Kennedy’s resignation allows him to transition to a position where he will oversee special projects in statewide economic development and educational opportunity, according to university spokesman Joe Carr.

Chancellor Richard Pattenaude and the president began discussions about the possibility of a new role for Kennedy at the system level in October.

“We just sort of started to explore what I wanted to do and what I wanted to spend my time and focus on,” Kennedy said in an interview on Wednesday. “We came to the conclusion that these would be not only interesting projects but something that my background would help with, and also something very important to the students across the system at other campuses.”

“This is an evolving process,” Kennedy said. “I talked to the chancellor this morning, and neither of us really know how this role will be structured or where exactly it will be going.”

Kennedy said that while the specifics were unknown, the focus of his new position would be on sustainability and green initiatives, and to create a statewide curriculum on alternative energy. He said he would continue his focus on federal research funding to benefit the university and the state. He said he would continue to tackle the challenges, especially economic pressures, that face the university system.

“I’m an optimist,” Kennedy said. “But part of me has always asked, ‘How can we surmount these challenges, what can we do to overcome them, to put the university and ourpeople in the best position?’”

Though his new role will have him working on system- and state-wide projects , Kennedy will be a faculty member of  UMaine, according to University of Maine System spokeswoman Peggy Markson.

“We’ve had faculty members at the universities work on special projects before, sort of ‘on-loan’ to the system office,” Markson said. The university will be compensated by the system office for Kennedy’s position.

A search committee to find a new president for UMaine, comprised of a board of trustees member, undergraduate and graduate students, and faculty members, will begin the process of replacing Kennedy in September, according to Markson.

With the time he has left as president, Kennedy will continue projects he’s been working on, including the Academic Program Prioritization Working Group, the establishment of UMaine as a tobacco-free campus and continuing to secure grants and federal funding for the university.

“My focus will be on positioning the university in the best possible way as we surmount the challenges we face,” Kennedy said.

Kennedy names the expansion of the Honors College, the focus on climate change, the success of Habib Dagher’s Advanced Engineering and Wood Composites Center and his fundraising record among his proudest achievements as president. According to a statement from UMaine, the university has amassed more than $100 million in investments under Kennedy’s nearly seven-year tenure, which includes his time as interim president.

Kennedy came to UMaine in 2000, and served as executive president for academic affairs and provost, as well as interim president, before his appointment to the presidency in April 2005. He holds a doctoral degree in plant botany from the University of California at Berkeley. He was a finalist for president at Kansas State University but withdrew his name from consideration before a final decision was made.

Kennedy’s resignation was first reported in Wednesday’s issue of the Bangor Daily News.

Two recent independent analyses of the system’s finances, one commissioned by the Associated Faculties of the Universities of Maine and the other by the University of Southern Maine student senate, asserted the system has large cash reserves it is unwilling to tap into.

“Any suggestion that the University of Maine System is broke or out of money is preposterous,” wrote Howard Bunsis, professor of accounting at Eastern Michigan University, in his analysis for USM’s student senate.

Without directly responding to either analysis, Pattenaude sought to tamp down concerns the system is not using its reserve funds while the economy is in a downturn.

“You cannot make long-term commitments using one-time money,” Pattenaude wrote. “This is tantamount to buying a car because you have enough savings to pay the first few months’ payments, but not enough income after that to cover the ongoing costs.”

Pattenaude also stated that much of the system’s funds are restricted, meaning they are reserved for a specific use such as scholarships.

According to the system’s most recent annual financial report, it has nearly $132 million worth of restricted funds and $83.6 million in unrestricted funds. Restricted funds are down $14.7 million from 2008-2009, but unrestricted funds are up $6.4 million. Pattenaude said the system is currently aided by federal stimulus funds, which can not be counted on in the future.

“The next direct challenge, following the current year budget cut of $6 million, will be the permanent loss of $5.9 million in stimulus funds after FY [fiscal year] 2011,” Pattenaude wrote. “Stimulus funds are helping us handle the current budget cut, preserve jobs, pay the bills, and hold tuition increases down.”

“We cannot accept the idea that state revenues will return quickly to former levels and that enrollments can be increased with ease,” Pattenaude wrote in the e-mail. “Nor can we simply ignore the costs of retiree health care or deferred maintenance for several years.”

The system is projecting flat enrollment for the next several years, according to system spokesperson Peggy Markson. The system’s enrollment has decreased 4.3 percent over the last five years.

Bunsis, a certified public accountant accountant, said Wednesday that universities generally use overly pessimistic projections and that enrollment at institutions of higher education generally increase when the economy is in trouble.

“I think the [University of] Maine System has more financial flexibility than they are claiming,” Bunsis said. Bunsis based his findings on expendable assets, which include unrestricted and some restricted assets, he said.

