FY 2010 Budget & Finances
Dear Colleagues,
As our academic year draws to a very successful close, I want to use this opportunity to update you on the progress the University has made as we navigate the recession and our budgetary plans for the coming year.
First, I want to thank you for your efforts in support of Boston University’s mission through what has been a period of unprecedented uncertainty. The University has had an outstanding year, measured by the success of our students, the accolades earned by our faculty, and the success of our athletic teams. There will be other opportunities to discuss our accomplishments, as well as our ongoing challenges.
The turbulence in the financial markets and the start of the recession in the United States and around the world has caused all institutions to reassess their operations and plans in the context of the new economic reality. Boston University began reacting early to the financial crisis by implementing a freeze on staff hiring and capital expenditures late last September. We also followed an aggressive plan to work with those students and their families who faced unexpected financial difficulties so they could remain enrolled. I appreciate the hard work of many in our community who shouldered additional responsibilities because of the open staff positions across our campus. In the fall, we also began developing an operating plan and budget for fiscal year 2010, which begins July 1, 2009, that represents the reality of the reduced revenues expected in the recession. Our collective goal has been to position Boston University to remain strong and vibrant through the economic downturn and to be in a position to move forward when economic growth returns.
As I communicated to you in my letter of January 12, 2009, much of our attention has focused on reducing costs by improving efficiency and by reducing expenditures. Our principles for executing this process have been those described in that letter:
- Maintain the quality of a Boston University education through the excellence of our faculty and the classroom environment and the breadth of our offerings;
- Deliver sustainable efficiencies in our operations and permanent cost reductions;
- Minimize the impact of these reductions on the quality of our services and the quality of our research and scholarly efforts;
- Continue our momentum for the future as defined by our Strategic Plan, to the extent possible.
In January, we established the target of removing $10 million of recurring expense permanently from our operating budget and created seven Task Forces, each focused on an area for potential savings. I would like to acknowledge the many suggestions we received from the community about how we could reduce expenditures; we will be working to implement many of those ideas in the months ahead.
I am pleased to say that we have reached our goal and that we have an approved budget for FY2010. The purpose of the remainder of this letter is to describe our budget for the coming fiscal year and the reductions we have taken to put this plan in place. The changes described below primarily impact the Charles River Campus; Medical Campus Provost Karen Antman will communicate with staff and faculty there about steps taken in the planning for their fiscal year 2010 budget.
Fiscal Year 2010 Budget
The approved FY2010 budget represents a 2.6 percent increase from our adjusted budget for the present fiscal year and was developed with the support of the 3.75 percent increase in our tuition rates that was announced in March. The budget includes funds for modest salary increases for staff and faculty, funding for additional faculty positions, funding to support our highest academic priorities, and some funding for new academic initiatives, including the expansion of our student services, which we announced in BU Today last fall. The budget also includes an increase in our financial aid and enrollment reserve that is equivalent to 4.3 percent of the total of the undergraduate financial aid budget.
Even with these increases, the fiscal year 2010 budget is very far from “business as usual,” as we prepare the University to operate with the lower revenues from many sources and the increased demand for financial aid that will persist through the recession. It contains few increases for academic or administrative expenses outside those mentioned above and essential funding for increases associated with inflation in areas such as employee benefits, utilities, and facilities.
Budget Reductions
Many changes in our operations were needed to develop a balanced budget. Some of these changes were recommended by the seven Task Forces while others emerged during our annual budget process.
These changes include:
- Small salary increases for administrative staff in this academic year, including no increases for staff earning more than $ 150,000 per year.
- Frozen salaries for the senior leadership until at least July 2010.
- The closing of Sargent Center for Outdoor Education. (We are planning to maintain the property as a research facility.)
- The elimination of the early retirement medical and dental benefits option.
- The reduction in subsidies to several external organizations.
- The closing of the University Computer Store and the redesign of services for the sale of PCs, and consolidation of PC service into the Personal Computing Support Center (PCSC).
- The elimination of paper versions of bulletins for schools and colleges.
