David Flanagan, a lifelong Mainer with deep ties to the state’s education, business and political communities, talked of “hardships and sacrifices” Wednesday as he took the reins as the interim president of the University of Southern Maine.

“We know this work will not be easy. Transitioning a bureaucratic organization into a successful competitive one will be hard work, and it will require many hardships and sacrifices,” Flanagan said during a news conference at USM’s Glickman Library where his appointment was announced. “This university has extraordinary assets … yet something is seriously wrong here. USM is losing out.”

Flanagan replaces Theodora Kalikow, who stepped down earlier this month after serving a contentious two years as USM’s interim president during an ongoing financial crisis fueled by falling enrollment, a tuition freeze and flat state funding.

Flanagan inherits a campus that has been in upheaval since Kalikow announced this spring that she was laying off 12 faculty members and cutting three academic programs to close a $14 million gap in a $134 million budget for the fiscal year that began July 1.

“I really like his enthusiasm. We are in a period of great change right now,” said USM international relations senior Joshua Dodge, the chair of the student senate and one of about 15 students who met with Flanagan before the news conference. “Students understand cuts need to be made. We understand what needs to be done. We need someone to inspire confidence.”

Flanagan, 67, is the former CEO of Central Maine Power Co. and ran as an independent candidate for Maine governor in 2002. He has served as chairman of the University of Maine board of trustees, and is part of an advisory council to the Muskie School of Public Policy at USM.

University system Chancellor James Page said he and the trustees recruited Flanagan, who will remain interim president during the search for a permanent president, which will take about a year.

“We cannot wait to bring bold leadership to this university,” Page said. “David Flanagan is one of Maine’s most trusted, experienced and accomplished business leaders and public servants.”

Kalikow eventually rescinded the faculty layoffs, but went ahead with 26 staff layoffs and the elimination of American and New England Studies, geosciences, and Arts and Humanities at the Lewiston campus. All seven campuses faced deep budget cuts, but marches and rallies broke out only at USM, the only campus to have targeted tenured faculty for layoffs.

Phillip Shelley, one of the leaders of student protests this spring, said choosing someone without an academic background “says a lot about the system’s priorities.”

“The board and the chancellor’s office have a vision – disempower faculty, centralize power in the chancellor’s office, concentrate on STEM (science, technology, engineering and mathematics), offer more profitable online classes. And they will bring their vision to fruition at any cost – to jobs, to academic reputation, to quality of life, to community cohesion,” Shelley said. “He is here to do the chancellor’s bidding and right now that means cut $12 million from the USM budget.”

COURTEOUS DIALOGUE, NOT INVECTIVE

Flanagan criticized the dissent and said he wants to work fairly and collaboratively with students, faculty and staff. “I expect a civil, courteous dialogue that will facilitate reaching common and constructive understandings,” he said. “Shrill invective, reckless exaggeration and disrespect for individuals are ultimately corrosive to both the public confidence and enrollment growth that we so desperately need.”

In the end, USM balanced its budget with $7 million in one-time emergency funds from the university system office, but the campus already faces a $12.5 million gap in the next budget, for the fiscal year beginning in July 2015.

“That is a very significant number and that is a very significant task,” Page said.

Flanagan agreed, saying the USM business model is “obsolete” and “unsustainable.”

“USM must transform itself,” he said. “Reform, restructuring and repurposing is a hard, wrenching, sometimes personally painful job. But it is possible for even a large unwieldy organization like USM to come out of it stronger and better and more service-oriented than ever.”

Board of trustees Chairman Samuel Collins also laid out his vision for USM.

“USM must undergo a significant organizational change,” he said. “The university has to eliminate underperforming programs, reduce its labor costs, improve access, build stronger ties to the community and invest in promising courses of study.”

Flanagan has the advantage of previously being involved in creating the road map for many of Page’s current initiatives in overhauling the system.

In 2008-09, Flanagan was chairman of a task force that produced a 73-page report evaluating the system. Among the report’s key recommendations, which the system is in the middle of implementing, are reducing overlapping majors and programs on several campuses, expanding online learning, creating more seamless student and credit transfers between campuses, and reorganizing the system as a single, cohesive entity instead of seven decentralized campuses.

