PROVIDENCE, R.I. [Brown University] — Based on recommendations from a committee of faculty, staff, students and senior administrators, the Corporation of Brown University approved during its May 2020 meeting a $1.3 billion consolidated base budget for the University’s Fiscal Year 2021.
The budget includes a 9% increase to $347 million in total funding for undergraduate and graduate student financial support; $552 million for faculty, staff and student salaries, wages and benefits; a 6% increase to $169.6 million in endowment distributions to support students and advance research and teaching; and 10% growth in revenue from Brown’s continually expanding research enterprise.
Because the University Resources Committee (URC) develops the budget proposal on a September to April timeline, the FY21 budget approved by the Corporation focuses primarily on finances prior to the arrival of COVID-19 and does not incorporate the full impact the pandemic will likely have on Brown’s financial position. Working from the approved base budget toward revised budget forecasts is a key next step already underway.
“Given the extraordinary circumstances that continue to rapidly evolve, we will use this base budget as the core for developing detailed budgets for a range of scenarios that consider varying trajectories of the pandemic and reflect the significant impact of COVID-19 on Brown’s finances,” said Brown President Christina H. Paxson. “This budget offers an excellent foundation for achieving the appropriate balance between responsible fiscal discipline and our need for continued investment in academic excellence, diversity and inclusion, and financial sustainability.”
Costs associated with COVID-19 have already exceeded $25 million in Brown’s fiscal year ending on June 30, and the approved FY21 budget reflects early actions taken to mitigate the pandemic’s financial consequences. This includes the removal of faculty and staff salary increases and the implementation of a hiring freeze and senior office salary reductions. But some of the scenarios under development for Brown’s academic year 2020-21 predict a negative impact that could range from $100 to $200 million or more, depending on varying forecasts of revenue losses and increased expenses.
The COVID-related financial decisions that will be made in the months to come will be driven by five commitments that are grounded in Brown’s values, including the goal of maintaining the financial well-being of students and employees. Paxson noted this spring that Brown will continue to meet full financial need for all aided undergraduates and to maintain graduate fellowships; she also said her hope is to avoid future layoffs to the greatest extent practicable.
With salaries, wages and benefits comprising the largest share (44%) of the approved budget’s expenses and student aid and support the second-largest share (27%), the FY21 base budget supports those goals.
Budget reflects commitment to Brown community
Brown Provost Richard M. Locke chairs the URC, which includes faculty, administrators, students and staff and develops the annual operating budget presented for the Corporation’s approval. He said that supporting an exceptional student experience, advancing research and scholarship, and ensuring that students can come to Brown regardless of family income level, are among the committee’s highest priorities.
“The approved budget reflects our unwavering commitment to academic excellence, a diverse and inclusive community, and a financially sustainable operating model,” Locke said. “Even as we contend with the unanticipated consequences of COVID-19, it’s more important than ever that we invest in bringing the most talented students, faculty and staff to Brown, and offering the resources and experiences that enable them to contribute to the world through exceptional research, teaching and service.”
Locke noted that to develop the proposed FY21 budget, the University implemented a new base-budgeting process designed to capture actual academic and administrative costs and needs each year with the goal of ensuring an increasingly predictable budget that is less reliant on tuition and fees. Units across Brown worked with finance staff to propose budgets that align with spending needs to meet their strategic objectives. As a result, the URC did not deliberate on specific line-item funding requests and focused attention on strategic decisions to support Brown’s academic mission.
Among the key decisions reflected in the approved budget:
- Brown will maintain its commitment to meeting the full demonstrated financial need of all undergraduates, with an undergraduate financial aid budget of $153 million, a 6.8% increase over the previous year.
- The University will provide $178 million in student aid and support for graduate students, an increase from a budget of $163 million in FY20.
- Endowment distributions are expected to increase by $12 million despite a decrease in the payout rate from 4.85% in FY20 to 4.80% in FY21, part of a strategic decision to enhance the value of the endowment over the long term and reduces reliance on tuition and fees. The payout will enable support for vital activities that range from undergraduate scholarships and professorships to graduate student fellowships, library acquisitions, academic programs and varsity sports.
