jobs in 1998. Many of the fastest growing occupations – many of them in the information technology field -- require a bachelor's degree.

In short, our economy depends on innovation, the ability to process information, and the capacity to solve problems. In many ways, intellectual capital is the new economic currency, and it comes in the form of both knowledge producers and knowledge users.

I strongly believe that higher education is the single largest driving force for the economy of the future. This has profound implications, particularly for research universities whose missions embrace both discovery and teaching. Not only will our role in economic development grow more crucial, our learning communities are bound to change with expanding marketplace needs for well educated workers. In either case, old models are giving way to new ways of looking at what our universities must do to support the continuing progress of society.

Our role in economic development is most often associated with research and technology transfer. Last year in our nation, medical and technological advances resulting from academic research contributed more than $33.5 billion to the economy and led to the creation of 280,00 new jobs. Certainly university-based research and development will remain vitally important in the future.

Such activities are the cornerstone of Penn State's support for Pennsylvania's technology driven economic development agenda, and we will want to partner with government, industry, and other institutions to capitalize on the collaboration that grows more critical in this area. And we must start thinking more broadly about the impact of all our missions in the economic arena.

Consider a study that looked at jobs created nationwide by companies founded by MIT graduates. The results are astounding. There are 4,000 such companies. They employ 1.1 million people and have annual world sales of $232 billion. If these companies formed an independent nation, the revenues produced would make that nation the 24th largest economy in the world.

Interestingly, whereas more than 60 percent of these company founders who graduated 50 years ago or more were engineering majors, only 40 percent of those who graduated in the last fifteen years were engineers. 43 percent of the more recent group were in the social sciences or management. What that says to me is that today's economy is wide open to well-educated and creative individuals from many fields. It suggests that the development of talent and leadership – the heart of undergraduate and graduate education – will be of even sharper focus within our broad teaching mission.

Yet as learning communities become more closely associated with workforce development in a knowledge-based economy, traditional concepts of students and programs are expanding. Looking in one direction, institutions of higher education have a vested interest in working with K 12 education to promote academic preparation for post-secondary-level work. Looking in another direction, colleges and universities have a vast opportunity to serve adult part-time students. I have already mentioned the growth that has occurred in adult student enrollments over the last two decades. Within this trend, continuing education is moving from the margin to the mainstream of many institutional missions.

For example, at Harvard, three times the number of students in full time undergraduate, graduate, and professional programs are enrolled in part-time continuing education classes. More than half of Johns Hopkins students are enrolled in part-time post-baccalaureate programs and two thirds of the institution's master's degree students are part time. At the University of California San Diego, 10 times the number of students pursuing graduate degrees in engineering are studying for an engineering certificate of some kind.

How our learning communities are defined and how programs are packaged and delivered will be important questions for universities in the years ahead. Penn State has a strong start on these issues by virtue of its historic leadership in continuing education and outreach, and innovative programs such as those at the School of Graduate Professional Studies at Penn State Great Valley and, most recently, the Penn State World Campus.

Our new School of Information Sciences and Technology is a wonderful example of how universities can be responsive to today's marketplace for knowledge. Addressing an urgent workforce development need in a key area of economic growth, the School of IST is partnering with industry and, when fully implemented, will meet a range of educational needs for learners on campus and off. The uncommon speed and cooperation with which this innovative initiative has been put in place are harbingers of how higher education will have to operate routinely in the future.

Indeed, advancements in technology have been behind many of the changes we are seeing in higher education, from the need to support the knowledge economy to pressing new issues of intellectual property to the way our institutions teach and our students and faculty learn. Thanks to technology, education can be highly individualized. Students potentially have access to unlimited courses and flexibility to pursue them as they wish. In business, the trend is away from mass marketing and toward customization of products and services. We need to ask how much a parallel model in higher education applies.

We are beginning to see some of the implications of this possibility. The growth of distance education is one. From 1995 to 1998, the number of distance education programs in this nation grew 72 percent. In 1998, 1,680 institutions offered a total of 54,000 online courses with 1.6 million students enrolled.

At Penn State, distance education enrollments increased 14 percent last year to more than 21,000

The emergence of new competition is another development associated with a movement toward increased flexibility in learning.

The University of Phoenix -- a.k.a. the Apollo Group, listed on NASDAQ -- reported enrollment growth on its campuses this fall of 22 percent or more than 13,000 students, for a total enrollment of nearly 87,000 students. It's on-line distance education enrollment increased nearly 60 percent last year to more than 10,000 students.

Unext.com, a company focusing on educational delivery over the Internet, is working with the business schools at Stanford, Chicago, Columbia, Carnegie Mellon, and the London School of Economics to develop courses for a business program the company will offer online.

