As we grapple with the realities of our state's $3.2 billion budget deficit, it helps to recognize that this budget misery has company. Forty-eight of the 50 states are facing shortfalls, and we are far from alone in worrying about how we will maintain the quality of our cherished institutions during such crises. Wisconsin is not the only place where hard decisions and hard actions are necessary.

This does not mean, however, that all states' economic horizons are the same, or that recovery will come simultaneously and equally among them. Wisconsin lags behind its neighbors in many important indicators of economic health: We earn about $3,000 less per capita each year than the average Illinoisan and $4,200 less than the average Minnesotan, and only three states rank lower in new business formation than ours.

As things stand now, Wisconsin is poorly positioned to take part in new economic growth, and thus dangerously prone to the kind of economic stagnation that helped create these deficits in the first place.

If we hope to face fewer times such as these in the future, we need to be thinking not just about stimulating Wisconsin's present economy, but completely reformulating it. The traditional foundation of manufacturing, agriculture, and tourism will not break this cycle on its own; we need a more diversified portfolio of industries that is better suited to growth in a knowledge- based economy.

UW-Madison has shouldered a significant share of the short-term fix. We have accepted reductions — $20 million during the budget adjustment bill of 2003, $24 million during the 2003-04 fiscal year, and an additional $15 million during the next fiscal year — that amount to the most significant cut in state funding in the university's history. I believe that, with the guidance of our strategic plan, we can endure these cuts while protecting the reputation of the university. We will survive.

Now, it is time to focus on long-term solutions. The university can and should be an integral force in moving Wisconsin toward a new, more viable economic future. And that future must begin right away.

In many ways, we're already on that path. Through the efforts of our students, staff, and faculty, the university has been constantly reshaping Wisconsin's long-term outlook:

• By educating students. A college degree remains one of the surest investments around. The average high-school graduate in Wisconsin earns slightly more than $24,000 a year, but those who continue on to earn four-year college degrees have nearly twice the earning potential. College graduates repay our investment in public education by returning more tax revenue to the state. They also are more likely to vote regularly, participate in their communities, and do volunteer work than those who don't earn degrees. Wisconsin needs more of them, and we're doing our part.



• By engaging in a rigorous program of research. Our faculty and staff members attract outside grants to conduct research and bring far more money into the university than taxpayers pay them in salary. Every year, this quest for new ideas helps us understand, explain, and harness the power of the world around us. Faculty inventions regularly create opportunities for new commercial ventures, and we continue to see new businesses develop from research inquiries, especially in technology-related fields, which tend to carry the most potential for investment and long-term growth.



• By fostering an environment that embraces creativity and innovation. UW-Madison's dedication to creating a diverse community rich in experience and perspective continues to be an important factor in the character of Madison and the state. Nurturing an environment of creativity — encompassing industry, the arts, and individual expression — is important for attracting and keeping these very mobile, highly sought knowledge-based workers within our borders.

These effects represent some of the anticipated rewards of our strategic planning process. Our diligence in planning has allowed us to progress toward a coherent set of goals that are both consistent with our past and relevant to our future. We have seen the importance of that exercise during these past few months. The community-wide process of building and enacting our current strategic plan resulted in clearly articulated priorities, which have allowed us to be adroit in making necessary cuts while protecting the core missions of the institution.

For all its utility in the short term, however, the plan remains a long-term document whose true sights lie farther down the road. For this report, we have chosen the theme "Forward. Thinking." — not merely because our current condition requires foresight and thought, but because both are qualities inherent to the character of UW-Madison. Educating students for careers that may come to fruition twenty or thirty years in the future is a necessarily forward-looking endeavor. The same is true of conducting inquiries into emerging areas of knowledge, or creating communities that reflect how our cities and workplaces will look decades from now. Our missions require today's ingenuity, targeted toward tomorrow's problems and opportunities.

I believe this message applies as easily to our shared values and aspirations as a state as it does to this university. We have an opportunity to pool the resources of our finest institutions and redefine the state's direction toward a more prosperous, healthier future. Our desire to fix the immediate problems should not obscure the need to address the long-term issues that underlie current conditions. It is time to act, rather than react — to move forward, thinking.

John D. Wiley, Chancellor