Boston University Fiscal 2023 Budget Process
October 5, 2021
This letter officially launches the process for development of the University’s Fiscal Year 2023 Stage I budget and provides guidance and context as you prepare your submissions. All areas reporting to the University Provost and Chief Academic Officer have already received guidelines and topics to address in their narratives.
The COVID-19 pandemic presented unprecedented financial and operational uncertainty and challenges beginning in March 2020. Fiscal Year 2021 was one of the hardest on record. The University modeled rapidly changing budget scenarios which led to our implementing hiring and capital freezes and significant reductions in operating expense at the beginning of the pandemic. The hard work and flexibility of our University community effectively mitigated the financial risks and produced year-end results that were better than expected. Fiscal Year 2022 is also off to a better start compared to the budget approved in April 2021.
It is time to plan for Fiscal Year 2023 and turn our attention to our future. It is time to regain the momentum we had before the pandemic and begin to address the challenges we have defined in the University’s 2030 Strategic Plan.
As a reminder, there are five strategic pillars that will guide the University through the next 10 years:
1. A Vibrant Academic Experience
2. Research That Matters
3. Diversity, Equity, and Inclusion
4. Community, Big Yet Small
5. Global Engagement
As you think about the funds available to your unit in Fiscal 2023, I ask that you take into consideration these strategic pillars.
There are other initiatives that we must address as well. Increasing undergraduate financial aid will continue to be one of our top priorities, as we move to increase access for all qualified students and make sure the value proposition for our students and parents continues to grow. In addition, we need to keep Boston University competitive for the most talented staff and faculty, through compensation, benefits, and the work environment.
Finally, we need to grow the support of our teaching and research from alumni and friends by increasing our investment in our Development & Alumni Relations, in preparation for our second comprehensive campaign.
Let me briefly recap the Fiscal Year 2021 final operating results, before giving a brief update on Fiscal Year 2022 and outlining some guiding principles to focus on in your Fiscal Year 2023 highest priorities.
Fiscal Year 2021
In the face of considerable threats and uncertainties in the spring of 2020, the University began to model potential budget scenarios that led to hiring and capital project freezes and significant operating budget reductions. I know these actions were difficult and rippled through the institution at a time when everyone was being asked to do more, rather than less. But the hard work and flexibility of the University community effectively mitigated the financial risks and produced a year-end result that was better than originally expected. We ended Fiscal 2021 with $29.8 million in undesignated reserves. The University Provost and I have earmarked most of these funds to support faculty hiring on both the Charles River and Medical Campuses.
In Fiscal 2021 endowment income and gifts represented 4.6 percent of total (all funds) revenue ($120.2 million). As I discussed in my State of the University letter, the endowment is estimated to stand at $3.35 billion as of June 30, 2021, a 41 percent return for the year, compared to the ending balance of June 30, 2020. The impact of the increased endowment phases in over several years according to the averaging formula used to smooth abrupt changes in both directions.
Fiscal Year 2022 Update
The Fiscal Year 2022 budget that was approved in April 2021 was developed during a time of continued uncertainty and disruption due to COVID-19. It was approved with a deficit of $32.0 million compared to what is required to fund all designated reserves.
All academic and administrative units assumed flat budgets for Fiscal Year 2022 based on their recurring expense budgets from Fiscal Year 2021 (i.e., non-recurring budgets reductions in Fiscal Year 2021 were restored). The Fiscal Year 2022 budget also restored employer contributions to the 403(b) retirement plan, senior leadership salary reductions, merit raises for faculty and staff, operating contingencies, and designated reserves. We also continue to carry costs related to PCR testing and other public health costs related to operating our campuses in the presence of COVID-19. Overall tuition, fees, room and board rates increased 2.6 percent, the lowest combined increase since Fiscal Year 1970. As described in my letter, our undergraduate and graduate enrollments are higher than anticipated and the operating budget now includes federal relief from the Higher Education Emergency Relief Fund (HEERF III). As a result, we are able to fund the deficit in designated reserves and fund the special 2 percent increase to all non-represented faculty and staff that went into effect on July 1, 2021.
Fiscal Year 2023 Budgeting Guidelines
We begin the Fiscal Year 2023 planning process with cautious optimism. We are moving forward with the new Strategic Plan as well as the following initiatives:
1. Attracting and retaining excellent faculty.
2. Support for Diversity, Equity, and Inclusion initiatives, as well as the related work on workforce culture.
3. Complete the Student Information System Renewal and Replacement Project. This also includes the retirement of all applications on our mainframe.
4. Continue our commitment to the University’s Climate Action Plan.
5. Complete construction of the Center for Computing & Data Sciences and continue to build the Faculty of Computing & Data Sciences and its educational programs.
6. Begin building the infrastructure needed to launch the University’s second comprehensive fundraising campaign.
The University Provost and Chief Academic Officer, Senior Vice Presidents, and I will hold budget meetings with each of our direct reports. The Vice President for Budget, Planning & Business Affairs will also attend these meetings.
As I mentioned, the University Provost has already provided additional guidance to those academic, research, and administrative areas reporting to her.
All other areas should submit a budget narrative, not to exceed 10 pages (inclusive of exhibits), that explains the strategic use and/or necessary reallocation of resources to meet your critical functions. The narrative should address any challenges or areas of concern you see this fiscal year or next, and how you are managing your resources to achieve your key strategic objectives. It should also prioritize requests for Fiscal Year 2023.
The Budget & Planning Office will separately provide additional information and instructions regarding the submission process.
We look forward to our discussions with you as we begin to develop the Fiscal Year 2023 budget. With a continued spirit of cooperation, we will keep Boston University moving forward successfully.
Robert A. Brown