The British Open University, one of the largest distance education enterprises in the world, has launched the United States Open University. It is noteworthy to me that the British Open University operates at half the cost of traditional British universities yet has been ranked 10th among 77 of those institutions in quality.

These are but a few examples of the new competition. Colleges and universities as we have known them in the past no longer hold a monolithic position in the delivery of higher education. And like other industries, they face an era of deregulation. As other educational competitors aggressively deliver what the marketplace wants, existing systems of accreditation and credentialing will be increasingly challenged.

One scenario I have read predicts that individual institutions, with the exception of the very top universities, will no longer grant degrees in the future but will simply provide educational programs to students who will be credentialed by a small number of degree-granting entities. The thinking here is than as that as educational flexibility grows, the credential itself will be more important that where it comes from. Taking that thinking one step further, one could ask whether there will be a demand in the future for degree programs or merely the need to show specific competencies by passing a test.

That is a future that seems unimaginable in January, 2000. But the delivery of education most certainly is changing. We can't ignore those changes and survive.

While the bottom line for some providers will be profit, I believe the bottom line for universities like Penn State must always be quality.

But as markets change, resources stretch more, the competition offers an attractive alternative, and knowledge dominates the world's commodities, what will constitute quality for a university like Penn State in the twenty-first century?

At the dawn of 2000, I would have to say from the Board's perspective that quality now and in the years ahead will be viewed as a matter of focus and cost-consciousness in concert with traditional measures of academic excellence. Our competitive edge in the educational marketplace is the comprehensive nature of our enterprise, the creativity and scholarship of our faculty, the synergy of our missions, and the integrity of our programs. On matters of cost and flexibility we will have to work hard to beat the competition. A major concern for the Board will be sustaining that which distinguishes Penn State's contributions as one of the nation's great research universities while operating within radically changing expectations for how those contributions are made. I firmly believe that if we don't pay attention to those expectations, including costs, our constituents – students, parents, corporate partners, the public, and governmental bodies alike – will turn elsewhere.

I've really been talking about a transformation in universities, the dimensions of which yet remain to be fully understood. So a big question for the Board is how do we govern in the midst of ambiguity and change?

As far as the Board is concerned, there's an old phrase I believe will be even more relevant in the future: "Noses in, fingers out." Trustees need to be as informed and involved as ever before, but we can't micromanage. We need to look at the big picture and be assured that Penn State isn't sitting on the sidelines of change but is taking appropriate initiatives to respond to societal developments. Of increased importance will be the Board's attention to the university's strategic plan that outlines institutional priorities and directions. We will want to see a university that is highly engaged and efficient and agile and an institution that wholeheartedly advances the missions of teaching, research, and service.

For the Board's part, we also will have to be flexible. We must be open to adapting Penn State's traditions to a changing world and creating new ones as needs and opportunities arise.

At the same time, the Board must guard jealously the form of governance that has served Penn State so well for so long. We are a large and diverse board coming from backgrounds representative of many different stakeholders. While we may have our differences from time to time, there is an unspoken respect between and among the members of the board that enables us to work effectively together. When it comes to the university, there is a love and devotion and commitment that brings all of the trustees together for Penn State – no personal or political strings attached.

That is a quality that is recognized, admired, and even envied throughout the higher education community. Having served on two presidential selection committees for Penn State, it is indelibly etched in my mind that, without exception, the finalists being considered in those searches said that a compelling reason to leave their present positions was our form of governance. Mind you, these were impressive individuals doing outstanding jobs where they were. But the chance to lead within a governance system unconstrained by outside agendas that tie so many institutions down was viewed as a tremendous opportunity.

The Penn State Board constantly needs to be cognizant of the value of our form of governance and the need to preserve it, particularly through the quality and vision each member of the Board brings to our collective responsibility for oversight of the university. The Board's singular focus on the best interests of Penn State will be especially important as the university must respond ever more quickly and creatively to change.

It's been said that if you don't think about the future, you can't have one. That's never been more true than in this time of accelerating societal change. When I think about the future of Penn State, I see tremendous opportunity as long as we keep our eyes open to the environment around us, our fingers on the pulse of change, and our energies devoted to fulfilling our land-grant mission of teaching, research, and service in keeping with contemporary society. There is no university that has more to offer to a world increasingly dependent on learning than Penn State. I am confident we will rise to the challenges of the 21st century and continue to see Penn State's leadership for learning grow in the future.

In closing, let me say how grateful I am to the faculty, students, and staff of this institution for the creativity and energy they bring to this work. I know the Board joins me in deep appreciation for your commitment to Penn State and for making our role as Trustees so fulfilling.