The accountant rejected the assertion that the system is in trouble. “I really think that’s unfair,” Bunsis said. “I really think that borders on irresponsibility.”

The system spends too much money on administrative costs and should cut in those departments before furloughing or cutting faculty, Bunsis said.

“The University of Maine System is not putting enough dollars into education,” Bunsis said.

The trustees revised the report in response to feedback from public comment sessions that took place on each system campus, according to Pattenaude.

Changes in the new version of the plan included an initial reduction in the strategic investment fund — a pool of money proposed to be set aside for the system to strategically invest in certain areas — from $5.4 million to $1 million for the following fiscal year, a three-year baccalaureate option, increased enrollment in online programs as well as further cost reduction strategies for the system office.

“Every dollar we save … allows us to maintain our work. It allows us to maintain the viability of our campuses to the best of our abilities,” Pattenaude said.

Board chairperson Joe Wishcamper spoke from his Freeport home, due to surgery.

“The next phase is implementation,” Wishcamper said via teleconference, citing the decline of state appropriations and Maine’s shifting demographics as factors contributing to the unsustainable financial future of the system.

“Crisis creates a window of opportunity,” Wishcamper said.

One fast-track measure touted by Pattenaude is the three-year baccalaureate degree option. Providing affordability, efficiency and an increased turnover into the workforce, the three-year option would draw on resources like online courses, summer sessions and the use of other system institutions in order to expedite degree completion. In addition to these measures, Pattenaude expressed the need for technology upgrades and the sharing of faculty members between institutions.

“We need to increase our emphasis on growth and revenue,” Pattenaude said. “We all feel a great sense of urgency. We must move carefully so our margin of error is small.”

Decreases in the disbursement to the strategic investment fund from the original $5.4 million to two disbursements of $1 million this fiscal year and $1.7 million the next reflect current financial conditions. The remaining funding will be phased in during a three-year period.

Speaking Monday afternoon by phone, UMaine President Robert Kennedy said he was pleased with the changes in the report, specifically with the strategic investment fund.

“I was very worried about it, and am still a little bit worried,” Kennedy said.

Pattenaude presented increased online enrollment as an additional fast-track measure. He said online enrollment offers a “democratic approach to higher education,” and that technological capabilities have not been maximized.

Pattenaude highlighted the importance of distance learning and the need for an inter-institutional online portal that would connect the various components of academic, employee and administrative needs of students, faculty and personnel — from parking permits to being able to access a list of students in a class. An interactive electronic portal would unite the features of MaineStreet, FirstClass, WebCT and Blackboard software systems. The portal would cost $20 per students per semester.

“[The portal] plugs into existing data … and brings it to a single accessible screen,” said Pattenaude of his hopes for technological integration on a systemic scale.

“The opportunity to interact electronically expands by using modern technology,” he said. “The institution has to adopt these tools.”

Trustee Charles O’Leary of Orono challenged the reliance on technological interactions when faced with traditional learning environments. He stressed the cultural significance of the University of Maine in towns across the state.

“Traditions are important,” O’Leary said. “In places like Fort Kent and Machias, the university is the only ball game in town.”

Pattenaude explained that, at times, public policy outweighs tradition.

In addition to previous cuts already made and those proposed, the system office has cut over $1 million in their operations and is currently seeking to further reduce costs through an office system study.

The report’s projected milestones will be to focus on campus-level refined missions, with contribution from campus leadership and community. The adopted missions will be implemented in June 2010.

Trustee Victoria Murphy questioned the proposed time frame of the report.

“I just wondered why the time frame is so far out there,” she said in reference of June 11, 2010, the five-year strategic plan’s implementation target date.

Pattenaude responded that the interim period “engages campus level processes” and will force each campus to focus on itself before participating in the overall plan.

Board members voted unanimously to approve the plan after two hours of deliberation and the presentation of changes made due to public feedback.

“We need to be able to show that we are alive and competitive,” said Trustee Marjorie Medd of the system’s future.

William P. Davis contributed to this report.

Nobody thinks the system’s current structure is optimal or sustainable. The board’s chair, Joe Wishcamper, said the system’s current structure could result in budget gaps of more than $40 million per year. Nevertheless, the chancellor and the board are sadly misinformed when it comes to the best way to structure the system.

If the system’s budget is any indication, administrative salaries are by far the biggest problem facing the system. As reported last year, the system spends more than half its budget on salaries.

Obviously the system office’s primary goal is to administrate, not teach, but it seems like administration could be streamlined across the board. To his credit, Pattenaude said increased use of MaineStreet will lead to the streamlining of administrative positions, but we doubt he’s talking about the drastic cuts necessary to fix our budget shortfall without negatively impacting the product the system offers — our education.

