At Tuesday’s faculty meeting, President Christina Paxson P’19 P’MD’20 outlined the University’s goals to reduce operating expenditures, lower the percentage of the endowment used for University expenditures and maintain campus facilities so all buildings are at 80% of the condition they were in when they were new.
The University aims to maintain an average 3% gap between revenue and annual operating expenses. This will be accomplished by slowing expense growth relative to revenue growth, Paxson explained.
“I hear from a lot of faculty about capital needs in the University,” she said. “If we have a 3% margin, we have an ability to invest in those capital needs — so positive margins maintain physical infrastructure, reduce reliance on debt.”
Over the last five years, the University has averaged an operating margin of around 0.6%, according to a graph shown at the meeting.
“The reason why the margins are so slim is, as our resources have grown, we’ve increased these expenses for faculty and financial aid and, to some extent, staff growth,” Paxson said at the meeting.
In comparison, the graph indicated that many peer institutions have an average operating margin of 3% or greater. Yale’s five-year average operating margin is 3.9%, Harvard’s is 4.7% and Dartmouth’s is 16.1%.
These schools’ larger operating margins “let them invest back into the campus and the community, and we’re not there,” Paxson said.
Administrators also hope that the University can evolve toward using just 5% of its endowment value to support University expenditures by fiscal year 2028, which begins in July 2027. Currently, the University’s endowment payout rate is 5.5%, which is the maximum rate that the Corporation — the University’s highest governing body — will typically approve.
“When you have a really high payout, it reduces the ability to compound endowment growth, and it limits the ability of Brown to respond to unexpected adverse circumstances,” Paxson explained.
According to a graph displayed at the meeting, the University’s payout rate remained steady at 4.8% from FY22 to FY24 before it increased to 5.5% in FY25, where it has remained since.
The third goal outlined at Tuesday’s meeting was maintaining a net asset value of 80%. The NAV is an average measurement of how close all Brown buildings are to being “as good as new,” Paxson said. A brand new building would have a NAV of 100%, while buildings in “bad shape” would have a NAV of around 40% to 50%, she added.
The University’s current overall NAV is 81%, though “there’s a lot of variation across buildings,” she added. “Excellent facilities are what it takes to bring faculty to Brown, bring students to Brown,” she added, noting that facilities in disrepair create larger expenses in the long term.
The University aims to achieve this goal by focusing on philanthropy and increasing the operating margin, Paxson said.
A slide shown at the meeting stated that current financial challenges the University faces include a decrease in applications from international graduate students, as well as short-term and long-term expenses associated with Dec. 13.
Brown has received more donations this year compared to the same time last year, and the University has been awarded $233 million in new research awards in FY26, compared to $164 million in FY25, according to meeting slides. In addition, the University’s efforts to control staff growth and reduce expenditures have been beneficial, a slide reads.
“Bottom line, we’re in a good position, but we have to be careful over the next five years,” Paxson said.
Samah Hamid is a university news editor covering faculty and career & alumni. She is from Sharon, Massachusetts and plans to concentrate in Biology. In her free time, you can find her taking a nap, reading, or baking a sweet treat.
