University officials are looking to identify new revenue sources to combat Brown's budget shortfall, culminating a three-phase budget adjustment period that began in early 2009. The final phase of budget restructuring will span the four fiscal years starting July 1, 2011 and is designed to close the gap in the $95 million budget deficit that resulted primarily from the $740 million endowment decline during the 2009 fiscal year.
Since the 2008-2009 academic year, administrators have taken aggressive steps to reduce the budget gap. The first phase of the adjustment included enacting wage freezes, eliminating staff positions, adjusting the pace of faculty expansion and modifying plans for key capital projects, which decreased the deficit by $35 million. Through a number of organizational initiatives designed to increase administrative efficiency, the University closed the gap by another $30 million during the second phase.
The third and final stage of the budget adjustment period is geared toward generating additional revenue rather than restructuring operating costs and will complete the efforts to realign the University's budget within its target range.
"You've got to start now if you're going to have the revenue in three years," said Beppie Huidekoper, executive vice president for finance and administration. "We either stop everything, or we find new sources of revenue."
Since the onset of the economic recession, the University has cut 200 staff positions and altered plans for capital projects, including renovating existing structures rather than constructing new buildings for the Medical Education Building and the recently combined Department of Cognitive, Linguistic and Psychological Sciences.
Though administrators are still grappling with the budget, Huidekoper said the next stage no longer contends with reducing costs.
Instead, the third phase of the adjustment period "will target investments in ways that will enhance the quality and national standing of Brown's academic programs," Huidekoper and Provost David Kertzer '69 P'95 P'98 wrote in an e-mail to faculty and staff Sept. 3. Possible investments include boosting the number of faculty, increasing financial aid, renovating dormitories, supporting new academic programs and improving classroom infrastructure, Huidekoper said.
But the current financial situation has called previously reliable revenue sources into question. Before the economic downturn, the University could count on solid endowment growth and substantial fundraising draws, Huidekoper said.
In the past, "we've been phenomenally fortunate that the growth in revenue has come from the endowment and the annual fund," Huidekoper said. "In this market, we're not so optimistic."
Because Brown's endowment is significantly smaller than that of many of its peer institutions — and because Brown has fewer masters students and does not have typical revenue sources such as a business school or its own hospital — the University must identify other methods for generating additional growth.
The value of Brown's total endowment stands at just over $2 billion — around $250,000 per student, compared to approximately $1.7 million per student at Princeton, $1.4 million per student at Yale and $1.3 million at Harvard, Huidekoper said.
The Campaign for Academic Enrichment, which launched in 2002 and has generated more than $1.5 billion, is slated to end Dec. 31, presenting another obstacle to revenue growth, she said.
Huidekoper said the University is considering new programs in continuing education as an additional revenue source. She said administrators are looking to adapt similar programs run by institutions such as Northwestern University and Johns Hopkins University to suit Brown. They will hold preliminary discussions with members of the Corporation during their October meeting to present possible sources for increased funds, she added.
Despite optimistic projections for the next phase of financial planning, Huidekoper said the actual methods for generating additional revenue in the next four fiscal years are still hazy. "We won't figure this all out in the next six months," she said. "We're better at figuring out what we want to spend it on."