The system should focus its efforts on funding faculty and endowing scholarships, which will, in the long run, build the school’s reputation and desirability and enhance what should be any state school’s mission of providing the best education possible. Instead, the system seems inclined to limit expenditures on faculty and cut low-enrollment courses, moves that will drive away both faculty and students. The restructuring process should refocus the system’s mission on — and it’s unfortunate we even have to say this — making education as affordable as possible. Instead, it seems as if the system is suggesting an increased — not decreased — administrative presence.

The most disappointing aspect of the process has been the response from the board of trustees. There has been little or no resistance from board members to the proposed changes — a shocking lack of due diligence.

In prepared remarks, Pattenaude said the plan is “bold in that it both reduces costs significantly through careful use of technology, strategic cost reductions and the many talents of our people, and simultaneously invests resources in key priorities facing the state of Maine.”

The report presents an action plan for the short-term — 2010 or sooner — and long-term — 2011 or later — future of the system.

Short-term goals include “Contain the cost of compensation and benefits at current levels for FY10 & FY11,” which is expected to save $13.8 million in fiscal year 2013, and “Create strategic investment fund,” which is expected to require a $5.6 million investment for an undecided return.

Long-term goals include “Develop a front end portal and virtual self service center for MaineStreet,” which is expected to cost $3 to $4 million for undefined returns, “Review and eliminate courses with enrollment of 12 or fewer,” which is expected to save $2 million in fiscal year 2013, and “Implement seamless student transfer of credit hours within UMS.”

The plan suggests the system contain employee compensation and generate a public agenda to more effectively lobby for funds.

Before the trustees approve the plan, there will be public meetings on each of the seven system campuses and at the system office in Bangor. The board will use input gathered at these meetings when making its decision on whether or not to adopt Pattenaude’s plan. Pattenaude said he hopes the board will approve the plan by November.

“[The plan] is very critical, first of all, because in these economic times, we have to be financially very, very careful, and we have to balance our budgets,” Pattenaude told reporters after addressing the board. “But also, the future of Maine depends upon an educated work force, so we need to continue to contribute and evolve so we do that. So it’s about the strength of the system, but it’s also about the strength of the state.”

Joe Wishcamper, the chair of the Board of Trustees, said the current structure is not sustainable. “We’re a state which is not growing in population,” Wishcamper said after the meeting. “We’re really in a position where our costs are continuing to escalate, and our enrollments are not growing to keep pace with the escalation of costs. So it’s crucial we address the fact that our trend lines are not going in the right direction, and that has to do not only with the financial stability of our system, but it really has to do with the viability of our higher education enterprise in the state of Maine.”

According to Wishcamper, if the system were to continue business as usual, “within four years, we’d have a structural gap somewhere in excess of $40 million annually.” The system’s annual budget is about $600 million.

“We’re taking this occasion where we really need to address our financial issues to address how to get better as a system,” Wishcamper said. “The economics of our system are essentially providing not only the opportunity but the necessity for us to analyze and address all our ways of operating.”

University of Maine President Robert Kennedy said he is pleased with the process thus far and is looking forward to the conclusion of the restructuring process.

“I think all of us are pleased to be at this stage in the process,” Kennedy said. “[After the] public comment period, it means this process will be done, and I’m looking forward to the outcome.”

“The concerns that we had … revolved mostly around the funding for the university and the centralization of services,” Kennedy said. “We’ve been quite proactive in … stating our concerns.”

“One of the things I’ve been pleased with is that the chancellor and the board of trustees and his staff have heard us,” he said.

Pattenaude said the decision of which classes to eliminate won’t be made just by the number of enrollees. “Each class we look at, [we ask] ‘Is it needed?’ ‘Is it part of a curriculum?’ ‘Do students need it for graduation?’ ‘Are there alternatives available?’ This is not a hard and fast rule; it’s a review process to make sure we are not unnecessarily running small classes,” Pattenaude said.

Kennedy said it is hard to make across-the-board decisions about class size. “It really varies from subject area to subject area,” Kennedy said in a phone interview. “It’s hard to make blanket decisions.” Kennedy went on to say, “On average, the University of Maine is at or above the level recommended in the document for our peer institutions.” He did not state what that level was.

Pattenaude said the restructuring will make transfers between system universities easier, and more classes will be offered online. Increased use of MaineStreet will lead to streamlining administrative staff. While the University of Maine System “will always keep the capacity for face to face,” Pattenaude said he likes the ideal of a student who never has to go to an administrative building because he or she can do everything online.

Pattenaude stated the restructuring of the system was started in April 2009 in response to the growing financial problems of the system’s campuses. Pattenaude formed three groups to look at three arenas of university operations: academics, finances and the system structure. The first two groups were composed of chief academic and financial officers from the campuses and the system office. The third was an independent task force of representatives taken from every university in the system.