The approved budget reflects a modest $8.4 million deficit. When considering the scale of the University’s total operating budget, the deficit is comparable to that in FY20, Locke noted. Brown will continue efforts to eliminate the remaining operating deficit while simultaneously generating sufficient funds for ongoing investments in students, faculty, staff, programs and facilities.
“Looking ahead to FY21, our highest consideration will be to continue to manage the University’s operations, including the continued mitigation of the effects of COVID-19 on our community, while advancing academic excellence and financial sustainability,” Locke said. “This base operating budget is a significant step in the right direction, though more work and ongoing diligence is required to achieve our long-term financial objectives.”
An ad hoc administrative committee focused on finance and strategy in response to the pandemic is developing plans to maintain Brown’s short- and long-term financial stability. That group will work closely with a COVID-19 Finance Committee of Brown Corporation members on financial plans in the months ahead.
Brown’s Fiscal Year 2021 Base Operating Budget
Consolidated Budget Revenue — Key Drivers
Undergraduate tuition: $391.6 million
Graduate and medical school tuition: $208 million
Endowment: $169.6 million
Sponsored research: $218.4 million
Annual Fund and spendable gifts: $93.9 million
Auxiliary and miscellaneous: $164.1 million
Consolidated Budget Expenditures — Key Drivers
Faculty compensation: $219.5 million
Staff compensation: $320.1 million
Undergraduate student aid: $152.8 million
Graduate student aid and support: $178.1 million
Budget by Division
The University’s $1.3 billion consolidated budget comprises six main budget divisions, detailed here with total revenue budgets for FY21:
- Education and General: $956 million
- Biology and Medicine: $178 million
- Public Health: $70 million
- Engineering: $19 million
- Professional Studies: $10 million
- Summer at Brown: $32 million
Brown’s endowment payout is governed by a disciplined policy that balances the need for current income with the important goal of preserving the endowment’s value to provide funding for future generations of students. This year’s budgeting process reflects the strategic goal of continuing to reduce the percentage of the endowment’s fair value contributed to the annual operating budget.
The policy recommends a payout of an amount in the range of 4.5 to 5.5% of the endowment’s 12-quarter average fair value. Until reductions in the last three years — to 5.07% for FY18, 4.9% for FY19 and 4.85% for FY20 — the payout had been at the high end of the policy’s range.
For FY21, Brown’s endowment, with a fair value of more than $4.2 billion, will provide $169.6 million of revenue to the operating budget. The payout reduction to 4.80% percent helps to preserve the value of the endowment and ensures the University’s solid financial footing over the next decade and beyond.
Brown’s $3 billion BrownTogether fundraising campaign, launched in fall 2015, has raised more than $2.25 billion, helping to build the endowment’s ability to provide additional revenue in future years. The University’s long-term goal is to reach a more sustainable endowment payout level of 4.5%.
Tuition and Fees
As part of the transition to the University’s new base-budgeting process, tuition and fees were approved by the Corporation in February 2020 to enable students to anticipate the following year’s cost of attendance.
The URC strives to keep tuition increases as low as possible, even as tuition continues to provide the largest share of revenue for Brown’s Education and General budget. Undergraduate tuition and fees, approved by the Corporation in February 2020, will be:
Tuition: $59,254 (a 3.75% increase)
Standard room rate: $9,774 (a 3.76% increase)
Standard board: $6,134 (a 3.76% increase)
Health fee: $978 (a 3.82% increase)
Student activities fee: $286 (a 0% increase)
Student recreation fee: $66 (a 3.13% increase)
TOTAL UNDERGRADUATE: $76,492 (a 3.75% increase)
Graduate tuition for most doctoral and on-campus master’s degree programs is the same as undergraduate tuition: $59,254, a 3.75% increase. Given a shift in 2018 to market-based pricing for some master’s degrees, approximately 10 on-campus master’s programs have tuition rates that vary from the standard — for most, tuition for 2020-21 will remain the same as 2019-20 or increase by 3.75%.
Medical school tuition will increase by 3% to $64,974.