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Annual Address to the Faculty

By Steven B. Sample, President
University of Southern California
February 10, 2009

Next month Kathryn and I will celebrate 18 years as president and first lady of USC. They have been very good years, for us personally and for this university.

During that time, USC has progressed further, faster than any other university in America. We’ve recruited and retained more world-class faculty. We’ve watched USC become one of the most academically selective universities in the nation. We’ve seen our endowment grow and our reputation rise at a rapid rate. We’ve witnessed the transformation of our two campuses through the largest capital construction program in USC history.

USC’s faculty and deans have played a vital role in our dramatic ascent among America’s premier research universities. You are the reason we’re attracting more of the best and brightest students. Your research is helping solve societal problems and it’s enhancing the quality of life for people here and everywhere. It is your efforts and your commitment that are helping us expand USC’s reach and influence around the globe.

I speak to you today at a very uncertain time in the history of American higher education; indeed an uncertain time for our entire country. In the midst of this period of change and uncertainty, I should remind you that I am by nature a contrarian and an optimist. As a contrarian, I don’t automatically accept the conventional wisdom on anything I might happen to hear. As an optimist, I believe there are opportunities hidden in every problem.

After nearly 30 years as a university president, I have learned that difficult times often bring out the best in us. Complex challenges have a way of focusing our attention on what is essential. They remind us of our core values.

In times such as these, I am reminded that our most valuable asset is not our endowment. Our most important capital investment is not our buildings. A university is not great because of bricks and mortar, or libraries and laboratories, or rankings and SAT scores. A university is great because of its people – its faculty, students, staff, and alumni – and the ways in which those people work together for a common cause.

Let me begin by focusing on some recent accomplishments of our faculty. I believe that many of our faculty are among the best in the world in their respective disciplines. Over the last few months, we’ve received several confirmations of this belief.

Last fall Dr. Andrew Viterbi – an alumnus, a trustee, a professor of engineering, and the namesake of our Viterbi School of Engineering – was awarded the National Medal of Science. In 2007 Distinguished Professor Morten Lauridsen – a three-time alumnus and longtime professor in the Thornton School of Music – became the first USC faculty member to receive the National Medal of Arts. And in 2006 USC University Professor and eminent historian Kevin Starr earned the National Humanities Medal.

We believe USC is the only university in history to win all three national medals back-to-back.

Last November we learned that Professor Carol Muske-Dukes, who teaches English in the USC College of Letters, Arts and Sciences, was appointed by Governor Arnold Schwarzenegger to be California’s newest poet laureate.

There’s more good news. Last December nine of our faculty were nominated for Grammy Awards. And last Sunday three of them won Grammys!

We have not only great faculty, but also exceptional students. As I indicated earlier, USC is now one of the most academically selective universities in America. Last fall’s freshman class included 244 National Merit Scholars, which placed us fourth in the nation. USC now receives 13 applications for every opening in the freshman class. This year we also had a record number of Fulbright Scholars – 18, in fact, which placed us ahead of Columbia, Duke, Johns Hopkins, and UCLA. In addition, the number of our freshmen who have SAT scores between 2200 and a perfect score of 2400 has increased 24 percent. We now have more students in our freshman class who score in the top tier of the SAT than UCLA, Berkeley, or Caltech.

All of us who teach undergraduates at USC agree that it’s a lot more fun teaching the bright, highly-motivated students whom we are now attracting in large numbers.

Moreover, as Jovan Vavic, coach of USC’s national-champion men’s waterpolo team (29 - 0), told our trustees the other day, USC’s dramatic rise in academic standards has made it easier for him to recruit the very best waterpolo athletes from around the world.

Over the last year, there have been many other signs that USC’s reputation is on the rise.

Recently, in a nationwide survey of college applicants conducted by the Princeton Review, USC was named one of 10 leading “dream colleges” – that is, the 10 colleges students would most like to attend if they could. U.S. News & World Report recently ranked USC as one of the top three “up-and-coming national universities,” in large part because of our innovative undergraduate programs.

