Though President Christina Paxson’s strategic plan “Building on Distinction: A New Plan for Brown” has identified general objectives for University growth, formal plans for the allocation of University resources to accomplish these goals have yet to be formulated.
The Corporation approved the strategic plan the weekend of Oct. 26 and will soon convene a committee of key administrators to determine how to distribute resources for individual initiatives within the plan, said Provost Mark Schlissel P’15. The committee will then structure a capital campaign, a formal fundraising effort that will be launched to support the goals of the strategic plan.
Building on Distinction does not include estimated costs of implementing each initiative, partly because the University “did not want to make promises it can’t keep,” Schlissel said.
In the aftermath of the 2008 financial crisis, the University announced losses on the endowment that compromised its ability to fulfill components of former President Ruth Simmons’ strategic plan, the Plan for Academic Enrichment.
The goals of Paxson’s strategic plan, which include physically revamping the campus, increasing financial aid, expanding research, establishing a “virtual campus” and growing the size of the faculty and student body, “will need significant philanthropy,” Schlissel said.
“We wanted to craft a plan that could be fulfilled in a financially responsible way in very uncertain times,” Schlissel said.
Though Building on Distinction offers many broad visions, the University’s immediate projects will be contingent upon the bounds of its upcoming capital campaign — and those initiatives that promise successful fundraising will direct Brown’s long-term priorities.
Crafting a campaign
Financial resources have long posed a challenge to the University as it strives to maintain its reputation and compete with peers that possess greater assets.
The current endowment is about $2.86 billion — the smallest in the Ivy League.
Brown’s revenue comes principally from tuition and fees, federally sponsored funding, the endowment and annual giving, said Beppie Huidekoper, executive vice president for administration and finance. These funds support the University’s biggest expenses: faculty salaries and benefits, student support, research and maintenance, Huidekoper said.
The University’s small endowment can be partially attributed to a weaker “culture of giving” among alums compared to that found at other Ivy League schools, Huidekoper said.
Economic uncertainty and heightened competition to build prestige and attract the best students are changing the “endowment model” that top institutions use to finance both everyday operations and top fundraising priorities. Endowments were originally composed of gifts but have over time expanded through financial planning and investments, according to a report issued by the Center for Social Philanthropy and Tellus Institute last year.
Growing an endowment poses a distinct challenge: It requires balancing planning for long-term investments — like the objectives outlined in the strategic plan — and accounting for more immediate expenses, according to a July 2010 report from CNN on university endowment strategies.
Because of Brown’s comparatively limited endowment and lack of a strong alumni donor base, the upcoming capital campaign will play a key role in fulfilling goals outlined in the strategic plan.
In turn, the campaign’s success will partially depend on national economic conditions, which are currently unclear, Schlissel said.
Brown’s last major capital campaign — the largest in its history — was the Campaign for Academic Enrichment, which ran October 2005 to January 2011 and helped fund Simmons’ 2004 Plan for Academic Enrichment. The campaign raised $1.61 billion, exceeding its initial goal by more than $200 million.
But some objectives from the Campaign for Academic Enrichment were unfulfilled due to unforeseen endowment losses that stemmed from the 2008 financial crash.
The University will have to balance fundraising for the plan’s long-term objectives with its constant goal of increasing the endowment and maintaining its short-term commitments. The University aims to raise $225 million for the next fiscal year, as well as $37 million for the Annual Fund — goals that have been determined independently from any plans for a capital campaign, said Patricia Watson, senior vice president for University advancement. Watson will help oversee the University’s next capital campaign when it is launched.
Brown must proceed while recognizing and accounting for potential decreases in other sources of revenue, particularly federal funding, Watson said, adding that the amount of federal funding received will affect how much money administrators pull from existing sources to fund the strategic plan’s goals.
The University will pursue other means of increasing its fundraising abilities, like bringing in new staff to the Division of Advancement, Watson said.
The University will also use its upcoming 250th anniversary celebration as a “springboard” for initiating donor interest in the strategic plan and fostering pride in Brown’s legacy, she added.
Simultaneously, increasing the number of students in graduate and master’s programs could be a positive way for the University to grow its “constituent base,” Watson said.
The University must also consider how to “match donor interest” with the priorities outlined in the strategic plan, Watson said.
Paying for proposals
The initiatives outlined in Building on Distinction, which include financial aid, physical developments and academic programs, will incur steep costs over the years and require increasing the University’s fundraising efforts, Huidekoper said.
Some undergraduate-specific areas identified in the strategic plan — “need-blind admission,” “summer support” and “diversity of experience” — relate to financial aid, a long-term priority the University has historically struggled to balance with its other ambitions.
In addition to maintaining the need-blind status already afforded to most domestic students under Simmons, the plan proposes extending need-blind admission to international, Resumed Undergraduate Education and transfer students, all of whom are currently admitted on a need-aware basis.
But Schlissel said the University cannot commit to a firm timeline to achieve universal need-blind aid.
“I would feel very guilty saying that in three years we’ll be going need-blind for internationals, and then in three years can’t do this,” Schlissel said.
The University draws between 55 to 60 percent of the need-blind financial aid budget from the endowment, said Ken Miller ’70 P’02, professor of biology and a member of the strategic planning Committee on Financial Aid.
Tuition will contribute to the capital needed to implement a fully need-blind program but will not cover the entire cost, Huidekoper said. Fundraising related to the endowment and the Annual Fund would also play a part.
