State of the University, Spring 2015

February 27, 2015

Dear Colleagues

I hope your spring semester is off to a very good start, even with all the disruption caused by the snow. Although our facilities team has done a wonderful job clearing our campuses, we realize that the very significant problems in Boston and surrounding communities are still hampering commuting. I appreciate all the effort that is going into altering class schedules, assignments, and testing to make up for the missed class days.

I am sending my spring letter earlier than usual because there are a number of important discussions under way on campus this semester. I hope that this message may motivate you to engage in these discussions when you have the opportunity. Topics of discussion include:

• The Report of the Employee Benefits Task Force
• The consideration by the Advisory Committee on Socially Responsible Investing (ACSRI) of a petition calling for divestment from fossil fuel producers
• The ongoing work of the Task Force on Undergraduate General Education

The Employee Benefits Task Force, established last spring, completed its work and its report was announced to the community several weeks ago. See the report and related material on the Benefits in Transition website. I hope you will carefully review the group’s recommendations. You have the opportunity—by means of the website’s blog—to offer insights and ask questions. In addition, we will be organizing a series of forums at which the task force recommendations will be explained, with opportunities for you to seek answers to questions and express your concerns. The schedule of these events can be found on the website. The task force report will also be an agenda item at the Faculty Assembly on Monday, March 23. Depending on the levels of interest in faculties of individual schools and colleges, there can be additional opportunities for presentations and discussions at faculty meetings or similar forums. I very much hope you will study the report and participate in the discussions.

Our plan is to listen to feedback from the community throughout the spring semester and to finalize recommendations for changes in our benefits programs by fall, with some recommendations potentially going into effect in January 2016.

The Advisory Committee on Socially Responsible Investing (ACSRI), composed of trustees, students, and faculty, was established by the Board of Trustees as a body that would review and discuss concerns about investment policies of the University that have been formally expressed by members of our community, with a charge to offer recommendations to the Board for its consideration. As you know, the ACSRI first deliberated on a call for the University to divest from civilian firearms manufacturers. The ACSRI, in turn, recommended that the University divest from direct investments in civilian firearms manufacturers. After thoughtful discussion the Board declined to accept this recommendation and responded to the ACSRI with a description of the principles by which it would consider future proposals. These are:

1. When the Board, acting on behalf of the University, is asked to prohibit investments of the endowment in a given industry or in companies doing business with a particular government, it is being asked to express an opinion or take action on an external social or political issue that, in the overwhelming majority of cases, is not directly related to the operations of the University.
2. A fundamental goal of Boston University is to create an environment in which an academic community can productively consider, discuss, and debate a variety of viewpoints on social and political issues, and that encourages freedom of inquiry. Such conditions allow scholars to pursue knowledge according to standards of evidence and logic without the encumbrance of an institutional position that may dampen discussion of alternative views. When the University, as an entity, adopts a single viewpoint or takes action relating to divestment, it risks undermining that goal. Therefore, non-investment or divestment actions based on social or political principles should be very rare and occur in only the clearest of circumstances, and should be judged to withstand the test of time in terms of how the wisdom of the University’s decision will be judged by future generations.
3. Such circumstances exist only when (i) the degree of social harm caused by the actions of the firms in the asset class is clearly unacceptable; and (ii) any potential negative consequences of the decision (including the risk of censorship of competing views within the University or the risk that the wisdom of the decision will fail to withstand the test of time) are clearly outweighed by the importance of taking the divestment action in order to lessen or mitigate the social harm.

The ACSRI is now considering a faculty petition and student request that the University divest from fossil fuel interests. Public forums on topics related to this are being organized by the ACSRI as part of its deliberations. Please watch for a future announcement with details, and I hope that you will be able to attend one or more of these forums.

In the fall, University Provost Jean Morrison announced the formation of the Task Force on Undergraduate General Education, co-chaired by Elizabeth Loizeaux, Associate Provost for Undergraduate Affairs and Professor of English in the College of Arts & Sciences, and Bruce Schulman, William E. Huntington Professor of History in the College of Arts & Sciences. The convening of the task force resulted from the articulation of seven new priorities in the update of our Strategic Plan. The first of these was to create a “common and compelling vision for the general education of all our undergraduate students, building on our model that combines liberal arts and sciences and professional education. This vision includes a commitment to residential education that prepares graduates to live and work in a global society.”

The charge to the task force is to:

• Develop a set of core areas or competencies—knowledge, skills, and habits of mind—that will equip Boston University graduates to thrive in their personal, professional, and civic lives in an increasingly interconnected world.
• Engage in a) broad consultation with the faculty and relevant staff of Boston University, b) exploration of the practices of high-quality research universities that have mature and successful general education programs, and c) evaluation of the relevant literature on general education.
• Develop a report that articulates the rationale for each of the core areas or competencies that is sufficiently detailed to provide substantive guidance for a subsequent task force charged with responsibility for implementing the vision.

