Despite anticipating major endowment losses and tight budgets due to the slumping economy, the University remains committed to moving forward with some ambitious capital projects, top administrators said at a monthly faculty meeting Tuesday. They also provided details of planned budget tightening in the years ahead.
The budget drafted by the University Resources Committee for fiscal year 2010, which begins July 1, recommends that both the general budget and the separate budget for the Division of Biology and Medicine break even next year. That goal represents a departure from recent years, in which the University's expenditures have outpaced revenue to fuel a rapid phase of growth.
The proposed general budget would set expenses for the next academic year $21 million below previous projections. It would also increase payout from the endowment to the operating budget and raise undergraduate student charges by 2.9 percent - smaller than the four- to five-percent increases of recent years.
At the meeting, Provost David Kertzer '69 P'95 P'98 also suggested that the University has not yet found ways to generate all of its needed savings, and President Ruth Simmons revealed that the University had scrapped plans to finance construction by taking on new debt.
In her report to the faculty, Simmons said the worldwide economic crisis provided the University with the opportunity to "question long-held assumptions about our needs" and emphasized the importance of maintaining educational excellence despite the financial downturn.
Simmons said the University typically projects budgets five years into the future when planning, a practice it would maintain to "prevent radical, shortsighted solutions." Since there is no consensus among economic experts on the economy's prospects for recovery, she said, planners are assuming that the crisis will last longer than two years.
The University is also "assuming all revenue sources will be down next year," she said, and does not expect to be able to draw on its endowment much more heavily than it already does. Since payments on debt have to be accounted for in the operating budget, Simmons said, "no significant additional near-term debt will be incurred in order to fund our capital projects."
The University is already drawing on its endowment at record levels this year to help fund increased financial aid commitments.
It was still expecting to take on additional debt to fund planned construction as recently as last fall, The Herald reported in September. Though Simmons' comments yesterday indicated a departure from that strategy, the president insisted that "our emphasis is on moving forward."
The Corporation, she said, agrees that the University should continue to invest in new construction projects - hopefully at a reduced cost - despite making budget cuts in other areas. To fund new buildings, Brown has asked donors to redirect gifts toward more urgent projects and to deliver pledged payments early, if possible.
In his report to the faculty, Kertzer said the University is budgeting for just three-percent revenue growth over the next five years, less than the five-percent growth it anticipated last year for nearly the same period. Brown now expects general revenue - which does not include BioMed funds - to grow from $543 million this year to $635 million in the fiscal year ending in 2014, which is $60 million less than was projected last May.
Projected BioMed revenues have been lowered $10 million over the same period.
But that money is not being cut from current budgets, Kertzer said. Instead, the numbers represent the difference between newly projected budgets and "where we previously thought we would be."
The BioMed division, which is now projecting 3.25-percent yearly growth, revised down from 4.6 percent, is "discussing various options" for how to proceed with plans for a $65-million Medical Education Building, Kertzer said.
The URC's budget recommendations for the next fiscal year include a 2.9-percent increase in tuition and fees for undergraduate students and a three-percent rise in charges for graduate and medical students. Even so, Kertzer said, "tuition is not going to be the place" for the University to make up lost money, since costs would not increase at all for the 41 percent of students currently receiving financial aid.
The URC's budget recommendation includes a 9.8-percent increase in funds for undergraduate financial aid, he said.
The University is still looking for $30 million that it can cut out of projected general budgets by the fiscal year ending in 2014, Kertzer said, adding that the Organizational Review Committee is looking for ways to do so. Simmons announced in a campus-wide e-mail last week that top administrators are already seeking ways to cut their budgets, and Executive Vice President for Finance and Administration Beppie Huidekoper said several administrators volunteered last month to cut their own salaries.
Simmons told an audience at Family Weeekend in October that she planned to discuss a reduction in her own salary with the Corporation.
The URC will present its budget for the fiscal year 2010 to the Corporation for approval in February. Simmons reviews the URC report and makes her own suggestions to the Corporation as well.
Simmons and Kertzer both emphasized the University's commitment to continuing to review and approve some capital projects.
"I very much think of us as being at a building moment," Simmons said. "We went through a period of time where we invested relatively little in our infrastructure. We're not in a position to wait five years before starting up again."
In response to a question, Huidekoper said the University expected to save some money on healthcare costs in the coming year, but then see costs rise by about eight percent per year after that. The University became self-insured this past year and is now saving about a million dollars a year in healthcare overhead.
Asked whether the University would allocate funds to departments based on their potential to bring in revenue, Simmons said she "would not be prepared" to take money from departments that do not produce as much revenue, such as humanities departments, in order to focus money elsewhere.
"That is a business decision that's excellent, but that's a lousy decision for a university," she said. "I'm probably being a little too emotional as somebody from French, but there it is." The faculty met this comment with a round of applause.
After questions ended, Professor of Philosophy and Chair of the Faculty Executive Committee Jamie Dreier presented the first annual Faculty Service Awards for "distinguished service in faculty government." Simmons, who had told the faculty in her address that she assumed the University's existing governance processes could "serve us well during this period," joked that the three award recipients would not be asked to decline their $2,000 research awards.
In other business at the meeting, the faculty voted unanimously to approve a motion to officially change the name of the William R. Rhodes Center for International Economics to the William R. Rhodes Center for International Economics and Finance. The meeting also included a memorial minute for Professor Emeritus of Mathematics Katsumi Nomizu, who died at age 84 on
Nov. 5.