Master Plan
Recently we’ve also made a lot of progress in USC’s ongoing physical transformation.

In my office I have a book published in 1939 by the USC Alumni Association. The book has a watercolor painting depicting the construction of the university’s gymnasium. Underneath the painting is the following caption: “Exemplifying the spirit of the Trojan campus – always growing, ever-changing, never finished.”

Isn’t that a great way to describe USC?

Seventy years later, it’s still true. This university is always growing. Our two campuses are ever-changing. Our progress is never finished. USC always has been – and always will be – a work in progress. In other words, we’re not satisfied with where we are today because we know we can be much better.

Over the last few years, the transformation of our two campuses has been accelerating. As this evolution occurs, we’ve done something that is very rare. Unlike other urban universities, we’re not only adding many beautiful new buildings, but we’re also adding a lot more green space.

Along with meeting places and gathering areas, we’ve enhanced our campuses with copious flowers, trees, fountains, and gardens. In the midst of a bustling urban environment, our University Park campus is becoming a sanctuary for reflection, creativity, and human interaction. It’s becoming an ideal environment for teaching, research, and academic life in general.

This physical transformation is helping the University Park campus change from a commuter campus to a residential university. One of the most telling signs of that transformation is the increase in the number of bicycles. Eighteen years ago, you could have walked all over campus and spotted only a handful of bikes. Today you’ll find hundreds of them everywhere. And sometimes it’s like running a gauntlet to walk from one building to another at high noon.

There are other signs we’re becoming a residential university. As you know, more and more students are demanding housing on or near our University Park campus. To meet those demands, we have been working toward adding a total of 8,000 new beds for undergraduate, graduate, and professional students and we’re getting close to meeting that goal. I’m astonished that we have made so much progress in this area so quickly.

We also have a tremendous amount of construction taking place on our University Park campus. Workers are putting the finishing touches on the main section of our new School of Cinematic Arts complex. It is truly a spectacular project. This new complex is a fitting home for the nation’s top-ranked school of film, television, and interactive media. It was made possible by the support of many generous individuals, companies, and foundations. They were all inspired by alumnus George Lucas, who, through his personal gifts and through the Lucasfilm Foundation, put up $175 million toward this project. This gift is the fifth gift to USC of $100 million or more, and the largest single gift in our history.

We’re also delighted by the progress being made on the Ronald Tutor Campus Center. This center will feature offices for student organizations, meeting rooms, study lounges, dining facilities, a beautiful piazza, and the Epstein Family Alumni Center. The great thing about the Campus Center is that it is named for Trojan alumnus, parent, and trustee Ron Tutor, who provided the lead gift of $30 million to get the project started.

I’m also excited that these buildings are not only aesthetically pleasing, but also friendly to the environment. All of us care about USC’s ecological footprint. We have made a commitment to what I call taking the “green step.” By that I mean that our new buildings are models of energy efficiency. They take advantage of natural lighting. And they are more environmentally sustainable than ever before.

We’re also excited about a new partnership that will help our students find affordable housing. Recently USC entered into an agreement with Westar Housing to manage seven properties formerly owned and operated by Conquest Student Housing. Not only will the university manage these properties, our students who live in these facilities will have access to USC Housing’s support staff and maintenance department.

As we improve the housing options for our students, we’re also working to enhance our local neighborhoods. A few days ago, the City of Los Angeles issued a Notice of Preparation of an Environmental Impact Report. This is the next phase of our master planning process.

Over the last few years, we have gone through a planning process with our surrounding community in which we considered six zones on or near our University Park campus. We’re now focusing our attention on three of those zones, where we own all of the land.

Professor Elizabeth Garrett, USC’s vice president for academic planning and budget, is chairing a faculty committee that is looking at a variety of academic priorities for the use of this land.

Eventually, we will likely replace the University Village shopping complex with a new development. That development will provide more housing for undergraduate and graduate students, as well as for faculty. It will also create additional benefits for the university and our neighbors, including more green space, more open space, more retail, and other amenities.