- The re-tasking of the Residential Computing Laboratories (RCLs) into study spaces and the redesign of printing services for students in the residences and other spaces on campus, developed around the ubiquitous ownership of laptops by our students today.
- The creation of a modern and expanded Information Commons in Mugar Library to meet the needs of students doing information processing on campus, but without their laptops.
- Reduction of the funds generated from the indirect costs associated with external contracts and grants and which are redistributed to centers, schools and colleges on the Charles River Campus.
- A restructuring of conference and event management for the University to reduce costs and create a single point of contact for these services, which will occur over the summer.
The Task Forces also recommended more profound changes in our model for delivering administrative services (e.g., financial support, research accounting, and desktop services) to academic and administrative units. They recommended that we explore the idea of reorganizing and clustering these and other services into specialized service centers that would be prepared to work with faculty, students, and staff across traditional departmental, school and college boundaries. These clusters will be large enough to deliver high-quality service that comes from a staff dedicated to specialized functions and to gain efficiency from the economies of scale that will come with the larger transactional volumes. I believe that administrative clusters offer a substantial opportunity for sustainable efficiency and expense reduction. As a result of these recommendations, this summer we will launch several large-scale experiments to test the service cluster model. Only small budgetary savings from this initiative are expected in FY2010, although a much greater impact on our expenses will likely occur in future years.
Open Positions and Reduction in Workforce
The final step needed to establish the budget for FY2010 was the elimination of approximately 25 open staff positions on the Charles River Campus from the more than 200 positions that are currently frozen. The eliminated open positions are in addition to the 25 occupied positions that were eliminated as a result of the actions described above. The impact of this reduction in workforce should be put in the context of the more than 6,000 faculty and staff who currently work on the CRC. Because these open positions were waiting to be filled, no staff will lose employment as a result of this action. However, there are clearly added burdens to the academic and administrative units that are losing staff positions through this mechanism. Work will need to be rethought and assignments restructured so that we can continue to deliver our most important services smoothly and efficiently.
With this reduction, we are working with the deans and vice presidents to release the majority of other frozen positions for re-posting so that we will have close to a full complement of staff by next fall.
Capital Projects
We instituted a freeze in September on new capital spending, and almost all of our ongoing capital projects have been completed. The Student Village II residence will be completed this month and first will be used during the summer for orientation sessions. The renovations to the rehearsal facilities in the College of Fine Arts main building at 855 Commonwealth Avenue are on schedule to be completed by the fall.
We will continue to hold down capital expenditures for the foreseeable future and will initiate a relatively small number of new renovation projects this summer. Foremost on this list will be the planning for some badly needed classroom renovations in the Metcalf Science Center at 590 Commonwealth Avenue.
We continue to plan several major projects, including the Law School expansion and renovations, the new student services center mentioned earlier, and a medical campus residence. Fundraising is underway for all three projects.
Going Forward
There is no crystal ball to predict the pace of economic recovery or the impact of a continued recession on the ability of our students and their families to afford a Boston University education. These uncertainties remain very real. We are still recruiting our freshman class from almost 38,000 applicants, with a truly exceptional cohort of admitted students. But we expect this last phase of the recruitment process to be more difficult than in recent years, as families struggle to find the needed financial resources before making final decisions whether or not to accept our offers of admission. Additionally, we must continue to work with our current students so they can afford to complete their education with us. Our goal is to continue to make Boston University accessible to these students, while not compromising the true quality of a Boston University education.
Faculty hiring has continued throughout the year and, through the hard work of the departments, schools, and colleges, we are on track to bring in an excellent group of new colleagues across the campus. There is nothing more important to the continued excellence of the University and all indications are that we will have a very good recruiting year.
Although there is little good economic news on which to hinge hope for a fast recovery, our commitments to the quality of Boston University and a Boston University education are intact and preserved in our plan for moving forward. We will continue to manage the fiscal situation consistent with these goals. I wish you all the best for a successful end of the semester, a wonderful Commencement, and a productive summer.
Sincerely,
Robert A. Brown
President