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Big Budget: the Big Picture

How the numbers stack up for 2010

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Photo by Kalman Zabarsky

Budgets are promises and predictions, blueprints and crystal balls.

They bore us, and intimidate us too. Line item by line item, they present like some medieval text. But once deciphered, they show where the money really goes, which shows us, in turn, priorities. After all, money talks.

Boston University’s new budget, announced yesterday by BU President Robert A. Brown, speaks volumes. It is big, more than $1.9 billion. That’s an increase of more than $55 million from last year. While $55 million sounds like a lot, it translates into a hike of 2.6 percent, including all inflation and automatic cost-of-living increases. Holding at 2.6 percent requires several actions: some hiring freezes, some salary freezes, some positions left unfilled, and some layoffs. It includes tuition hikes. It anticipates a slightly smaller freshman class and a tad more student aid. It is a budget created during a downturn — what some call a recession, what others call a depression. Compared to the relative comfort of recent years, it will cause some pain.

One thing this budget did not do, however, is institute across-the-board cuts. Executive Vice President Joseph Mercurio notes that such an approach might seem attractive at first glance and easier to sell, because, the argument goes, it spreads hardship without playing favorites.

“But it penalizes the people who have been austere, who’ve done the best job holding the line,” says Mercurio. “And it doesn’t protect the crucial, core programs that should be expanded, even in hard times.”

The strategy chosen, for example, allows the University to continue to fill faculty positions, including 25 at the College of Arts & Sciences alone last year, while ending health-care coverage for people who no longer work for the University and are over 55 years old. The savings from that move alone is worth $3 million a year, says Mercurio, and it doesn’t touch classroom activities.

Mercurio says the budget is grounded in an assessment made last September that the economy was in serious trouble.

“We were the first University in the country to come out this way,” he says, referring to the decision to freeze hires for nonacademic, non–public safety jobs, freeze salaries for anyone making more than $150,000 a year, and cap salary increases at 2 to 3 percent for those making less. “We took the position that if we take these steps early and we’re wrong, we can reverse them. But if we’re right, we’re ahead of the bad downturn.”

In January, seven task forces were created to find ways to shave $10 million off the University’s operating budget. The hiring freeze meant that 125 jobs were pulled off postings in the current year, representing savings of $6.7 million. Many of those jobs (between 75 and 80) have been reinstated, but there are still more than 200 open administrative positions that were never posted. Some savings were achieved by leaving some of those jobs unfilled, some by reducing the workforce; between 40 and 50 jobs have been cut at the Charles River Campus. The University still employs more than 6,000 people.

Most of the job losses come from two recent actions: closing the Sargent Center for Outdoor Education accounts for 41 layoffs, some part-time and some full-time, and closing University Computers, BU’s retail and service center for computers, and consolidating computer services and sales into the Personal Computing Support Center on Cummington Street, results in 10 layoffs. Mercurio now expects that a few additional layoffs will be needed, but he adds that the majority of the remaining “frozen” positions will be thawed and filled by fall. Salaries of senior management will remain level until at least July 2010.

Other expected savings will come from “retasking” the University’s residential computer labs and reducing the amount of free printing now offered to students. Paper versions of many college bulletins will be replaced by online versions.

The University has also slashed capital spending, meaning monies for improvements to buildings and infrastructure. Last year’s budget called for $246.5 million in capital spending. The revised plan brings that number down to $163 million. Student Village II is complete and ready for occupancy, and some projects (renovations to rehearsal facilities at CFA and to classrooms at the Metcalf Science Center) will continue, but most others are on hold.

The University has also moved to shore up its investments. After its investment banker, Lehman Brothers, went bankrupt, and its bond insurer, AIG, teetered on the brink, the University went directly to banks to secure letters of credit and shifted assets into government-guaranteed investments.

Still, the tumbling stock market has taken its toll. Boston University’s endowment has lost roughly 30 percent of its value, down from about $1.2 billion a year ago to about $840 million today. The relative good news is that unlike some schools (such as Harvard) whose earnings from massive endowments have sustained annual budgets, BU’s operations do not rely as heavily on investment earnings.

What follows are key snapshots, medium-sized details of a very big budget. No single number tells a full story, but viewed together, the figures reveal an outline of next year’s Boston University, the boundaries of a fiscal map.

Income

Total income
2010: $1.97 billion
2009: $1.91 billion

Total expense
2010: $1.91 billion
2009: $1.86 billion

Total tuition
2010: $914 million
2009: $891 million
Percent raise, 2009-10: 3.75
Average 3-year percent raise: 4.39

Student aid
2010: $237 million
2009: $237 million

Financial aid and enrollment contingency
2010: $9 million
2009: $3 million
(This budget reserve can be deployed to help give additional financial aid as needed or cushion an enrollment shortfall if fewer students attend than expected, a possibility given the recession.)

Expected enrollment (expressed as equivalent full-time students)
Charles River Campus
2010: 21,614
2009: 21,837
Medical Campus
2010: 2,366
2009: 2,385

Study abroad
2010: 800
2009: 742

Total enrollment
2010: 24,780
2009: 24,964

Other sources of revenue

Fees
2010: $78 million
2009: $75 million
(By far the largest amount, $39 million to $40 million, is in the form of payment by students in the study-abroad program.)

Sales and services
2010: $80 million
2009: $75 million
(Most of this is from clinical services, i.e., dental and medical care and physical therapy.)