I’m also delighted that we are now developing a master plan for our Health Sciences campus, which will take into account the spectacular new County+USC Medical Center and the two hospitals we are purchasing from Tenet Healthcare.

An executive planning committee got this planning process underway on January 8. Over the next two years, the committee will be addressing a number of issues, including student housing; increased office and research space;, additional parking; more food-service amenities, and the development of a biomedical research park.

Economic Challenges
Now that I’ve talked about the positive changes taking place at USC, let me take a few minutes to talk about some of the challenges we confront. Specifically, I want to talk about the current economic crisis and how it’s affecting our university.

This is a demanding time for all of us – trustees, administrators, faculty, staff, students, parents, and donors. We must look at the next few months through the lenses of prudence and pragmatism.

That’s why we have taken aggressive steps to mitigate the negative impacts of this recession on USC. Last fall USC instituted a staff hiring freeze. It’s a preventive measure. Many of our peer institutions around the nation have taken much more severe actions, cutting deeply into academic programming.

Like many other universities, our endowment has declined substantially. As of today, it has lost about 24 percent of its peak value. That’s bad news.

However, it’s not as bad as it might seem. Let me explain why. We’re less dependent on our endowment for day-to-day operations than many other private research universities. USC’s endowment per student is much less than that of our more richly-endowed competitors. Hence, losses in our endowment have a much smaller effect on our operating budget.

In addition, we are to a large extent unharmed by severe reductions in state funding, which of course is not the case at many of the leading public research universities in the U.S.

Rather than endowment or state support, USC is more reliant on tuition revenue for its operations. The good news is that so far our tuition revenues appear to be holding steady. We also have positive news about student applications. For the second consecutive year, more than 35,000 students have submitted Part I applications for fall admission to USC. Moreover, applications from graduate students for next fall have increased by 10 percent.

We’ve taken special steps to help students who are currently enrolled, but who may be struggling because of the recession. We anticipated that some of our students would need to have us recalculate their financial aid packages. So last fall we contacted all of our undergraduate students and their families and informed them about their financial aid options. We invited them to work with our Office of Admissions and Financial Aid if their circumstances had changed for the worse. However, since last fall, only a tiny fraction of families have sought additional help because of the recession.

I’m convinced that our enrollment and applications remain strong in part because of our exceptional program of financial aid. More than 65 percent of USC students receive some type of financial assistance. We enroll more Pell Grant-eligible students than any of our private university peers. Overall we have the largest and, I believe, the best financial aid program in the nation. For the coming year, we will increase financial aid by 8 percent.

One of the greatest strengths of our Office of Admission and Financial Aid is the way its staff interacts with students and families. We don’t distribute financial aid according to a formula. Students aren’t treated like numbers. We really care about them, not only as students, but as individuals and as members of the Trojan Family.

Although USC has the largest and one of the most generous financial aid budgets in the country, it is important to remember that none of our students pay the full cost of their education. When you add up the investments that have been made over many years in land, buildings, library holdings, scientific equipment, and endowments, we can safely say that even those students who pay the full sticker price do not pay the full cost of their education. In other words, all of our students have their education subsidized to a greater or lesser extent, depending on their need.

On a different front, I’m pleased to report that sponsored research is increasing throughout the university. Last year federal research awards at USC rose 11 percent. At the Keck School of Medicine alone, annual sponsored research awards increased by nearly 20 percent. Just so you appreciate the importance of last year’s 11 percent increase in federally-funded research awards, I should point out that Stanford last year experienced a 6 percent decline in federally sponsored research awards.

We owe this positive outcome to the hard work and creativity of our faculty, along with the excellent efforts of USC’s staff in Washington, D.C., who are providing major assistance to our faculty in securing federal funding for their research.

Let me turn my attention for a moment to charitable donations. The decade preceding this recession was extremely prosperous for universities around the nation. That period was especially fruitful for USC. From 1998 to 2007, total annual private support received by USC (not including pledges) increased at a compound annual growth rate of 11 percent. That’s very good. Compare this to many of our peers among the nation’s leading fundraising universities, whose growth rate was just over 8 percent.

