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November 28, 2005
Funding plans begin to take shape

by michael terrazas

At the June Board of Trustees meeting, during which the board was treated to a preview of the University’s strategic plan and revised campus master plan, two main questions arose, according to Mike Mandl, executive vice president for finance and administration: How much is it all going to cost? And how will Emory pay for it? Mandl’s answers (only partially in jest) were: “A lot. And I have no idea.”

Much work has been done in the past six months to provide more serious responses, and Mandl now estimates that, when the strategic plan’s initiatives are fully implemented, it will add about $200 million to the University’s annual expenditures (currently at $1.2 billion, not including Emory Healthcare). Tack on another $730 million in capital investments to realize the master plan (not including the total cost of Emory Healthcare’s ambitious Clifton Road Redevelopment Project, estimated at $1.2 billion), and it’s clear that turning Emory’s vision into reality will not be inexpensive.

But, despite the daunting numbers, he said the University is well positioned to pull together the resources; as much as $100 million already has been reserved for strategic initiatives over the next five years, and another $185 million has been identified for capital projects. The rest will come through a combination of methods, including financial management, program development, revenue from intellectual property (such as the recent sale of royalty rights to the anti-HIV drug Emtriva)—and, of course, the comprehensive campaign.

The first thing to understand, Mandl said, is that when it comes to financial strategies, the distinction between “strategic plan” and “master plan” does not exist. “To me,” he said, “the master plan is just a component of the strategic plan, and our financial planning will pursue both simultaneously.”

Second, all projects will be considered in relation to four criteria, which Mandl described at the Nov. 15 Faculty Council meeting. Projects that will be funded will:
• make a visible difference in advancing the University strategy;
• initiate activities that become self-sustaining;
• create a traceable, clear return on investment (though the return does not necessarily need to be financial); and
• encourage the leveraging of additional resources.

In the short term, a number of capital projects already are in the pipeline, including the School of Medicine administration and education building, already under construction; a new psychology/chemistry complex for Emory College; the theology initiative to replace Bishops Hall and provide a new home for the Pitts Library; a home for the Center for Ethics; and a new freshman residence hall, on which Mandl said he hopes to break ground next summer on the site behind the Dobbs Center currently used for surface parking.

Over the longer term, time lines will vary according to the success of strategic initiatives and the progress of the campaign; philanthropy, Mandl said, will play a large part in determining which capital projects make it from concept to construction most quickly.

“A number of leaders in the Woodruff Health Sciences Center have been meeting over the past three to four months to develop a financial plan to fund the Clifton Road Redevelopment Project,” said Michael Johns, executive vice president for health affairs. “It is clear that we will have to look to a number of sources to support an initiative of this magnitude, including Emory Healthcare operations, philanthropy, existing funds and bonded indebtedness. Our goal, naturally, will be to minimize the amount of debt we have to assume to reach our strategic goals.”

Strategic initiatives
According to Johns and Provost Earl Lewis, who co-chaired the Strategic Planning Steering Committee, prioritization and funding allocation mechanisms for strategic initiatives were built into the planning process itself; all of Emory’s schools and units were asked to develop resource components to their respective plans, which together make up the bedrock of the University’s overall strategic plan. And though certain strategic initiatives will receive special consideration this fiscal year from the Ways & Means Committee, Johns and Lewis said such funding will be built into the University’s normal budgeting cycles.

“These plans arose from the schools, and it only makes sense to let the schools implement them through their own budgeting processes,” Johns said. “The University can help out with providing resources from a central fund earmarked for strategic initiatives, but the schools know best which programs will help them realize their strategic goals most effectively.”

However, the five cross-cutting themes will have new structures created for them; each theme will be managed by an implementation leader, and within the themes, each strategic initiative will have a pair of co-chairs charged with overseeing implementation. For example, the theme “Exploring New Frontiers in Science and Technology” will have an implementation leader; within that theme, the strategic initiative in predictive health will be managed by a pair of co-chairs. This structure will be replicated for each theme and each initiative. “The ultimate goal is to make this a better research university. The plans and the implementation process must facilitate that objective,” Lewis commented.

Johns and Lewis said standing BOT committees likely will play some role. For example, the board’s academic affairs committee could be linked to implementation of the “Strengthening Faculty Distinction” theme. As one trustee observed, developing a world class faculty is key to the university realizing its overall goals.

Finally, because much of the initial funding available for strategic initiatives is taken directly from the Emtriva sale, there are significant federal compliance issues; the Bayh-Dole Act, under which these proceeds are governed, stipulate that the money must be used for “scientific research or education,” and that language generally has been interpreted to mean research or education in the “hard” sciences. More guidelines about applying for funding as a strategic initiative will be going out to school-based planners soon.

“It does all sound complicated, but as we move through the year, make the necessary appointments and flesh out these implementation outlines, it will become clearer,” Johns said.

“The hardest part is managing expectations,” Lewis said to Faculty Council. “When you’re trying to deal with something this grand, it requires patience. We have to set priorities, build an evaluation structure, and assume that some things we will try won’t succeed. The plan requires us to take intelligent risks, and we must be prepared to do so.”

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