Dear Students and Families: Congratulations—we crossed the threshold of the midway point of the fall semester earlier this week! I hope you’ll take time this weekend to recharge your batteries, connect with friends and burn off some stress. The activities…
Chancellor Syverud Addresses November Meeting of University Senate
Chancellor Kent Syverud provided a budget overview to the University Senate during his appearance Wednesday afternoon in Maxwell Auditorium. He also discussed the Campus Climate Survey, announced two new appointments and mentioned recent revisions to the University policies impacting free speech, among other topics.
Below are the Chancellor’s remarks as prepared for the University Senate meeting:
I know Provost Wheatly intends to address the Promotion and Tenure Committee and the Faculty Salary Review Committee shortly.
At the last Senate meeting, I promised to give a budget overview, including covering questions related to the VSIP. I have nine slides to do this, and I am asking Gwenn Judge to join me in this presentation, and to cover some of the slides. You will remember that Gwenn succeeded Lou Marcoccia and became interim CFO this summer. She has been working very hard and well, including I think much more transparently with the Senate and the schools and colleges.
Before I do the slides, some quick news since last meeting.
I would be remiss if I did not acknowledge that the world has gotten more complicated in the last 24 hours. It is important that we at Syracuse University engage and respond in ways that reflect our values and include all in our community. I will be conferring with student, faculty and staff leaders, and with the Senate leadership in the coming days to consider how we should live up to our values in this way.
The Board of Trustees met last week and engaged positively with the University. Two large new gifts were announced to the board, including a $2.5 million gift to endow scholarships and a graduate fellowship benefiting two schools, and a $5 million gift to endow a research center involving more than two schools. The formal public announcement of those gifts will be coming later in the semester.
The Campus Climate Survey executive summary was released more than a week ago, and it is apparent to me we have a lot of work to do, both in understanding the results and in responding meaningfully to them. That will be a collective effort over the coming months and I urge all to participate in it.
Revisions to three University policies impacting free speech were posted at the end of October. These revisions were a product of a lengthy effort started by the Student Association, the Graduate Student Organization and the Student Bar Association, followed by a careful study and report by a committee chaired by Dean David Rubin. I encourage everyone to read the revisions carefully and comment on them by Nov. 18, so that the Policy Committee can review them for final revision in response to the comments and approval and implementation in the new year.
There were incidents in September and October off campus or near campus that caused concerns to our community about security and safety. Many University staff and leaders are working on these issues, and working on them in cooperation with local law enforcement and neighbors. I expect more communication about this in the coming weeks.
Finally, I want to report that I have appointed, as co-chairs of our University’s new standing Diversity and Inclusion Council, Barry Wells and Diane Wiener. Barry is special assistant to the Chancellor. Diane is the director of the Disability Cultural Center. I thank them and the members of the council for serving and have asked them to start work promptly this month.
Now on the budget. As I said, I have nine slides, and I am trying to give a clear overview with Gwenn’s help. We welcome questions, but it would help if you could let us get through all nine slides first as they are interrelated.
When I came here three years ago, there were some serious challenges facing our University. One of those challenges was athletics, which was the subject of a very long NCAA investigation involving allegations that seriously implicated academics at Syracuse University. I think athletics has been significantly improved, especially on the academic side, and you will be hearing more about that in subsequent Senate meetings.
The second serious challenge we faced three years ago involved our budget. As longtime Senators will recall, by 2013 our Board of Trustees had become substantially engaged with many aspects of the management of the University, including academic issues like promotion and tenure and on the budget. The Board, in part on a recommendation of the Senate Budget Committee, had commissioned Bain consulting to analyze our finances and spending.
As it turned out, our budget was running a substantial operating deficit. This was reflected in part by the use of carryover funds of the schools, colleges and auxiliary units in order to balance the budget. But it was also reflected in other things.
1) Our endowment had not grown substantially in many years, despite a major campaign and growth of endowment at our peers. This reflected that we were spending from our endowment, through special distributions, at a higher rate to pay for our budget, and that we were not adding enough new gifts to our endowment.
2) Our operating deficit was also reflected in our facilities, which were characterized by serious deferred maintenance that was not being addressed. This was apparent in our classrooms and our offices, but even more so in our residence halls, our IT and utility infrastructure and in our student spaces like our library and health and wellness areas.
3) The third place our budget deficit was evident was in our academic units, which had serious challenges in balancing their budgets given operating costs and enrollments, challenges that were related to our ability to deliver the best quality research and instruction on this campus.
The good news—and it really is good news—is that in the last three years we have gotten to a genuinely balanced budget and addressed the first two problems of endowment spending and facilities. The bad news—and it is bad news we really need to address this year—is that we have done those good things (balance the budget, deal with deferred maintenance and overspending of endowment) at the cost of significant added challenge to our faculty and our academic units. We now need to rectify the budget situation of the academic units and the faculty, and to fund our academic strategic plan. That is the overview. Here are the slides that illustrate this good and bad news.
Fiscal Years 2016-and 2017 Comparative
So last year, in the fiscal year ending on June 30, 2016, we had a $1.2 billion budget, which involved reducing the endowment spending rate and addressing a large backlog of deferred maintenance. We planned to run a $14.3 million deficit. Instead, our deficit was only $2.5 million.