Here’s something to note. The last five years of the decade 1997 to 2008 occurred after our $2.9 billion Building on Excellence campaign was completed. Normally, after such a massive fundraising effort, growth rates slow or flatten. But ours remained high. Why? Because people believe in the quality of our research and teaching. And they believe we’ll be able to do something truly wonderful with their money.

How has this economic downturn affected our current fundraising? From July through December 2008, fundraising at USC was slightly ahead compared to the same period last year. But like everyone else, we are now seeing a slowing of major new gifts. A slowdown is to be expected during a recession. But here’s the good news. Historically, after a recession ends, philanthropic giving rebounds and surpasses its previous levels.

We’re not putting fundraising on hold. Instead, we’re redoubling our efforts. We’re meeting with more potential donors. We’re maintaining and building relationships. We’re looking at this as an opportunity to improve the efficiency of our advancement efforts.

And keep in mind that during our Building on Excellence campaign, slightly more than half of the money raised came from non-USC alumni.

Despite all of the economic uncertainty, I remain optimistic about USC’s future. The short term may be painful for all of us in higher education. However, for USC there may be a silver lining in the dark economic cloud hovering over the nation. Because USC is less dependent on endowment and on state support, we may actually enjoy a strategic advantage relative to our competitors in the forthcoming years. We may end up with more resources than most other research universities with which to recruit the best faculty, doctoral students, and postdoctoral fellows.

Although I am optimistic about USC’s immediate future, let me remind you that this is not a reason for us to relax. We must continue to maintain our stringent fiscal discipline. We must continue to be wise stewards of the resources at our command. And we must think about the years ahead with prudence and caution.

If we do all that, I believe USC may emerge from this recession in even better shape – when compared to our competitors – than before the economic downturn began.

Hospitals
For the next few minutes I’d like to focus on the big news of the day, which has far-ranging implications for the entire university. I’m speaking here of our purchase from Tenet Healthcare of the USC University Hospital and the USC Norris Cancer Hospital.

After spending thousands of man-hours analyzing this deal from every conceivable angle, the trustees and officers of USC believe it is very much in the university’s best interests to make this purchase at this time.

The terms and conditions of the sale have now been approved by both Tenet and USC, the purchase agreement was officially signed yesterday, and we can expect to take full possession of the hospitals as early as March 31.

The process leading up to this purchase has not been easy. It has been a complex and expensive undertaking. Our trustees brought tremendous experience and expertise to this deal. Our clinical faculty and staff offered valuable insights into what is needed in order for us to have a successful academic medical center of the highest quality.

I once believed that not owning our teaching hospitals gave USC a competitive advantage. I watched other universities hemorrhage money from their teaching hospitals. I was concerned that such financial risks could jeopardize other parts of the university.

Today I realize that the greater risk can come from not investing adequately in the university’s clinical facilities. USC has dramatically different values from those of a for-profit hospital corporation such as Tenet Healthcare. There is nothing intrinsically wrong with Tenet’s values. They’re just very different from our values.

We need to consider this news in the larger university context, looking at some of the schools and departments that are helping to improve the health and well-being of citizens throughout Southern California.

USC has a powerful collection of health-related programs. Our Division of Biokinesiology and Physical Therapy is ranked first in the nation by U.S. News and World Report. The USC Division of Occupational Science and Occupational Therapy has been number one for eight of the last nine years.

Recently our School of Pharmacy earned three prestigious national awards for its innovative system of safety-net clinics, which have become national models.

During the 2007-2008 academic year, the USC School of Dentistry’s Mobil Clinic provided $1.5 million in free dental care to nearly 3,000 children from northern California to the Mexican border. The School of Dentistry is also home to several talented faculty who are doing stem cell research that could someday help patients regenerate natural teeth.

Our biomedical engineering program, and especially the Alfred Mann Institute, are national leaders in developing electrical and mechanical devices that can improve patient health.

