Brown Corporation approves base budget for Fiscal Year 2022

The approved $1.34 billion base budget strikes a deliberate balance between long-term financial sustainability, economic recovery from COVID-19, and continued investments in academic excellence and support for students.

PROVIDENCE, R.I. [Brown University] — The Corporation of Brown University approved during its May 2021 meeting a $1.34 billion consolidated base budget for the University’s Fiscal Year 2022 based on recommendations from a committee of Brown faculty, staff, students and senior administrators.

springThe budget includes $371 million in total funding for undergraduate and graduate student financial support, an 8% increase over last year’s budget; $185.2 million in endowment distributions to support students and advance research and teaching, which represents a 7% increase; $585 million for faculty, staff and student salaries, wages and benefits; and 7% growth in revenue from Brown’s continually expanding research enterprise.

The approval of the budget comes as Brown approaches the end of Fiscal Year 2021, which will conclude on June 30 with a projected deficit of approximately $79 million. That deficit is due largely to the financial impact of the COVID-19 pandemic, which both reduced University revenues and required new investments to protect the health and safety of the Brown community. Expenses ranged from investments in a campus-wide COVID-19 testing program, to pandemic-related financial support for undergraduate and graduate students, to costs to purchase COVID-related supplies and ensure single-occupancy housing for undergraduates on campus.

While COVID-19 will continue to impact the budget in the coming year, the University Resources Committee (URC), which develops the recommended budget for the Corporation’s review, expects the financial effects of the pandemic to decrease as Brown moves toward a more traditional 2021-22 academic year. With $30 million in COVID-19 impacts anticipated in the FY22 budget, the projected deficit for next year will reduce to $34.8 million.

Brown President Christina H. Paxson noted that COVID-related financial decisions have been guided by five commitments grounded in Brown’s values, including the goal of maintaining the financial well-being of students and employees. In addition to new financial support for students facing emergent COVID-19 challenges, the University has continued to meet full financial aid for all aided undergraduates, increased support for graduate students, avoided layoffs of regular employees, and eliminated earlier-than-expected a hiring and salary freeze implemented after the pandemic’s arrival.

“The thoughtful, strategic approach of Brown’s financial leaders and each of the URC’s faculty, staff and student representatives in recent years proved instrumental in positioning us to meet the unique challenges of a truly extraordinary moment, while continuing to invest in Brown’s commitment to academic excellence,” Paxson said. “This Fiscal Year 2022 budget continues our focus on long-term financial sustainability and ensures our ability to advance the world-class teaching, learning, research and discovery for which Brown is known.”

The FY22 budget continues Brown’s focus on investing in the faculty, staff and students who worked to fulfill the University’s academic mission every day — salaries, wages and benefits comprise the largest share (43%) of the approved budget’s expenses, and student aid and support comprises the second-largest share (27%).

Brown Provost Richard M. Locke, who chairs the URC, said the budget invests in teaching and research, expands financial support for students, and reflects the University’s commitment to building a more fully diverse and inclusive community. At the same time, it advances Brown’s efforts to create a financially sustainable operating model and eliminate a modest structural deficit in the University budget.

“Even as we contend with the significant financial impacts of the pandemic, we’re continuing to expand resources for essential institutional priorities spanning scholarship on critical 21st century challenges, diversity and inclusion initiatives, and measures to better support students from low- and moderate-income backgrounds,” Locke said. “All of our decisions are shaped by a persistent focus on supporting an academic community consisting of world-renowned faculty and students driven by curiosity, creativity and the opportunity to make a positive impact well beyond our campus.”

Locke noted that the development of the FY22 budget marked the second year of the University’s new zero-based budgeting process, which is 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 focused attention on strategic budget decisions to support Brown’s academic mission rather than deliberating specific line-item funding requests.

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 $170.8 million, an increase of $17.1 million, or 11%, compared with the FY21 base budget.
     
  • The University will provide $187.3 million in student aid and support for graduate students, an increase of $8.9 million, or 5%, compared with the FY21 base budget.
     
  • Endowment distributions are expected to increase by $12 million, even as the University continues its strategic shift to a decreased annual payout rate, which will both enhance the value of the endowment over the long term and reduce Brown’s reliance on tuition and fees. This year’s payout will enable support for vital activities that range from undergraduate scholarships and professorships to graduate student fellowships, library acquisitions, academic programs and varsity athletics.

The budget’s approval follows the February 2021 establishment of a 2.85% increase in tuition and fees for 2021-22, the lowest percent increase in more than a decade. The same month, the Corporation approved faculty and staff salary increase pools of 2.5% for FY22 and a staff bonus pool of $500,000.

In addition to the work of the URC, an ad hoc committee chaired by Locke and convened in October 2020 is developing a set of recommendations to promote the long-term financial health and sustainability of the University, with a specific focus on creative strategies and operational innovations to increasingly reduce Brown’s dependence on tuition revenue in the future. In the coming months, members of the campus community will engage with recommendations from the committee and be encouraged to offer feedback and provide new ideas.

The full URC report is available on the website of Brown’s Office of the Provost.

Brown’s Fiscal Year 2022 Base Operating Budget

Consolidated Budget Revenue — Key Drivers

Undergraduate tuition: $422.7 million
Graduate and medical school tuition: $205.4 million
Endowment: $185.2 million
Sponsored research: $236.4 million
Annual Fund and spendable gifts: $94.7 million
Auxiliary and miscellaneous: $179.5 million

Consolidated Budget Expenditures — Key Drivers

Faculty compensation: $240 million
Staff compensation: $332.7 million
Undergraduate student aid: $170.8 million
Graduate student aid and support: $187.3 million

Budget by Division

The University’s $1.3 billion consolidated budget comprises six main budget divisions, detailed here with total revenue budgets for FY22:

  • Education and General: $1 billion
  • Biology and Medicine: $191 million
  • Public Health: $93 million
  • Engineering: $21 million
  • Pre-College Programs: $18 million
  • Professional Studies: $10 million

Endowment Income

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 over the last four years — to 5.07% for FY18, 4.9% for FY19, 4.85% for FY20 and 5.0% for FY21, which represented a one-time increase in response to COVID-19 — the payout had been at the high end of the policy’s range.

For FY22, Brown’s endowment will provide $185.2 million of revenue to the operating budget. A payout reduction to 4.8% will help to preserve the value of the endowment and ensure 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 $2.89 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 2021 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 2021, will be:

Tuition: $60,944 (a 2.85% increase)
Standard room rate: $10,054 (a 2.86% increase)
Standard board: $6,292 (a 2.84% increase)
Health fee: $1,006 (a 2.86% increase)
Student activities fee: $286 (no increase)
Student recreation fee: $68 (a 3.03% increase)

TOTAL UNDERGRADUATE: $78,650 (a 2.84% increase)

Graduate tuition for most doctoral and on-campus master’s degree programs will increase by 2.85% to $7,618 per course. Given a shift in 2018 to market-based pricing for some master’s degrees, approximately a dozen master’s programs have tuition rates that vary from the standard — for most, tuition for 2021-22 will remain the same as 2020-21 or increase by 2.85%.

Medical school tuition will increase by 1.75% to $66,110.