News from the Corporation 2009
February 21, 2009
Dear Members of the Brown Community,
The Corporation of Brown University has just completed its February meeting, which occurred in the context of the extraordinary and ongoing global financial crisis and deepening recession. In addition to considering recommendations for the FY10 budget and recommended reductions in line with our substantial anticipated drop in revenue, the Trustees and Fellows reviewed numerous strategies for navigating the crisis with an optimum outcome for the University. Throughout the deliberations, repeated concerns were expressed about keeping the University moving forward in spite of the severity of the budget situation and general economic environment.
I. FY10 BUDGET AND PLANNING ASSUMPTIONS
Each February, the Corporation acts upon recommendations from the Committee on Budget & Finance regarding the budget for the following year. Their recommendations include input from the campus community through the University Resources Committee (URC). The Corporation committee expressed appreciation for the diligent and insightful work of the URC as reflected in its report and supported most of its recommendations. However, following extensive debate throughout the weekend, the Corporation established new parameters for the University budget in view of the more negative environment that we face. We have been relying upon a return to annual growth in the endowment in FY11 and beyond of 10%; this is reflected in the assumptions in my letter of January 27, 2009
ESTIMATED REVENUE FOR FY10
The Corporation, accordingly, approved an overall operating budget of $758.7 million for the 2009-2010 academic year, an increase of less than 1 percent over the budget approved for the current year. This figure anticipates lower than expected revenue across nearly all of the University’s revenue sources.
Major influences on the more modest revenue growth include the following:
a) Tuition revenue will increase only slightly next year, given our strong commitment to our students and families to limit the tuition increase as much as possible.
b) Following sharp declines in the financial markets and falling endowment values across the country, revenue from the endowment will decrease by 1 percent, providing a total of $111.4 million to the Education and General (E&G) budget.
c) Gifts to the Brown Annual Fund are a major source of unrestricted funds and have been growing at a record-setting pace, more than doubling since 2001. However, in the coming year, gifts are expected to decline by $4 million below our projections to about $ 37.9 million.
INCREASES IN SPENDING
Proposed savings and spending cuts, coupled with $7.1 million in reallocation of funds among existing budgets, will allow the University to undertake $19.6 million in new spending. Areas in which the University will be able to increase spending in 2009-2010 include:
* a 10.9-percent increase ($7.5 million) in the undergraduate financial aid budget. (This has been expressed as one of our highest priorities and the Corporation agreed that support for students should remain a strong commitment going forward.)
* faculty positions, based on searches already underway and part of the continued growth called for by the Plan for Academic Enrichment;
* inflationary costs in computing hardware and software and in library acquisitions;
* support for new and renovated academic facilities, including the undergraduate Center for Advising and Teaching in the Sciences, due to open in the Sciences Library during the next academic year;
* funding for transportation, including the SafeRide shuttle and subsidized RIPTA program.
TUITION AND FEES
In approving the budget, the Corporation set tuition and fees for 2009-10. Tuition will rise 3 percent to $38,048, and the overall undergraduate charge, including standard room and board, health and other fees, will rise 2.9 percent to $49,128. That is the smallest annual increase since the 1960s. Tuition for graduate and medical students will also rise by 3 percent. For more information on the budget and its impact on tuition and fees, please see the news release at: http://brown.edu/web/tuition.
REDUCTIONS ANTICIPATED BY FY10
Given the lower planning assumptions in revenue going forward, it will be necessary to achieve greater levels of reductions than previously thought. Instead of the $4.5 million of budget reductions previously identified for FY10, we now expect total reductions will be $6 million. Targeted position eliminations will be enacted in the coming months to help achieve this goal. While some will come from existing vacancies made permanent, some administrative and staff positions will unfortunately have to be eliminated. These will be managed, wherever possible, through the assistance of careful transitional planning and severance.
REDUCTIONS FOR FY11-FY14
We had previously projected reductions of $60 million from the planned E&G budget by fiscal year 2014. In order to respond to the revenue assumptions the Corporation discussed this weekend, reductions will need to be significantly greater, in the range of $80 to $90 million by FY14. Reductions will also need to be made at a somewhat greater level than the original assumption in the Biology and Medicine portion of the University budget. These additional reductions will require the Vacancy Review Committee and the Organizational Review Committee to identify further reductions for FY11 and subsequent years. We will continue to work with various campus groups to determine where services can be cut back, eliminated, or provided more efficiently through greater consolidation across administrative, service, and operational units. The staff hiring pause will continue.
II. CAPITAL PROJECTS
Over the past several months, and in light of the current economic environment, the University has conducted a review of all planned capital projects. The difficulty and inadvisability of debt-funded capital projects led the Corporation to suggest that we should, wherever possible and prudent, consider re-use and renovation as an alternative near-term solution to our unfunded facilities needs. The result, they reasoned, would significantly reduce the impact on the operating budget by avoiding debt service expenses and minimizing additional operations and maintenance costs. The overall cost of construction itself would also be greatly reduced and we would then be able to proceed with a number of high-priority projects.
Consistent with this approach, the Corporation discussed and endorsed efforts to explore renovation of existing buildings for the following programs, sufficient donor funding having been identified to begin these projects:
* Mind Brain Behavior;
* Medical Education.
At the same time, the Budget & Finance Committee also authorized construction or design to begin on other capital projects where sufficient funding from donors has already been secured. The following projects will proceed:
*The Creative Arts Center is entirely funded by gifts from donors; its construction will begin in June, 2009;
*The Stephen Robert ’62 Campus Center in Faunce House is also funded by donor gifts and its construction will begin in the summer of 2009.
* An Aquatics Center in the athletics complex is funded by donor gifts. Design for this facility can begin immediately.
III. ACCEPTANCE OF GIFTS AND OTHER BUSINESS
During the Saturday business meeting the Corporation accepted and ratified a number of gifts totaling $35.375 million. These include a gift of $10 million for a reconfigured Mind Brain Behavior Building, $5 million for the Stephen Robert ’62 Campus Center, $2 million for undergraduate scholarships, and a bequest in the amount of $1.5 million to complete the funding of a professorship in the humanities. Additional gifts accepted previously by the Advisory & Executive Committee and ratified by the Corporation include a bequest of $14.75 million for the new Aquatics Center from the estate of the late Raymond L. Moran ’41, a gift of $1.125 million for undergraduate scholarships, and $1 million for the Greater China Endowment Fund.
Further information about the Corporation is available at: http://brown.edu/web/corp/.
IV. CONCLUSION
The meetings of the Corporation over the past several days have been the most intense and engaged during my time at Brown. The recognition that Brown, along with every university, is undergoing a critical period in its history where the import of each decision is magnified many times over added a sobering tone to the deliberations. Throughout the meetings, Trustees and Fellows focused on the importance of our academic programs, on providing students with the optimal educational experience, and on maintaining the uniqueness and strength of the University over time. That they must consider these goals in the context of the most challenging economic environment in a century makes their task - and ours - difficult but by no means impossible.
The decisions described above demonstrate, I believe, a continuingly strong commitment to act in concert with and in service of our core aims as a university, and in consequence of our important societal role.
Sincerely,
Ruth J. Simmons