While the unprecedented growth in market value of Emory's endowment in recent years has provided the University some much needed breathing room, growth at that pace will probably not be sustained over the long term. Emory, like other private universities, must seek new ways to generate revenue if academic programs are to flourish.
The role the endowment plays in Emory's academic budgeting process was one of the central themes discussed at the March 31 Faculty Town Hall on "Budgeting Resources/Resourceful Budget: A Look on the Financial Side." About 50 people attended the event, which was sponsored by the President's Office and the Faculty Council.
Vice Provost for Academic and Enrollment Planning Mel Lockhart gave an overview of the University's academic budgeting process. Lockhart likened Emory's General and Educational Budget to a family's household budget. At Emory, tuition and external funds that support faculty research are like salary, while the university's endowment plays a role analogous to the family savings account. "We try to figure out how best to use our income to support the kind of lifestyle we want to have," she said. "Perhaps, the most challenging part of that is deciding how to use the money that's in the bank [the endowment]."
One way in which Emory's situation differs from that of most families is that the income earned from tuition and sponsored research is not enough to pay for the cost of educating students or supporting scholarly activities. To make matters worse, Emory's "house" isn't quite big enough yet for the size community Emory is becoming
Growth in Emory's income is slowing. Lockhart explained that most of the revenue for the academic budget-62 percent-comes from tuition and fees. The growth of that source, however, has slowed dramatically in the past 10 years, from about 15 percent annual growth to an average of 5 percent growth for next year. Annual growth in indirect cost recovery from sponsored research also has slowed.
Emory's rapidly growing endowment was a key source of new funding for the 1997-98 budget. Because a substantial portion of Emory's endowment is invested in Coca-Cola stock, the skyrocketing increase in the value of that stock has prompted a corresponding surge in the value of Emory's endowment. Endowment spending is based on a three-year average market value. Within the recently adopted 1997-98 academic budget, a $9.2 million increase in endowment spending helped University officers configure an academic budget 7.7 percent higher than last year's, as opposed to the approximate 5 percent increase that would have been possible without the extra endowment support.
While a 7.7 percent annual increases is nothing like the double-digit growth of the late '80s and early '90s, Lockhart pointed out that many of Emory's peer institutions are facing even tighter constraints. Strong growth in endowment, however, is not a given for the future. One possibility Lockhart mentioned for future revenue growth is in the area of gifts to the University. Because so much of Emory's programmatic growth has been tied to constructing new buildings, a large portion of gifts to Emory have been committed to building projects. If current levels of giving are sustained when Emory completes its building program, some gift income could be shifted to support the annual budgets of academic programs.
In the question-and-answer session following the formal presentation, history professor Tom Burns raised the issue of continued support for weak and /or obsolete programs in an environment in which academic budgeting has gotten so tight. In response, President Bill Chace said that the strategic planning process is addressing the issue of making difficult choices in terms of academic programming. "We must make some choices," Chace said. "We can't maximize everything we have."
Donna Brogan of the Public Health faculty wondered why increasing sponsored research activity and the revenue it brings is such a high priority for the University when the costs of supporting that research in terms of buildings and equipment are so high. Chace said that the goal to increase sponsored research is not driven by a desire to bring in more revenue. Rather, the goal is driven by an academic priority to strengthen Emory's basic science programs, which are not yet as fully developed as they must be to support the overall level of academic excellence Emory is striving to achieve.
-Dan Treadaway