The Keck School of Medicine of USC has a tremendous impact on this university, this city, and this region. It accounts for nearly half of all of USC’s sponsored research. The doctors of USC serve 1 million patients per year, many of them among the nation’s most underserved. Each year USC faculty physicians supervise and train 900 medical residents at the County-USC Medical Center, many of whom go on to work for local hospitals. Because of this tight relationship between the Keck School and the County-USC Medical Center, those of our doctors who treat the rich also treat the poor.

And we are justifiably proud of our long and very close relationship with Childrens Hospital Los Angeles, where all of the doctors are full-time employees of USC.

Dean Carmen Puliafito has brought a new energy and vitality to the entire Keck School. In what is proving to be a major achievement, Provost Max Nikias and Dean Puliafito are working closely with the chairs of the clinical departments to integrate all 19 of the existing practice plans in the Keck School into a single plan that will improve patient care throughout our clinical operations.

And let me note another positive development: the construction of the Eli and Edythe Broad CIRM (California Initiative for Regenerative Medicine) Center for Regenerative Medicine and Stem Cell Research at USC. In September 2008 it became the first CIRM-funded center to formally break ground. Last spring we were delighted when our Broad Center was awarded nearly $27 million in CIRM grants to help support the facility’s construction, in addition to the $30 million we received from the Broad Foundation in support of this project.

I want to come back to something I said a couple of minutes ago: that the purchase of these two hospitals has far-ranging positive implications for the entire university. In effect, what this purchase means is that we are establishing a USC Academic Medical Center on the Health Sciences campus.

One of the most important aspects of this change will be the opportunity to build stronger bridges between our Health Sciences campus and our University Park campus. We will be able to establish deeper connections among various disciplines in order to enhance research, teaching, and patient care. The entire university will benefit from these bridges.

Let me remind you of something unique to USC and important to our mission and our future. We are located in a megalopolis of 10.4 million people. Greater Los Angeles is the de facto capital of the Pacific Rim. And this is a huge advantage for USC.

Boston, Philadelphia, Chicago – all of these cities are in fact smaller markets than L.A., but each of these cities has several academic medical centers. Not so Los Angeles, where at present UCLA is the only full-service academic medical center.

I believe we have before us an extraordinary opportunity to establish a first-rate academic medical center that will benefit this city, and that will benefit all of the health-related disciplines at USC, not just medicine.

This is our new frontier. And my earnest hope is that we embrace this historic opportunity with enthusiasm, creativity, insight, and foresight.

Thoughts about the Future
Now let me take a few minutes to talk about what we might expect in the years ahead.

Obviously – at least for the short term – there will be continued uncertainty about America’s economic future. However, with a new administration and several new members of Congress, we’re looking at potential increases in federal research support, particularly in science and technology.

President Obama and members of Congress have clearly expressed their support for applied research – that is, research which addresses societal problems. That’s good news for USC, because applied research is one of our greatest strengths. Throughout the university, we have hundreds of faculty members working on some of society’s most complex challenges.

Let me add one final thought about the future. If we are to continue to expand USC’s global reach and influence, we must continue to capitalize on our location. We must take advantage of the fact that, as I said earlier, Los Angeles is the capital of the Pacific Rim, in part because of the central role that L.A. plays in the economy of the Pacific Rim, and in part because L.A. encompasses the greatest diversity of peoples in history, and particularly peoples from around the Pacific Rim.

Soon we will add Seoul and Shanghai to the list of four Pacific Rim cities in which USC currently maintains offices. And we are in the planning phase of adding an office in India.

In times such as these, we want to be even more aggressive in recruiting the best international students and forming international partnerships in research and teaching.

Conclusion
This is a very important moment in the history of USC. During my nearly 30 years as a university president, I cannot recall a time that was as challenging for the academic calling to which most of us here have gladly dedicated our lives.

But keep in mind that this university has faced severe difficulties before. We have experienced the Great Depression, dramatic recessions, two World Wars, earthquakes, fires, floods, riots, and a host of other problems.

For nearly 130 years, USC has not only survived through difficult times; it has thrived. Let us therefore redouble our efforts, so that one of the darkest days in American economic history will be remembered as a bright and shining moment in the history of USC.