University News

Deficit rises 58 percent, doubles 2014 projection

Rising financial aid budget, decreasing federal funds linked to $8.7 million deficit

By
Senior Staff Writer
Wednesday, October 1, 2014

The University ran a $8.7 million operating budget deficit for fiscal year 2014, according to Beppie Huidekoper, executive vice president for finance and administration. This marks a roughly 58 percent increase from the $5.5 million deficit in the 2013 fiscal year.

The deficit is more than double the $4.4 million operating budget deficit projected by the Corporation in the beginning of fiscal year 2014, President Christina Paxson wrote in an email to faculty and staff on Aug. 15. Fiscal year 2014 ran from July 1, 2013 to June 30 of this year.

A budget deficit is the result of campus expenses exceeding campus revenue, Huidekoper said.

The budget deficit is a “structural problem,” said Provost Vicki Colvin. “A structural deficit is one you don’t see changing over time. It’s something deep in how the University is structured, and the decisions it has made up until this point.”

The deficit is significantly higher than expected due to an increased financial aid budget and cuts in federal research funding to the University, Huidekoper said.

In fiscal year 2014, the University Resources Committee predicted a $95 million budget for financial aid. But actual spending on financial aid for that year was $99 million, Huidekoper said.

The University instituted a need-blind admission policy for domestic applicants beginning with the class of 2007, a decision that continues to impact the budgetary process. “There’s more needy students than there have been in previous years,” Huidekoper said. “When you’re need-blind, it’s really hard to budget.”

Last year’s admission cycle marked the fourth consecutive one in which approximately 68 percent of first-year applicants applied for financial aid, The Herald reported at the time.

Raising revenue is something that the University has a degree of control over, said David Savitz, vice president for research.

Savitz said he is “optimistic” about the future. From fiscal year 2013 to fiscal year 2014, requests for funding increased by $178 million, or about 28 percent. More awards were approved in fiscal year 2014 than fiscal year 2013, which may lead to increased revenue in the future.

“If you ask for more (research money), there’s a very good chance you’ll get more,” he said.

There was a 9 percent decrease in federal funding available from fiscal year 2013 to fiscal year 2014, said Huidekoper.

Due to a “lag” in the distribution of funds, federal funding decreased this current year despite new awards having increased, Savitz said.

“There is an awareness and a cultural change going on where, as a university and faculty, we recognize that we’re in challenging times and we have to pick it up,” Savitz said. “We have to write more proposals. We have to look at a broader way of funding resources, be more strategic and more resourceful about it.”

The University has also raised tuition, which accounts for a majority of revenues. For the 2014-15 academic year, total undergraduate tuition and fees was raised to $57,232, according to the URC report.

“Our budget deficit in some ways involves moral questions about what we think the University’s responsiblities are for financial aid,” said Kevin McLaughlin, dean of the faculty.

McLaughlin cited the University’s current inability to provide loan-free financial aid to students with expected family contributions over $60,000.

Colvin said she hopes to announce a Deficit Reduction Committee early next week. The committee’s goal will be to identify “how we can change some of the cultural ways we deal with the budget” and combine organizations with similar functions to increase efficiency, she said.

“It’s not abnormal to run a deficit when you have an almost $1 billion budget,” Colvin said, adding that “the challenge is that we’ve been consistently overspending. Our reserves are becoming depleted.”

In three to five years, the University will run out of reserve funds, Colvin said. “If that happens, it’s not a tragedy,” she said. “We will probably have a couple of options.”

Running out of reserve funds means that administrators “would have to take drastic and specific efforts that would not feel consistent with the plan of growth we’re setting forward for the campaign,” Colvin said.

In her August email sent to faculty and staff, Paxson discussed progress made in implementing the strategic plan, Building on Distinction, and efforts to correct the “short-term structural deficit.”

“In the coming months, we will develop a sustainable financial plan that eliminates the deficit while supporting our highest priorities,” Paxson wrote.

In the early 2000s, the Corporation gave then-President Ruth Simmons permission to run small deficits, said Gregory Chatzinoff ’15, a representative from the URC. “Before that period, they rarely had deficits. Often they had a surplus,” he said, adding that universities in general face a “tough time” for finances.

 

Correction: A previous version of this article incorrectly stated that the University had a $8.7 million operating budget deficit for the current academic year. In fact, the University’s $8.7 million operating budget deficit was in fiscal year 2014. The Herald regrets the error.

