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April 24 , 2006
Budget to grow by 7.8% in fiscal ’07

BY michael terrazas

It’s not quite the double-digit days of the late 1990s, but Emory’s Unrestricted Operating Budget (UOB) will grow by a robust 7.8 percent in fiscal year 2007 to a total of more than $616 million, despite continuing financial constraints imposed by depressed endowment payouts, skyrocketing utility costs and overdue investments in the University’s research infrastructure.

The Board of Trustees approved the FY07 UOB at its April meeting. The UOB plus other academic resources and Emory Healthcare’s budget will total an estimated $2.6 billion in FY07.

The multiyear outlook is positive, as well. After two years of declining endowment payouts (calculated on a three-year rolling average of market value, hence the delayed recovery after the market began trending upward), FY07 should be the last year of the downturn for the foreseeable future. Barring unforeseen events, endowment payouts are expected to begin increasing slightly next year.

“For the University as a whole, the picture is very positive, although we are well aware that local conditions vary from school to school,” said Provost Earl Lewis, who chairs the Ways and Means Committee that develops the UOB each year.

Faculty and staff across Emory will be happy to hear the University will invest a total of $3 million in its central research infrastructure (institutional review board and other research compliance areas, grants and contracts, sponsored programs, and technology transfer). In order to attenuate the financial impact for schools that would bear an inordinate amount of that expense, two-thirds of the increase initially will come from the Strategic Plan Fund, and the total cost will be gradually rolled into the UOB over the next few years.

“Our goal, and indeed our institutional responsibility, is to invest in areas like this that are so important to the research efforts of our Emory faculty, and to ensure compliance with research regulations,” said Michael Johns, executive vice president for health affairs.

Finally, as far as onerous expense growth, utility costs will climb by some $4.6 million, as individual consumers aren’t the only ones hit by exploding energy costs, specifically natural gas and steam. Mike Mandl, executive vice president for finance and administration, said the University is working on a comprehensive energy-efficiency plan to reduce consumption and control these costs in the future.

In terms of personnel, funding the merit salary pool was a priority in FY07, Mandl said, as the University implements a pay-for-performance plan across its schools and divisions. “Real headway is being made with this change, and providing a larger salary pool than in the last five years was a high priority in light of the focus on rewarding performance coupled with the uptick in the inflationary environment,” Mandl said.

The University is also investing additional funds for market adjustments for select job titles (staff) and in certain departments (faculty), for leadership and professional development programs, and for additional Human Resources capabilities in organizational dynamics (to address workplace issues, team building, organizational structure analysis, etc.).

Academic highlights of the FY07 UOB include:
• new faculty lines in Emory College, business, law, nursing, public health and Oxford College;

• $700,000 in additional library resources to keep up with 7–8 percent inflation for maintaining current collections;

• $1.5 million to implement a mandatory student health insurance requirement, plus the addition of a primary care physician for Student Health Services; and

• a 9.1 percent ($6.5 million) overall increase in financial aid.

Of course, a significant and much-anticipated component of Emory’s expenditures in FY07 are those to be made from the Strategic Plan Fund and central capital funds, which together will provide nearly a half-billion dollars of support over the next five to seven years. Announcements regarding these expenditures were made at a strategic planning retreat, held April 21, and will be reported in one of the final two Emory Report issues of spring semester (May 1 or May 8).

“We are convinced that we are taking the necessary steps to position us for a leading role in higher education over the next generation,” Lewis said. “The combination of an approved operating budget and funds for implementing the strategic plan positions us to achieve our goals. We must take prudent care to make sure our investment strategies are replaced by new funds in the future to sustain the viability of our initiatives. Without question, however, the next few years will mark a new and exciting chapter in Emory’s history.”

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