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Predicting hundreds of millions in upcoming pandemic expenses, Brown Corporation approves base budget for FY 2021

University Resources Committee recommends $1.3 billion budget, revisions to come as COVID-19 impacts fall plans

The Corporation, the University’s highest governing body, voted to approve a $1.3 billion base budget for the 2021 fiscal year during its May meeting, but this budget may be revised once the format of the fall semester is decided.

Expenses and potential losses

Because the budget was drafted from September 2019 to April 2020, it “does not incorporate the full impact the pandemic will likely have on Brown’s financial position,” President Christina Paxson P’19 wrote in a May 26 Today@Brown announcement.

The budget report predicts potential financial losses of $100 million to $200 million due to the COVID-19 pandemic, The Herald previously reported.

The University has already spent over $21 million on COVID-19-related expenses including refunding room and board, facilitating travel, providing technological support to students and maintaining employment for some students and staff who could not work remotely or on site, Provost Richard Locke P’18 told The Herald.

Ramping down research, extending tenure clocks, employment contracts and financial support as well as canceling pre-college programs also increased the financial loss. The University also expects that “there will be a dramatic increase in our financial aid budget” in the upcoming fiscal year, Locke said.

During the 2008-2009 financial crisis, the University’s financial aid budget increased by 21 percent, The Herald previously reported. “The current economic crisis we’re now in is much worse … in impacting Brown families,” Locke added. “When you add up all of these lost revenues and extra expenses, that’s just $100 million dollars.”

Additionally, if the University goes fully online next semester, it will lose room-and-board fees, as well as the tuition of students who may decide to take a leave of absence rather than enroll in an online semester.

In a “de-densified residential” scenario, the University will need to rent hotel rooms and implement safety measures. With a possible tri-semester calendar, Locke said the University will likely need to hire more faculty to teach during the extra semester.

All these pandemic-related measures amount to further financial strain. But “because the University has done a great job over the last several years in how it runs itself, we actually have the resources to do what we need to do” to handle the pandemic’s impacts responsibly, Locke added.

Budget priorities: "A picture of … an institution's values"

The recently approved budget serves as a baseline for developing detailed budgets specific to the three forms the fall semester could take: entirely remote, part of a tri-semester model (with students only attending two of the three terms) or a regular return to campus.

The current base budget, which was designed by the University Resources Committee before being approved by the Corporation, has an operating budget of $1.265 billion of revenues and $1.274 billion of expenses for a deficit of $8.4 million or -0.1 percent, according to the report. This deficit will increase as the budget adjusts to COVID-19-related losses, according to Paxson, and an ad hoc administrative committee will be working with a COVID-19 Finance Committee of Brown Corporation members on financial plans and strategy for the coming months.

The budget also includes $347 million in funding for undergraduate and graduate student financial support — a 9 percent increase from the previous fiscal year. The budget allots $552 million for faculty, staff and student salaries, wages and benefits, including a 30 percent increase in funding for student wages from last year.

A budget is “a picture of … an institution’s values,” Locke said. “If you look at our budget, the vast majority of money that we spend is on people … as opposed to palaces.”

Total endowment distributions are projected to increase by $12 million, despite a 0.05 percent decrease in payout rate — the money distributed annually to the University to support operations — from FY 2020 to FY 2021. This decrease is part of the University’s plan to grow the endowment in order to ultimately increase the percentage of the budget drawn from the endowment, therefore decreasing the University’s reliance on tuition and fees over time, Locke explained.

While tuition and fees still comprise about 49 percent of the University’s operating budget, this year the URC made a conscious decision to commit to decreasing the growth curve of tuition and fees by keeping the percent raise below four percent, Locke said. Undergraduate tuition for the 2020-21 academic year increased by 3.75 percent, The Herald previously reported.

The University was also able to decrease potential budget expenditures by tens of millions of dollars through the implementation of a zero-base budgeting system, Locke said. While the previous incremental budgetary system simply built on the preceding year’s budget — often including unnecessary expenses from years past — the base budget keeps focus on funding each department’s top priorities for the coming year and reallocating resources away from unimportant expenses.

“Notwithstanding very tough times, we’re still investing in some of the major priorities of the University,” Locke said. “Diversity and inclusion, financial aid, economic inclusion and academic excellence.”

During the meeting, the Corporation also formally accepted approximately $88 million in individual gifts of over $1 million made since February 2020 and discussed the status of the BrownTogether campaign, which remains on track to meet its $3 billion fundraising goal by 2022.

Seven new Trustees and one New Alumni Trustee were elected to the Corporation. Two new members were elected to the Board of Fellows and the Corporation approved the appointment of 21 faculty to named chairs.

The Board of Fellows also approved the candidates for 2,657 degrees which were awarded May 24. This past April, the Board had also approved the candidates for 48 doctors of medicine degrees for Alpert Medical School students who graduated early to assist with medical responses to COVID-19.



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