For the current fiscal year, which started on July 1, we actually budgeted a surplus of $1.5 million, again including lower endowment spending and another set of deferred maintenance projects. One quarter of the year in, we are still projecting a small surplus of $300,000. We enrolled many more freshmen than we budgeted, and many fewer master’s students.
What are the major issues that explain our FY16 budget outcome of a smaller than expected $2.5 million deficit? Gwenn is going to help here.
Sources of Funds
So on the revenue side for the fiscal year that ended on June 30, our sources were modestly below budget by about $1.9 million.
Most of this came from reduced graduate revenue, and from reduced auxiliary revenue.
Uses of Funds
But we spent $13.8 million less than we budgeted in FY16. Here is where the savings came from. Just to be clear, of the $5.4 million in reduced administrative costs, $4 million came from not allowing support units to carry over unspent salary and fringe benefits. That savings was used to reduce the administrative charge to the schools and colleges.
2012-2016 Carryover Balances
So that is the FY16 close information. How come if we now have a balanced budget does it feel so pressed, particularly in the schools and colleges?
This chart shows the change in carryover balances for the last four years. Put simply, we have been spending the carryover balances of the schools and colleges and adding to the carryover balances of the auxiliary units. So even though the University as a whole has been stable in terms of these reserves, the schools and colleges have been feeling a real pinch at the same time enrollment has increased and salary increases have been modest.
I show this slide to provoke two questions: Why have the schools been pinched relative to the auxiliary units, and what do we do to get resources to the academic units to improve delivery of our core vision and mission? The answers to both questions come from four areas:
What do we do?
- Expense Savings. We need to continue to reduce administrative expenses and find savings to support the academic mission.
- We need to increase the value and the performance of our endowment, and to direct more of the payout from the endowment to the core academic needs of the University.
- We need to raise more money for the academics of the University.
- We need to increase revenue.
Gwenn and I will talk about each of these and then take questions.
It is my belief that our new leadership and other changes in BFAS should be expected to help us generate significant expense savings, including savings from outside of academic units.
The most significant savings to date have come from the VSIP and related workforce transition planning. I’d like Gwenn to address the question of where those savings have come and gone so far (a question the Senate asked earlier this semester).
The VSIP and related strategic workforce adjustments produced $12 million in immediate cost reductions in the FY17 budget. They will produce annual savings of $14 million by the time all the costs of the VSIP are paid out by 2019. (The costs include some health benefits for people who took the VSIP until they all reach a certain age.)
So where did the savings from VSIP go in the budget, including in the budget for FY17. Part went directly to schools and colleges, and part went to non-academic centers and support units. The part that went to the support units went to cover the increased costs in the few areas where Bain recommended new staffing—mostly in the area of advancement. By using this money here, we were able to prevent passing those costs of new staff on to the stressed budgets of the academic units.
The plan for future years is to use more of the ongoing savings to directly fund academic strategic initiatives and school and colleges.
There is good news here. Our endowment is now growing again. In the fiscal year 16, our endowment grew by 1.6 percent, which may sound paltry but is better than almost all other universities in the same period. Only Yale and Oregon that we know of did better. The large majority of endowments lost money last year. In the first quarter of FY17, our endowment also grew due to new gifts and investment returns—it grew by about $25 million dollars. This is a very important long-term development for the future of the University and its academic units.
There is also good news here. In fiscal year 16, our new advancement business was $108 million dollars and our cash received was $90 million, the highest in our history. In the first quarter of FY17, we are way ahead of recent previous years in both categories, and on track to a $125 million new business goal. Advancement results also are going in the right direction.
But if you look at this chart, you see we have a ways to go and a challenging recent advancement history. I believe we need to raise much more than $125 million a year to fund our academic needs, so this slope needs to accelerate, and soon. More importantly, you should ask why our cash has not grown in parallel to our new business, and in particularly why we have not yet seen the benefit of our reported very significant giving years in 2008 and 2011.
The answer is pretty simple. A significant fraction of the new business in these peaks is in the form of life insurance and bequests from donors who are relatively young. Another fraction was fundraising for worthy community causes, such as the Say Yes Endowment to provide scholarships to SUNY schools for Syracuse city students—worthy causes that were never intended to produce cash to Syracuse University.
The final way we need to generate resources for the academic units is by increasing revenues. We can do that at the margins in many ways, including in our research revenue and our graduate enrollment. But in reality, the majority of our revenue comes from our undergraduate tuition, room and board.
And when we look at our major source of revenue, it is pretty obvious why the academic units are pressed. For many years, our tuition revenue has run substantially below the peers with whom we compete, and our room and board revenue has run substantially above our peers. I remind you that, under our RCM model, tuition revenue goes to the schools and colleges and room and board revenue goes to the auxiliary units. Our undergraduates generally pay four semesters of room and board and eight semesters of tuition. Given this reality, you would expect academic units to have trouble competing, and auxiliary units to generate substantial carryover balances. And that is what has happened under RCM.
I say this because I believe part of the answer to our current challenge is that we need to shift more of the cost of attendance at Syracuse to the academic units, and that requires figuring out what to do about our above-market room and board and our below-market tuition. That has to be done very carefully in consultation with our students, faculty, staff and Board of Trustees. But we need to look at it this year because the faculty need is great.