The 2005 fiscal year will be the first in which Emory's new administration has full responsibility over the University's budget, and changes are in store.
Central in the planning for FY05, according to President Jim Wagner, was the necessity of competitive salary programs for both faculty and staff. Human Resources will roll out a pay-for-performance initiative for staff employees that will assist Emory managers in defining performance expectations, helping employees understand those goals, and recognizing and rewarding superior employee performance.
"This will help us attract and retain the very best staff employees; as the economy recovers, we run the risk of losing our best staff if we cannot offer competitive salaries," Wagner said. "Recruiting and retaining faculty is driven by a national marketplace, and as Emory's reputation continues to advance, so will the cost to recruit and retain the best faculty."
More details about the pay-for-performance program will be released in the coming weeks, but that will not be the only difference in the FY05 budget. In years past, fiscal discussions have focused on the Educational and General (E&G) Budget, which comprises the resources necessary to fuel Emory's core instructional budget, and administrative and support units.
This year the budget officers provided an enterprise-wide snapshot of Emory finances to the Board of Trustees. The "All-Funds Report"--which includes both the University and Emory Healthcare--is projected at some $2.25 billion, split almost evenly between the two major components.
"This was a pilot year," said Charlotte Johnson, senior vice provost for administration. "We estimated all of our funds to expand the board's view and more clearly reflect all the resources that support our missions."
The main focus of the report was the Unrestricted Operating Budget (UOB), of which the E&G is now a subset. The UOB also incorporates University auxiliaries (such as housing, parking and food service) and independent operations (Blomeyer Health Fitness Center, the Emory Conference Center), as well as nondegree programs in Goizueta Business School and study-abroad programs within Emory College.
Just approved by the Board of Trustees Executive Commit-tee, the UOB for FY05 totals some $552 million, an increase of 6 percent over FY04. With expenses projected at about $549 million that leaves a $3.4 million surplus for the next fiscal year, attributable to auxiliaries and independent operations, according to Johnson.
On the income side of the UOB, tuition and fees account for more than half (52.6 percent) of University revenue, followed by endowment and trust income (15.7 percent) and indirect cost recovery (11.1 percent). Tuition for Emory College will increase by 4.9 percent to $28,940 next year; other schools' tuitions will rise by comparable percentages.
Though the market value of Emory's endowment is recovering from the downturn that began in 2000, the spending distribution is not projected to increase for the next several years since it is calculated on a three-year moving average of market value. This, combined with a drop in interest rates on University operating capital, presents Emory's biggest revenue challenge, Johnson said.
It has been offset to some degree by continuing to increase spending for operations and reduce it for capital matching, and by additional reliance on the Emily and Ernest Woodruff Fund.
"For the next three years, the University is projecting a continued decline in the distribution from endowment," said Mike Mandl, executive vice president for finance and administration. "In order to move forward on strategic initiatives and a comprehensive campaign, we must work creatively to maximize the utilization of existing resources and increase other revenue streams."
Johnson said initial funding for the comprehensive campaign is included in the FY05 budget, including resources for a new donor records system and additional development staff in some of the schools.
Other notable incremental expenses include:
· increased support for financial aid, including an additional $250,000 in Emory College to enhance merit aid and a restructuring of student stipends in the graduate school.
· new faculty lines in several schools.
· increased support for research activities, including operational expenses for new facilities scheduled to come online, as well as new staff and program support in several research-support offices.
· a 9 percent growth in central library resources to maintain collections at current levels.
· continued rising insurance costs. This line increased by 81 percent and 56 percent in fiscal years 2003 and 2004, respectively, and is projected to grow by another 21 percent in FY05, though Johnson expressed optimism that this trend is leveling off.
"This budget reflects progress toward strategic goals," Wagner said, "but also leaves issues we must address in the future to ensure excellence in research and teaching at Emory and improve our competitive position."