Expenses itemized

Instruction and research
2010: $440 million
2009: $430 million
(This figure includes all direct operating expenses for the schools and colleges, including faculty salaries.)

Faculty and staff benefits
2010: $158 million
2009: $148 million
(Benefits, for example, the University’s share of health-care insurance, are in addition to salaries.)

Administrative
2010: $85 million
2009: $81 million
(This includes items like liability insurance, audit and legal fees, payments in lieu of taxes, as well as central administration salaries.)

Academic plant
2010: $105 million
2009: $104 million
(This includes all building expenses for academic activities, including utilities.)

Electricity
2010: $25.8 million
2009: $25.3 million

Natural gas
2010: $9.8 million
2009: $8.2 million

Fuel oil
2010: $4 million
2009: $7 million

Seth Rolbein can be reached at srolbein@bu.edu.

7 Comments

7 Comments on Big Budget: the Big Picture

  • Anonymous on 05.08.2009 at 11:06 am

    So clear

    Thanks for this article! It made the BU money flow so much more transparent to all of us and its exactly what everyone wanted to know.

  • Concerned graduate joining the staff on 05.08.2009 at 12:22 pm

    A few responses

    I don’t understand why benefits expenses grew $10 million this year, when A) So many positions were pulled from postings and remain unfilled, and B) the elimination of health-care for former employees over 55 supposedly saves the University $3 million. This implies that the cost of benefits grew $13M (8.8%) for a shrinking workforce during a recession. I’m calling Bullshit on this.

    I understand that group health-care coverage costs more during economic crisis, but the figures shown exceed the expected national average increase of 7.4% (http://www.businessinsurance.com/cgi-bin/news.pl?id=16081). I hope the University is simply anticipating and overestimating a growing demand for and utilization of health benefits.

    How about rescinding the eye coverage recently granted to employees? It was basically a token gesture anyway, and provided marginal (if any) incremental benefits over the prior plan, and served only to shift patients to a similarly-priced BU-owned Ophthalmology center. To be fair, the revenues collected by increasing patient volume can only help the University, but if the hiring freeze applies to staff in these clinics then it means longer waits and poorer service for employees.

    Also, energy and utility costs are understandably growing. While I laud the University’s efforts to reduce waste and improve efficiency, I think we still have a long way to go. To balance a student schedule, I work evenings on the medical campus. Leaving work at 7, I pass maybe two dozen empty rooms with lights on and computers buzzing, in my building alone. Installing motion-reactive light switches and mandating the use of power-save features on all terminals idle for, say 45 minutes, could save literally millions across two campuses with as many facilities/offices as BU. I don’t have figures and can’t say for certain, but I bet the payoff in saved energy in the first six to nine months would offset the costs of implementation.

    I’m impressed with the steps the administration has taken to secure our financial future. I think they’ve done a great job, snipping the budget in just the right places and leaving the other (right) parts untouched. But if I can spot a few simple adjustments that could mean big savings, I’m sure there are many more to be found.

  • Anonymous on 05.08.2009 at 1:32 pm

    I agree with the previous comment about installing motion activated lights. BU could be saving jobs and money just by turning off the lights at night!

  • Anonymous on 05.08.2009 at 5:12 pm

    Budget

    I would just like to point out some errors with the post having to do with the new eye care benefit and the faculty and staff benefits budget increase for 2010.

    First and foremost the new eye care benefit is not adding to the benefit budget. The e-mail from the BU HR office on 4/28/09 specifically states so in second sentence of the e-mail:

    “During this time of financial constraints we are able to offer this benefit at no additional cost to you or the University.”

    The New England Eye Institute has simply offered a discount on glasses and waiver of copay to eligible BU employees and their family members.

    Second, the New England Eye Institute clinic at 930 Comm. Ave. is not BU owned or operated.

    Finally the increase in the faculty and staff benefit budget for 2010 is 6.75%, not 8.8% as was estimated in the earlier posting. One cannot simply add any savings from the elimination of the early retiree plan to the faculty and staff benefit budget. All that being said the increase of the faculty and staff benefit budget is really $10M not $13M.

    As an aside, before someone is to call Bullpoop please make sure the items which are being commented on are understood correctly.

  • DJ Capobianco on 05.10.2009 at 6:02 pm

    Thanks for the great explanation—it really highlights the University’s strategy and thought process on keeping the place secure. Great work.

  • Anonymous on 05.13.2009 at 11:20 pm

    Is there a website where we can see a more detailed and itemized budget.

    I would like to see just how many people are making what amount of money. How much was each member of the seven member task force organized to save 10 million dollars paid?

    Also this article seems to champion the fact that we do not depend a great deal on financial investments. THIS IS BECAUSE THE UNIVERSITY HAS NO MONEY.
    We are essentially living year to year. A lack of alumni contributions is to blame. I feel these contributions would come in if the university spent more money on student services and increasing student happiness, they might lose a little money in the short term, but will gain money for far more in the future.

    Finally, I think the University has made some progress in going green. Adding geothermal heat to buildings and such bu they can do more. How about talking to students in the dorms about energy conservation. Find a way to do an energy audit so students know just how much electricity they use and will have to pay for when on their own.

  • Anonymous on 05.14.2009 at 9:47 am

    health coverage

    I can appreciate the University fine tuning the budget to eliminate waste in these difficult economic times, but I do think it is shameful to take away the medical benefit for those that retired before the age of 65. There must be other places to save.

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