Tuition has risen steadily, nearly 12 percent over the last four years. But increasing tuition does not solve the problem of insufficient revenue, because fewer people are able to pay higher prices and more students need financial assistance, said Ronald Ehrenberg, director of the Cornell Higher Education Research Institute.
As part of its goal to offer summer support to students on aid, the University, following the Corporation’s approval of the plan, committed $500,000 to “defray summer earnings expectations” for low-paying internships, Paxson wrote in a community-wide email Oct. 27.
In addition to improving financial aid, Paxson’s plan proposes increasing the undergraduate population by 1 percent every year. This change could be accommodated without any additional cost by granting more juniors permission to live off campus, said Richard Bova, senior associate dean of residential and dining services.
The next step in accommodating the proposed growth would be renovating existing residence halls as opposed to building new structures, Bova said.
Such residential developments will likely be funded through “a combination of funding, tuition and new revenue,” Klawunn said.
Later this year, the committee planning the capital campaign will help craft the budget for renovations and construction as part of a proposed expansion of the physical campus, said Vice President for Facilities Management Stephen Maiorisi.
Other projects in the plan include new classroom space, buildings for professional and graduate schools, renovations to the Sharpe Refectory, space for performing arts, student activity space and new athletic facilities.
The strategic plan provides a “framework going forward” for how to make the campus more efficient and sustainable, Maiorisi said.
Building “green” allows Brown to save on operational costs, which are steeper investments in the long term than is initial construction, Maiorisi said. The University has spent approximately $18 million in the past year renovating utilities to make buildings more environmentally friendly, as outlined in Facilities Management’s annual sustainability report.
Academics-related proposals in the plan include increasing the size of and support for faculty and staff while also providing “competitive compensation and academic resources.”
Faculty growth — a priority outlined under the plan — must be balanced with the expenses of current faculty and staff salaries, health benefits and retirement benefits, Huidekoper said.
As other universities offer new opportunities for teaching other than the traditional tenure track, universities like Brown must pursue ways to shrink their administrative costs, Ehrenberg said. Northwestern and Duke universities have created teaching positions that are “professorial rank” but do not provide tenure or stipulate research, which attract skilled professors at lower costs, Ehrenberg said.
Building on Distinction asserts that increases will be made in “stipend levels and summer support for the most promising applicants” to doctoral programs. Graduate students have historically voiced concerns over the summer stipend level, which has remained stagnant at $2,500 for the past four years.
Profiting from the plan
While many of the plan’s proposals call for new or increased fundraising efforts, some may prove profitable themselves.
Building on Distinction proposes increasing the number of the University’s master’s degree programs, in part as a source of revenue for the University, Paxson told The Herald.
Expanding programs and funds for more advanced degree programs — particularly those in the life and physical sciences — enables universities to train people in “socially important” fields without spending as much money, since many professional degrees offer little financial aid, Ehrenberg said.
The plan’s proposal to expand the “virtual campus” could also generate alternative revenues.
The University offers not-for-credit online courses for high school students and “blended learning” undergraduate and master’s courses with both classroom and online components, in addition to massive open online courses, said Laurie Ward, director of finance and administration in the Office of Continuing Education.
For University-developed online and “blended learning” classes, technology and faculty members are the largest expenses, Ward said. The costs vary depending on the type of course and faculty members’ individual knowledge of the platforms, said Instructional Designer Ren Whitaker.
Students pay a fee to take online pre-college courses, which currently “pay for themselves,” Ward said.
Funding an online course costs about the same as funding a traditional course with similar content, and online courses could eventually become profitable, Ward said.
Huidekoper said it is unclear what the long-term financial benefits of this expansion could be.
But if Ivy League degrees become more attainable, universities will have “to be careful not to dilute their brands,” Ehrenberg said. In using the virtual campus as an alternative revenue source, the University must consider how to maintain the distinctiveness and market value of a Brown education.
The economy’s impact
And as the University determines its long-term strategy for financing objectives outlined in the plan, it must also consider the role borrowing plays in paying for various projects.
The University is highly ranked in both short-term and long-term credit ratings by the standards of the Moody’s Corporation, an independent credit agency. These ratings are based on Brown’s competitiveness as an Ivy League university, its fundraising capabilities — particularly the $1.6 billion raised from the Campaign for Academic Enrichment — and its distribution of revenue among various expenses, according to Moody’s.
Following the 2008 financial crisis, universities across the country cut costs but still had to take on debt to sustain themselves, The Herald previously reported. Though universities’ finances are still recovering from this debt, borrowing remains an important aspect of their long-term financial plans.
Universities may take on debt to finance construction projects that are designed to attract top students and help the institutions remain competitive, according to a Dec. 13 New York Times article.
Brown’s debt has increased over the last decade, with nearly $800 million in fiscal year 2012 compared to $115 million in 2000.
If the United States falls back into a recession, the feasibility of any future capital campaign could be compromised, Schlissel said.
“In a strong economy, there are many things you could accomplish,” Schlissel said. “Things outside of our control will have a tremendous effect on the plan.”
As the University plans for growing its assets, campus and programs, it will consider how to work within its current means and bolster its brand, issues key to its future success.
Only after the University announces its fundraising priorities derived from the strategic plan will the “real goals of Brown’s future” be evident, Miller said.
As the University looks to finance new projects on College Hill, it will also examine its place in Providence, identifying projects that could strengthen Brown’s presence in the city. The next story in this series will analyze how the strategic plan could shape Brown’s relationship with and role in Providence and the city’s Jewelry District.
—With reporting by Molly Schulson