  • Martin William

    Another reason to fire Paxson.

    • Reality Check

      Takes a while to turn the ship after 11 years of neglect.

      • Penny Check

        Yes but she is squatting by the swimming pool.

  • ’15

    Let’s see… rank slide, structural deficit, profs jumping ship, increasing crime on campus, and a president paralyzed by fear of the student body.

    Anything going well?

    • confused

      To anyone,
      Me alum… been away for quite awhile.
      I’m reading the BDH and seeing comments like this above. There is so much negativity. But what is going on? profs jumping ship, crime? What happened? What crimes are going on? Is Brown’s main green turning into a Hobbesian state of nature with no Leviathan around (Thank you poli sci 11)?

  • johnlonergan

    Christina Paxson and the administration can no longer play in this game: dead last in the Ivies in endowment, amongst the highest tuition in the United States.

    My advice a year ago still stands: address millions with a Brown education and broaden the income base. Please refer to point 3 below. Christina–do you want more detail? We can provide it!

    Brown has made tremendous strides in the past 50 years, moving near the top of the Ivy League ranks in undergraduate and graduate education. Powered by the reforms of the 1969 Magaziner-Maxwell report, Brown chose a new direction, which has differentiated it from other top universities. I believe the University now has the opportunity to lead changes in education that are dramatic and far-reaching, requiring an effort far more revolutionary than what Magaziner-Maxwell envisioned. As a Brown and Harvard Business School alum, Silicon Valley entrepreneur and founder of over 10 companies, I’d like to share a new vision of the future of our university with you, the students, faculty, administrators and alums of Brown.

    A new vision for Brown in the next 250 years starts with three first steps. First, the University should find and admit potential Albert Einsteins from the whole world, not just the 30,000 who apply to Brown. The so-called yield rate — the percent of those matriculating after acceptance — is irrelevant. Find the best and the brightest from 7 billion people, not 30,000.

    Next, expand on Brown’s important qualities of close student-professor interaction by intensifying the experience and further improving the learning process. Brown should compare its education to the finest institutions in the world — including corporations like Google and Apple — not just the Ivy League.

    Third, Brown should offer a spectrum of opportunities to tens of millions of students to benefit from a Brown education — well beyond the few thousand who are residents of the College Hill campus. The University’s students should be of all ages, all educational levels and across all borders. This would both expand Brown’s “brand” and broaden its revenue sources.

    Brown is doing well, but complacency is a real threat.

    John Lonergan ’72 is the managing member of MachLabs, LLC in Redwood City, Calif. He encourages you to engage with these issues at http://www.brownnext250years.com and can be reached at lonergan.john@gmail.com.

    • Christina Pudgeon

      Dear John, Hi. This is Christina. I do not understand a thing you are saying, but I cannot appear dumb in front of the students. I am trying the hardest I can, and Brown remains in the Ivy League. So we have mishaps here and there. But will you just chill?

      • johnlonergan

        Sure Christina. How about another 250 years?

  • johnlonergan

    Look at the overall picture:

    1. Lowest endowment in the Ivies, contributing only 17% of the overall Brown budget

    2. One of the highest tuition rates of any university

    3. Falling government financing

    4. Continuing increases in costs faster than revenues

    The short-term result: fast-growing deficits (seehttp://www.browndailyherald.co…, in which the U said that it would “eliminate the deficit.” In fact, the opposite is happening; see:http://www.browndailyherald.co

    The medium-term result: more resignations of top teachers and administrators as resources dwindle (and other universities’ resources continue to climb).

    The longer-term result: a drastically reduced capability at Brown to maintain its rankings.

    This diminution of stature is already happening. See:http://www.browndailyherald.co

    Without any substantive change, there is no reversing Brown’s ever-increasing slide into mediocrity and irrelevance.

    Is there a way out? Yes, of course! We did it in 1969, and we can do it now.

    How can we make the changes happen? See

    1. http://www.browndailyherald.co

    2. http://www.browndailyherald.co

    and

    3. http://www.browndailyherald.co

    John Lonergan, AB ’72, Harvard MBA ’76, Medical Device Venture Capitalist, San Francisco
    John Lonergan, San Francisco
    find my new thriller, “Antidote: A Robert Cook Mystery Thriller” atwww.john-lonergan.com