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November 4, 2002

Budget data undergoing review

By Michael Terrazas

The University’s ongoing cost containment and reduction project has moved past the initial data-gathering phase of its work, and a preliminary report has been presented to the Ways and Means Committee.

Since early September, a working group—which includes Charlotte Johnson and Bill Cassels from the provost’s office, Edie Murphree from the chief operating officer’s office and Ronnie Jowers from the executive vice president for health affairs’ office— has been looking for ways to maximize efficiency in and among the University’s non-academic support units. The process included interviewing vice presidents, department heads and directors, reviewing data from discussions with the deans, along with reviewing e-mailed suggestions from the community sent to the address.

This work has yielded some 230 suggestions and comments of possible savings, including steps that could be taken immediately to help with budget planning for fiscal year 2004, intermediate steps that would require more planning, and long-term steps that would require still more analysis and planning along with follow-up consultation with the Emory community. The group has reviewed each area as it prepared its report for Ways and Means.

“We did not discard any suggestions,” Cassels said. “We decided to leave them all in and let Ways and Means, the President’s Cabinet and the deans decide which ones we should tackle.” Certain suggestions will require community input, he added.

One example of an immediate cost-saving measure that came up repeatedly, the group said, is to cut back on entertainment expenses like food and beverages at Emory events. Other short-term fixes include saving on energy costs, using the Internet to streamline purchasing and communications (both internal and external), and leveraging the University’s buying power to save money on bulk purchases.

Intermediate goals include such things as comparing certain areas of Emory operations against the standards of industry and/or the University’s peer institutions. Finally, long-range suggestions touched on possibilities for standardizing certain practices across the University, reorganizing departments, changing reporting structures, and revamping certain policies and procedures.

Regarding the latter two areas, the working group said it’s simply too early to get any more specific about where and how cuts can be made, and these are the kinds of changes that would require further consultation both with the affected departments and with the larger community.

So the group will turn its immediate focus more toward what can be accomplished for FY04, although Johnson was quick to add, “I don’t think of this in terms of being a ‘final’ report—I think of this as being a continuing process. Some of these ideas will be implemented for 2003–04, some will warrant additional discussion and some will fall off the table.”

One issue the group encountered was the impression among some budget managers that, despite the current economy and budget projections that show steady declines in revenue growth over at least the next few years, Emory need not do anything to reduce costs. In response, the working group stated that current budget models predict a 3.2 percent growth in revenue for FY04, which translates into about $13.6 million; compare this with the 7 percent growth ($26.8 million) realized for FY02—which ended in August—and it shows that Emory’s revenue growth will have been cut in half in just two years. A contributing factor is the distribution from the endowment in support of the budget which is projected to decline over the next four years.

“People don’t see the changes in Emory Healthcare and how those cuts affect the School of Medicine and the rest of the University,” Jowers said. “There’s a ripple effect.”
Several economic forces have converged to put a crunch on revenues from the Emory Hospitals and the Emory Clinic, and these in turn have an effect on the University. For example, Emory Healthcare reduced the medical school’s academic enrichment fund for FY03 by roughly $6 million, limiting the school’s ability to fund costs shared among all of the University’s schools.

Indeed, many schools either have gone or are going through the same kind of cost containment exercise that the working group is applying to support units. Though not all schools are facing the immediate problems of the health sciences schools or Oxford College, a challenge for one is a challenge for all, the group said.

“It really is a mosaic,” Johnson said. “We still have some schools growing aggressively—the business school, for example, is robust and at a different point in its development than a school like Oxford or the nursing school.”

As an important part of the review and consultative process for the project, the Provost
will work with the Council of Deans, the Faculty Council and with a faculty advisory committee appointed with assistance from the deans and Faculty Council. The advisory committee—which includes Connie Kertz (business), Frank Lechner (sociology), Michael Rich (political science), Michael Rogers (Oxford) and David Stephens (medicine)
—will work directly with interim Provost Woody Hunter, who chairs the Ways and Means Committee, in reviewing the proposals.

Once recommendations have been determined through this feedback process, the Ways and Means Committee will pass it on to the President’s Cabinet. The President’s Cabinet will make the final decisions that will impact the FY04 budget, which is scheduled for approval by the Board of Trustees next spring.

All of this is occurring at a time when colleges and universities across the country are experiencing the same fiscal constraints Emory is facing. Last week The Chronicle of Higher Education reported that Stanford and Duke universities, two of the wealthiest private institutions in the country, are considering job cuts to deal with tough economic times.

In an Oct. 29 meeting of University Senate, Hunter said both of those schools have many more employees than does Emory, and the University is not yet in the same situation they are. “And I hope we don’t get there,” Hunter said.