The task force’s report suggests reducing tuition for first-year and second-year students at all system campuses in order to attract and retain more students. Similarly, the report suggests pricing the universities at “appropriate rates that reflect the different student clientele they serve.”

“I think essentially what the task force is saying is take a look at reducing the price of the first two years with the understanding — the expectation — that it could bring in more students,” said Janet Waldron, UMaine’s vice president for administration and finance. “I think what’s not being addressed here is, what about the next two years?”

In terms of pricing the universities at “appropriate rates,” Waldron said the recommendation means looking at pricing policies in broader terms.

“What I’ve understood the task force report to say is look at the pricing structure across all of the institutions,” Waldron said.

The task force’s report, released during the summer, recommends four suggestions to the Chancellor: Create a public agenda that would transform the UMS’s economic impact on Maine; make system campuses act together as a union, instead of a confederation and pursue less redundant services and programs; restructure system-wide services to be more accountable; and “use financial policy to realize system goals.”

“When the [Faculty] Senate responded to the task force, we made our position clear that the big issue on the restructuring was the centralization of services,” said Judy Kuhns-Hastings, president of UMaine’s Faculty Senate. “That’s a very expensive thing to do, and that the centralization of services needs to be reduced and that work needs to go to the campuses that can do it; which is probably UM and USM. … Centralization of services costs a lot of money.”

The task force report does not share the belief that individual campuses are better suited for providing certain services. It states: “We believe, again, Maine is too small to fragment services where natural economies of scale exist, and further, that many of our problems have come about as a result of various campuses refusing to adopt common procedures.”

Kuhns-Hastings said she did not feel better about how the task force addressed centralized services after she read its report.

“I don’t think that the centralization of services has been well thought out at a central level, and I think it’s continuing to cost a lot of money,” she said. “It seems to me that when you have campuses that already have expertise and already are pretty well set — this campus does a very nice job on distance education — to pull that away to a centralized model is not necessarily money-saving.”

The task force recommended saving money through information technology, in addition to other areas of system services and operations. John Gregory, IT director at UMaine, said the report’s proposed model for IT services, called the “hybrid IT model,” is largely what he and his counterparts already do.

“It talks about trying to save money by increasing the number of virtual servers we have,” said Gregory. He added, “we’ve got a committee made up of some members of the IT directors who are working at ways that we can standardize the desktop and laptop computers that we use in administrative offices.”

Gregory said UMaine will likely migrate away from the WebCT program and switch to Project NG, a hybrid of Blackboard and WebCT, because the next version of WebCT has tools for such a migration and will soon be phased out.

“They’ll be the same product at that point,” Gregory said.

Gregory said the plan calls for replacing Microsoft Office at UMaine and its sister campuses with less expensive software such as OpenOffice. UMaine spends about $70,000 per year on licensing fees for Microsoft Office.

The report calls for switching to the hybrid IT reporting system between chief information officers, such as Gregory and the IT director at the system office. The task force report says this new model will likely save $700,000 during the course of the next four years. But another, called the “enterprise” model, which would require Gregory and other IT directors at system campuses to report directly to the system office, would have likely saved $950,000 during the same period, according to the report. Gregory said the enterprise model was rejected because it called for too much centralization and placed too heavy an emphasis on the system office, unlike the hybrid model, which only requires increased communication.

Pattenaude’s final plan, titled “Adding Value Through Educational Opportunity and Economic Development,” will be unveiled during the Sept. 14 meeting of the system BOT.

According to system Chancellor Richard Pattenaude, the system-wide tuition increase is the smallest in seven years. The 2002-2003 tuition increase was 4.7 percent, while the increases have ranged from 7.6 percent to 10.3 percent since then, according to a press release.

The increases come just three days after UMaine announced savings for fiscal year 2010 totaling $8.8 million, which included 32 layoffs and 31 work-year reductions.

“The university presidents and I are extremely concerned about maintaining our universities’ affordability and quality,” Pattenaude said in the release. ‘The new tuition rates are necessary to protect the quality and value of our educational offerings.”

UMaine’s $9,626 tuition represents 28 percent of Maine’s per capita personal income of $34,119. Of the New England public universities, UMaine is cheaper than all but the University of Rhode Island, but represents a higher percentage of the per capita personal income than all but the Universities of New Hampshire and Vermont.

UMaine projects an operating budget of $248 million next year.

UMaine is expected to suffer a 2.6 percent drop in enrollment for next year after four straight years of increases totaling 5.1 percent. UMaine is the only University of Maine System campus to increase enrollment over the past five years; overall the system’s enrollment has dropped 4.3 percent over the last five years.