University News

Strategic plan initiatives hinge on financial uncertainties

The focus and success of an upcoming capital campaign will influence Brown’s direction

By and
Senior Staff Writers
Tuesday, November 5, 2013

Several proposals in Paxson’s strategic plan, including the physical expansion of Brown’s campus, will require significant fundraising efforts.

This article is part of the series Launching a Legacy?

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

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  1. “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.” And why is that? Maybe the BDH could enlighten us on that point.

  2. On a per capita student basis, Brown does not have the smallest endowment in the Ivy. Cornell, Columbia and Penn all have more than double the number of students–since they have significant graduate and professional programs. Also, Brown’s giving rate among alums is higher than all Ivies other than Princeton and Dartmouth, so I am not sure where the BDH can state that Brown has a weaker “culture of giving”……. In order for Pres Paxson to achieve many of the goals in the newly-approved strategic plan, Brown will have to undertake a large capital campaign. If alums and friends of Brown find the strategic plan compelling, I think they will step up to support the university.

    • Well, someone’s not being honest. Where is the data?

        this shows Cornell and Columbia below Brown per capita, and UPenn slightly above Brown.

        • This is just endowment data. There is nothing here on alumni giving levels. If we assume that the endowment-per-student metric as presented in the link above is an accurate measure of university strength — i.e. that it’s kosher to lump b-school, law, med, etc. students together with undergrads — then Brown’s position in the list in the link above is still nothing to be proud of. Being above Cornell and Columbia when your alma mater is hanging around at about the 30th spot? What’s so great about that?

  3. No, it hinges on the incompetence and spinelessness of Chris Paxson and the hoards that call themselves deans.

  4. I personally don’t think Brown should try and compete with schools that have much larger endowments than we do. We should be content with what we have, which is a culture of academic exploration. There is no way we can compete with Harvard and Stanford or even with Penn and Duke when it comes to research.

    • Brown: change or die. Don’t ask us for more money. We have better places–more worthy places–to put our money. Once you develop a plan for REAL change, one that we can believe, we may open our wallets.

      John Lonergan, BA ’72, Harvard MBA ’76, San Francisco, Medical Device Venture Capitalst, former McKinsey consultant, serial entrepreneur

  5. Brown is attempting to pursue a strategy for which it has neither the resources nor the talent. Brown has the smallest endowment in the Ivy League–and is far below other non-Ivies in its endowment resources.
    And yet Paxson et al would like to maintain Brown’s ability to compete across a broad array of faculty areas teaching in the way that it always has–something that is patently absurd. With budget deficits, some of the highest tuition charges in the US, and losing key administrative and professorial talent, Brown must find another way to succeed, differentiate, and ensure its survival.
    Christina Paxson’s answer is “let’s double down on our current strategy of build and build, spend and spend.”
    That strategy works for Harvard or Stanford, but not for Brown. Simply put, Harvard, Stanford and U Texas can pursue major spending projects and even make major mistakes. Those universities have the strategic degrees of freedom to do so. Brown doesn’t.
    Brown can do neither–we can’t match the others on the amount of bricks and mortar we invest in. We can’t even match those other universities for prestige, salary or resources (and thus we can’t attract top professors).
    We can’t do any of it, in fact, unless we change the rules of the game.
    We did make this change in 1969 with Magaziner-Maxwell. We established clear differentiation that has helped Brown to weather competitive pressures for some time.
    We now need root-and-branch re-thinking of how we recruit, how we teach, and how we raise revenue (not just asking for money from alums, hat-in-hand). In short, we are losing top student applicants (40% of those we accept choose to go elsewhere), losing on teaching (we’re ineffective at teaching, and unable/unwilling to use new teaching technologies) and losing on revenue (government grants–risky, alumni handouts–not so great, tuition–amongst the highest already).
    Christina Paxson doesn’t want to hear it. She and Jerome Vascellaro and Todd Andrews have made it clear: “We don’t want change. We just want your money…shut up and hand it over.”
    That response doesn’t work for me. Nor should it work for alums, faculty, students or prospective students.
    Brown: change or die. Don’t ask us for more money. We have better places–more worthy places–to put our money. Once you develop a plan for REAL change, one that we can believe, we may open our wallets.

    John Lonergan, BA ’72, Harvard MBA ’76, San Francisco, Medical Device Venture Capitalst, former McKinsey consultant, serial entrepreneur

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