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February 25, 2002

Trustees approve FYO3 plan

By Michael Terrazas


On Feb. 14, the Board of Trustees approved Emory’s $425 million educational and general budget for the 2002–03 fiscal year, projecting a growth in revenue of 4.8 percent and new incremental resources of just under $19.3 million.

For the past four years, growth has ranged from a low of 6.4 percent to a high of 8.3 percent, according to Charlotte Johnson, senior vice provost for administration. Multiyear projection models developed as part of the budget process indicate that, for the next three years, growth will be just under 4 percent.

The slowdown in revenue growth is due in part to endowment performance, Johnson said. From fiscal year 2000 to 2001, the market value of the University’s endowment declined by $485 million. This loss figures into endowment spending distribution over time and will contribute to the slowed growth for the foreseeable future.

In these circumstances, said interim Provost Howard Hunter, the focus must be on maintaining the core academic programs of the University.

“Although Emory is strong financially and in many ways strategically better placed than many peers, we do have challenges,” Hunter said. “Due to resource constraints, we will achieve our goals—but over a longer period of time. For instance, faculty growth will happen at a slower pace than desired, a commitment to fifth-year funding for graduate students in certain disciplines will be phased in more slowly, and the units that support research will grow but at a slower pace.”

The new budget provides resources for a modest merit salary program, a 1.5 percent increase in the fringe benefit rate and partial funding for market adjustments for a small number of specific staff job titles, Johnson said.

The increase in the fringe benefit rate is being driven by health care costs that, after remaining stable for about five years, have begun to increase at a rate of 15 percent annually. In addition, efforts are continuing in Arts & Sciences, Goizueta Business School and Oxford College to keep faculty salaries competitive with Emory’s peer institutions. Salaries and benefits absorbed 56 percent ($10.8 million) of the new resources.

The budget invests an estimated $4 million in the University’s nine schools beyond the salary and benefits program, Johnson said, such as new faculty and staff lines in Emory College and the business school, and graduate school funding for the new business Ph.D. program. All schools have resources to maintain their current scholarship programs.

The University also continued investment in teaching and research, including additional staff positions to support research activities, inflationary increases for library acquisitions and system-related expenses for E-Learning at Emory.

An additional $1.3 million was absorbed by insurance. Consistent with nationwide trends, the University’s costs for property and liability coverage are increasing dramatically, said Edith Murphree, associate vice president for administration.

Due to budget projections, the ways and means committee is slowing down a number of capital projects that were in the initial stages of development, according to John Temple, executive vice president and chief operation officer.

Temple anticipated that new large capital projects will focus on renovating existing facilities rather than construction of new space on the main campus.

In the FY03 budget, operating costs for new facilities required funding of just under $1.3 million. Many of the facilities currently have partial funding but will require full operational funding in 2002–03. These facilities include the Whitehead Research Building, the Schwartz Center for the Performing Arts, Science 2000-Phase II, the Faculty Building at Grady Hospital and the Winship Cancer Institute.

As these new buildings are completed, Hunter said, the need to continue to increase Emory’s facility major repair and replacement fund becomes even more crucial. Currently Woodruff Library and the P.E. Center are in need of major repair work, he said, with both buildings suffering from water incursions that are damaging structural integrity.

The remainder of the available resources were used to address other systems costs and inflationary and volume increases, Johnson said.

“In the area of information technology, we are delaying additional investment in Web infrastructure and a comprehensive recovery plan,” Hunter continued. “We are facing costs related to the upgrade of the two major PeopleSoft systems, and the current donor records system is in dire need of replacement.”

Hunter reiterated this budget reflects the ever-tightening fiscal environment in which Emory must make careful and deliberate choices. In FY03, growth in endowment spending is relatively flat, increasing only 0.3 percent. In the following two years, projections reflect possible declines in endowment spending of 3 percent and 4 percent.

Although endowment spending accounts for only 20 percent of the budget, it has contributed to the University’s extraordinary growth in the past 10 years. Emory has benefited from the growth, Hunter said, but it now must turn to other revenue sources and reallocation of existing resources to fund high-priority academic initiatives.

Indirect cost recovery is one revenue steam that is growing and will continue to grow as research space and number of faculty researchers grow, Johnson said. However, this income is designated to the schools and faculties that produce it and covers research costs.

Tuition revenue contributes about 57 percent for this budget, Johnson said, and salaries and benefits represent about 55 percent of the costs. Few Emory schools are increasing enrollments, and the current economic environment will limit ability to raise tuition rates, she said.

Currently there are ongoing discussions with various campus groups to discuss possible changes to some benefits.