Flanagan declined to lay out specifics of his plan for USM, but said the new model “is leaner, smaller both in employment and footprint, more agile, less bureaucratic, competitively priced and offering greater flexibility to students.”

He plans to present a balanced budget to the trustees by January 2015.

The entire system is facing a budget crisis. In May, the board of trustees approved a $529 million systemwide budget for 2014-15 that closed a $36 million deficit. The year before, the budget closed a shortfall of $42 million, and the year before, a gap of $43 million. Since 2007, the system has reduced its workforce by more than 650 full-time equivalent employees.

Now the trustees have a draft five-year plan to close a projected $69 million budget deficit by 2019.

PRAISE AND CRITICISM ON SELECTION

In addition to making cuts, Flanagan said he would seek to grow revenue at USM and be “as customer-focused as can be.”

“In the end, we will do what we have to do to balance the budget,” he said. “Everyone needs to understand that. I think we can do what we need to do civilly and professionally.”

At the news conference, several business leaders welcomed Flanagan and pledged their support.

“David is uniquely qualified, I think, to lead the university,” said Denise Taaffe, a co-founder of the Baker Newman Noyes accounting firm and a USM graduate who serves on the USM Board of Visitors, which advises the campus leadership.

USM economics Professor Susan Feiner, however, said it was a “very disturbing appointment.”

“It shows the board of trustees and the chancellor have no interest in collaboration and discussion with the stakeholders,” said Feiner, who has argued that the system’s financial problems stem from misplaced, administration-heavy spending priorities. Choosing a businessman like Flanagan “means they really don’t have a vision of what USM can be and has been, they fundamentally don’t understand USM,” she said.

Before his time at CMP, Flanagan was legal counsel to Gov. Joseph Brennan and a partner in the Portland law firm Pierce Atwood.

In 2010, Flanagan was campaign treasurer in Eliot Cutler’s campaign for governor. Flanagan contributed $1,500 in May to a political action committee supporting Cutler’s current bid for governor against incumbent Republican Gov. Paul LePage and U.S. Rep. Mike Michaud, a Democrat.

Flanagan donated $1,500 to Cutler in May 2013, the maximum amount. Flanagan’s wife, Kaye, has donated $2,000 to Cutler in the last two years.

Over the years, Flanagan has donated money mainly to Democratic political candidates and some Republicans, according to Federal Election Commission records. In 2013, he donated to the U.S. Senate campaigns of both Republican Susan Collins and independent Angus King.

Flanagan also served as general counsel for the U.S. Senate Homeland Security Committee investigation of Hurricane Katrina.

More recently, he has been tapped to lead reviews of the state’s county jail system, and in 2011 was part of a bipartisan task force appointed by LePage to find $25 million in government cuts to balance the state budget.

USM PROVOST STEPPING DOWN

Kalikow is now acting vice chancellor at the system office, working on a one-year “community engagement initiative.” Her number two at USM, Provost Michael Stevenson, announced late Tuesday that he too was stepping down for a special assistant’s position at the system office through June 2015, working on an overhaul of academic offerings systemwide.

Stevenson will be senior fellow for Academic Affairs, reporting to UMaine Farmington President Kathryn Foster, who is leading the academic review. He will continue to be paid his $175,000 salary in the new role.

Stevenson’s move clears the way for Flanagan to pick his own provost. Under Kalikow, the provost took the lead in identifying which majors and academic programs faced elimination.

Page has praised Kalikow’s work at USM, and said he and Kalikow mutually decided it was time for her to move into a different role so a new person could bring “new energy.” Kalikow, 73, previously served as president of UMaine Farmington for 18 years.

Flanagan will earn $203,000 a year, the same as Kalikow.

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Correction: An earlier version of this story contained an omission. In the story, Flanagan said he was remaining neutral in the Maine governor’s race. However, Flanagan contributed $1,500 in May to a political action committee supporting Eliot Cutler, and Flanagan’s wife, Kaye, has donated $2,000 to Cutler in the last two years. Flanagan said Thursday that he is neutral in the race “as of July 22.”