Meeting weekly, the task force has been evaluating the relevant literature, exploring the practices of top research universities, consulting with those who have revised their general education programs, and gathering information from BU faculty and staff on our own programs. The co-chairs expect that the committee will begin soliciting ideas from the broader University community after Spring Break and will continue that process until the task force report is submitted in the fall. View the task force’s charge from Provost Morrison, including a list of its members.

Finally, the Fiscal Year 2016 budget is nearly complete and will go to the Board of Trustees for approval at their April Meeting. I will summarize the budget submission at the Faculty Assembly meeting on March 23. As you are aware, the University has stayed financially strong over the last decade, even in a very constrained and, at times, uncertain economic environment. We have generated consistently large annual reserves during this period. It is important to emphasize that it is critical to the health and long-term future of Boston University that we continue to do this. To make this case, I would like to describe how the University budgets for physical improvements—the ongoing renewal of our campuses through renovation and new construction.

Last fall we completed a renovation project that spanned six years—summer 2008 through summer 2014—the replacement of the windows throughout the buildings (685–755 Commonwealth Avenue) designed by Cram & Ferguson Architects and constructed from 1939 to 1948. Although there is much more to do to completely modernize these historic buildings, the new windows helped make more than 178,000 square feet of office, classroom, laboratory, and public space more comfortable for the faculty, students, and staff of the College of Arts & Sciences, the School of Theology, and Metropolitan College. In addition, the new windows provide greater insulation, leading to electricity savings of 650,000 kWh annually. The project cost $11.3 million and was funded by the renovation and renewal capital budget of the University. This project is an excellent example of how we are able to commit resources for needed improvements.

Today, Boston University maintains approximately 15 million square feet, distributed between our two campuses in Boston and facilities abroad. Our buildings are a mix of spaces built specifically for academic purposes and repurposed commercial and residential facilities. As is true for other institutions of our size and history, the quality of our spaces varies, from new or recently renovated buildings to ones that are visibly in need of restoration inside and out. As you would expect, there is continual demand to fund renovations and for new space to accommodate expanding programs or emerging directions in research, scholarship, and pedagogical delivery.

How much should we be spending on this ongoing renewal? Instead of presenting a detailed analysis of our capital budget needs, I will use a very simple calculation to give you an estimate of the magnitude of the demand. I assume that routine maintenance is accounted for separately and that each of our buildings has a useful life of 40 years. (This is obviously too long for laboratory buildings, but reasonable for residences and office buildings.) If our 15 million square feet of space is evenly distributed over the 40-year life span (a very optimistic assumption) and the replacement cost (in 2015 dollars) is $500 per square foot, then a rough estimate is that we should be spending approximately $190 million each year to renew our facilities.

Our goal for the last decade has been to spend at least $100 million annually, which is still well short of the $190 million estimate. In the last five years, we have spent $578 million on major renovations and renewal, an average of $116 million per year. Even though these expenditures have been among the largest in our history, there is still a considerable gap compared to the demand.

Why not spend more? Today, the majority of our capital comes directly and indirectly from our operating budget. Under our disciplined operating model, we annually commit a relatively small portion of the overall budget to capital projects. Then, we work during the year to increase this number by generating reserves—funds that are unspent at the end of a particular fiscal year. We then deploy these as part of future-year capital budgets, after transferring a portion to the schools and colleges and supporting academic initiatives and faculty hiring.

As an example, last year the University generated $132.5 million in reserves. Of these, $29 million was returned directly to schools and colleges according to revenue sharing agreements and $13.5 million was allocated to one-time academic initiatives and faculty hiring. The remaining $90 million was allocated to the Fiscal Year 2015 capital budget for renovation and renewal.

There are no easy choices to make in balancing our capital budget against other budget needs, such as salary and benefits support for faculty and staff, financial aid for students, and funding for new initiatives. In today’s fiscal environment, in which securing support for research (particularly from federal sources) is highly competitive and tuition increases must be modest, the only other source for increased capital spending is philanthropy. We are making heartening progress with alumni and friends whose increasing generosity is helping us meet our capital needs and lifting the University in many other ways. Major gifts were key components of the financing for the new Sumner M. Redstone Building at the School of Law, the Medical Campus Student Residence, and the Engineering Product Innovation Center (EPIC).

As we complete our budget for Fiscal Year 2016 (the year starting July 1, 2015), we can clearly see our choices. The budget proposal currently includes approximately $17 million of salary growth (on a total faculty and staff salary base of $603 million) and $4 million of new funding for academic initiatives on the Charles River Campus. Budgeted reserves amount to $72 million. These are the reserves we hope will be available at the end of the year to set aside for new academic and research initiatives and to fund future renovation and renewal projects. These budgeted reserves are similar to what we planned for in each of the last five years. Again, if we continue to carefully control expenditures, we will be able to generate additional reserves to increase support for campus renovations and renewal.

I hope that this information helps explain how the University budgets for capital expenditures and how we balance the complex set of demands that arise as we fulfill our mission as a major private research university.

Sincerely,

Robert A. Brown
President

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