Emory Report
December 15, 2008
Volume 61, Number 15

FY10 budget cycle

• January: Budget hearings week of Jan. 5 & 12; WAM reviews drafts of budget scenarios

• February: Tuition and fee presentation to Finance Committee and full BOT on Feb. 11 & 12 for approval; presentations to Faculty Council and Council of Deans, Feb. 17 & 18

• March: Budget finalized by WAM and reviewed with the president

• April: Budget presentations to Council of Deans, April 1; and budget operating plan reviewed and approved by Finance Committee, Academic Affairs Committee, and Executive Committee (BOT) April 8 & 9; presented to Faculty Council, April 21


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December 15
, 2008
Budget process moves forward

By Nancy Seideman

Emory leadership is moving quickly to take into account new realities brought about by the changed national economic environment: this year’s budget has been adjusted and balanced; the fiscal year 2010 (FY10) budget process is on track, albeit within a significantly lower resource outlook; and updated long-range budget projections are guiding decisions now and as the University moves forward.

According to the Ways and Means (WAM) Committee, decisions are being made based on priorities outlined by President Jim Wagner (www.emory.edu/home/news/releases/2008/10/emory-and-the-economy.html)
with the goal of maintaining and enhancing the quality of key programs, even if it means the reduction of other programs or no growth in certain areas.

“We have entered a new era of University finances that requires a shift in how we fulfill our vision and mission,” says Provost and Executive Vice President for Academic Affairs Earl Lewis, who heads the WAM committee.

“With guidance provided by our core principles and values, and by focusing on strategic priorities, we anticipate that Emory will emerge stronger and in an even better position to realize its strategic goals,” says Lewis.

Wagner, along with Lewis and other members of the WAM committee — Executive Vice President for Finance and Administration Mike Mandl and Executive Vice President for Health Affairs Fred Sanfilippo — have communicated with the Emory community about the new economic realities in a series of meetings, letters and forums over the past few months.

In this Q&A with Emory Report, the WAM committee leaders responded to questions regarding the FY10 budget process, and outlined what the Emory community can expect as the University moves forward.

Emory Report: What is the status of Emory’s budget process?
We all know that the Emory community is exceptional in its collective spirit and commitment to our mission, but that fact has been even more apparent this fall as we have worked together to balance this year’s budget, and to prepare for FY10, which begins Sept. 1, 2009. As a nation, we are adjusting to a new economic environment that will be with us for the long term. This, we believe, is more than a short-term economic downturn. At Emory, that means we need to focus on quality and invest in excellence within the realm of new economic realities.

ER: What do the new economic realities mean for Emory?
The level of resources we have to invest will be lower than we planned. We know this. Thus, we need to plan for what is known, and stay focused on excellence. Focus means pursuing the University’s vision with vigor, but without the full span of underlying activity that might have been undertaken previously. While we have to be ever more selective in deploying resources and ever more creative in ensuring the most effective approach in allocating budgets, we cannot lose sight of making sure every dollar is invested in bringing together and retaining the highest quality faculty and students at Emory.

In addition to the challenges presented by the investment market, when preparing budgets we need to take into account cost increases associated with financial aid, not only for future students, but for current students whose families have been adversely affected by the economic changes.

In order to present balanced budgets to the Board of Trustees for the next three fiscal years — based on what we know now and what we can project given the current financial indicators — we need to cut approximately $50 million from current year endowment spending levels. In light of the endowment spending formula, this will take place over several years, beginning in FY10.

The single largest endowment spending reduction will come from the Emily and Ernest Woodruff Fund, an endowment fund that supports a broad range of activities across the institution including core support for the various schools. We also need to cut another $10 million from unrestricted operating revenue due to declines in short-term investment income, and approximately $30-35 million from the Strategic Planning Fund, primarily by eliminating various contingency provisions and slowing some activities — some substantially.

ER: How is Emory Healthcare being affected?
Emory Hospitals, Emory Clinics and Emory Healthcare activities are supported by different revenue streams than the University, and are not directly dependent on endowment spending, net tuition, or other University income sources.

Although Emory Healthcare is in a strong position, we are taking steps to adjust to the changing financial environment. Senior leadership has developed a focused strategy to prioritize the use of our resources, and we have identified opportunities to cut costs, for example by phasing construction activities, reducing meeting and travel expenses, and reviewing vendor contracts.

We’re very much aware that our patients and their families are facing health care struggles that are now compounded with new economic concerns. We all need to provide our support, compassion and professional expertise for them now more than ever. Furthermore, it is too early to tell how Medicare and Medicaid payments to hospitals and doctors will be influenced. These impacts will be assessed as conditions unfold.

ER: What is the status of Emory’s salary and benefits programs?
WAM Committee:
One of Emory’s major priorities is to invest in our very best faculty and staff. Resources to support compensation increases in FY10 will need to come from existing budgets, and should be deployed carefully in light of the market context and according to clearly articulated compensation principles that are under review by deans and vice presidents as we speak. As for benefits, we know costs will increase due largely to higher medical costs, but at least for FY10, Emory will incur the largest portion of the cost increase.

At this time, we are not contemplating any significant changes in the current University benefits program.

ER: What do you want the Emory community to keep in mind as we plan for the future?
The new economic realities that we are dealing with as an institution will change aspects of how we fulfill our mission. That said, we want the Emory community to know we are absolutely committed to funding the priorities previously outlined by the president. And you’ll note that the first two involve investments in people — ensuring that we provide the financial aid required to retain and attract the best students, regardless of their economic standing; and that we maintain competitive, merit-based salaries to reward, retain and attract the best faculty and staff.