The University's proposed 2009-10 budget cuts $4.5 million from current spending levels, Executive Vice President for Finance and Administration Beppie Huidekoper said at a meeting of the Brown University Community Council yesterday afternoon.
If approved by the Corporation later this month as it now stands, the budget will represent a total reduction of $21 million from spending plans made last May, she said.
Expenses for the 2010 fiscal year, which begins July 1, are currently projected to be $551 million - down from what was once projected to be $572 million, Huidekoper said.
Dealing with the prospect of about $800 million in losses to its endowment, the University has said it needs to eliminate $60 million from previously anticipated spending plans by 2014. That estimate,
Huidekoper said Tuesday, stems from an assumption that total income will increase by an average of just three percent per year over the next five years, instead of the previous figure of five percent.
But Huidekoper said money saved by the current hiring freeze and other efforts to constrain spending should amount to about $30 million by 2014. Though those savings are impressive, that "still leaves $30 million to go" in order to reach the $60 million benchmark by the deadline, she said.
The estimates and projections of future spending, as well as the amount of cutbacks, do not include the Division of Biology and Medicine, which has a separate budget.
Huidekoper said major reductions will come from the deferral or revision of plans for large-scale capital projects, such as the Nelson Fitness Center and a new swimming pool.
"We're not abandoning priorities, but asking how we can be smarter about how we can undertake a project," President Ruth Simmons said at the meeting.
She said, however, that the University is "hopeful" that it will be able to go forward soon with the planned renovation of Faunce House. She said she will be attending a "decisive" meeting on that project today.
In an attempt to "smooth out" the pain of decreased contributions to the operating budget from the endowment, the University will draw on the endowment at a higher-than-normal rate during the next several years, Simmons said.
For the current fiscal year, the payout to the operating budget was set at approximately five percent, Huidekoper said. But holding that rate steady this year would result in a payout of about $40 million less given the new, smaller size of the endowment. Such an upfront revenue loss would be "almost draconian," she said.
Huidekoper also provided details on the "sacrifices" that will have to be made to balance the budget.
Some of the biggest savings, she said, will come from slower growth in faculty and administrative salaries and renegotiated maintenance contracts.
She further emphasized the increasing burden of debt holdings on University balance sheets.
In the past, a "very significant portion" of infrastructural needs have been financed by debt, Simmons said. Over the past 20 years, the University has accumulated about $450 million in outstanding debt. Loans have commonly been taken out, for example, to finance utility projects, such as the recent installation of new steam pipes. It can be hard to solicit donations for such projects, which also do not warrant an increase in tuition, Huidekoper said.
Though as a non-profit organization the University can take advantage of tax-exempt and low-interest loans, payments on debt must come out of the budget each year, Huidekoper said.
A certain level of debt is to be expected, Huidekoper said, but "it's when we start borrowing for gift-funded projects that we start to think 'whoops, we've gone too far.'"
Though the University's assets - which stand at approximately $3 billion, according to Huidekoper - far exceed its approximately $450 million in debt, "we do have to pay it off," she said, and the University does not want to take on anymore.
Service on existing debt, along with utilities costs, need-blind financial aid and "sponsored" expenditures (those that are earmarked by donors), will be largely unaffected by budget cuts, Huidekoper said. The proposed budget includes an 11-percent increase in financial aid, she said.
Instead, the University will look to staff and compensation levels, fee increases and "non-essential" expenditures like travel costs for cost reductions.
"We have to recognize that some levels of service will have to be decreased," Huidekoper said.
"In terms of academic programs, the challenge is to take advantage of opportunities that present themselves," Provost David Kertzer '69 P'95 P'98 said at the meeting. He said the University is committed to finding money to continue improving academic programs.
Other business
At the end of the meeting, Michael Glassman '09, Libby Kimzey '09 and Manager of Environmental Stewardship Initiatives Kurt Teichert presented an update on the Climate Action Plan and Community Carbon Use Reduction (CCURB) project.
The University has reduced its carbon dioxide emissions by 7.7 percent since 2007, Teichert said.
The BUCC also unanimously approved a proposal to add a Corporation member to their ranks.
