Big Budget: the Big Picture

How the numbers stack up for 2010

| From BU Today | By Seth Rolbein

Photo by Kalman Zabarsky

Budgets are promises and predictions, blueprints and crystal balls.

They bore us, and intimidate us too. Line item by line item, they present like some medieval text. But once deciphered, they show where the money really goes, which shows us, in turn, priorities. After all, money talks.

Boston University’s new budget, announced on May 7 by BU President Robert A. Brown, speaks volumes. It is big, more than $1.9 billion. That’s an increase of more than $55 million from last year. While $55 million sounds like a lot, it translates into a hike of 2.6 percent, including all inflation and automatic cost-of-living increases. Holding at 2.6 percent requires several actions: some hiring freezes, some salary freezes, some positions left unfilled, and some layoffs. It includes tuition hikes. It anticipates a slightly smaller freshman class and a tad more student aid. It is a budget created during a downturn — what some call a recession, what others call a depression. Compared to the relative comfort of recent years, it will cause some pain.

One thing this budget did not do, however, is institute across-the-board cuts. Executive Vice President Joseph Mercurio notes that such an approach might seem attractive at first glance and easier to sell, because, the argument goes, it spreads hardship without playing favorites.

“But it penalizes the people who have been austere, who’ve done the best job holding the line,” says Mercurio. “And it doesn’t protect the crucial, core programs that should be expanded, even in hard times.”

The strategy chosen, for example, allows the University to continue to fill faculty positions, including 25 at the College of Arts & Sciences alone last year, while ending health-care coverage for people who no longer work for the University and are over 55 years old. The savings from that move alone is worth $3 million a year, says Mercurio, and it doesn’t touch classroom activities.

Mercurio says the budget is grounded in an assessment made last September that the economy was in serious trouble.

“We were the first University in the country to come out this way,” he says, referring to the decision to freeze hires for nonacademic, non–public safety jobs, freeze salaries for anyone making more than $150,000 a year, and cap salary increases at 2 to 3 percent for those making less. “We took the position that if we take these steps early and we’re wrong, we can reverse them. But if we’re right, we’re ahead of the bad downturn.”

In January, seven task forces were created to find ways to shave $10 million off the University’s operating budget. The hiring freeze meant that 125 jobs were pulled off postings in the current year, representing savings of $6.7 million. Many of those jobs (between 75 and 80) have been reinstated, but there are still more than 200 open administrative positions that were never posted. Some savings were achieved by leaving some of those jobs unfilled, some by reducing the workforce; between 40 and 50 jobs have been cut at the Charles River Campus. The University still employs more than 6,000 people.

Most of the job losses come from two recent actions: closing the Sargent Center for Outdoor Education accounts for 41 layoffs, some part-time and some full-time, and closing University Computers, BU’s retail and service center for computers, and consolidating computer services and sales into the Personal Computing Support Center on Cummington Street, results in 10 layoffs. Mercurio now expects that a few additional layoffs will be needed, but he adds that the majority of the remaining “frozen” positions will be thawed and filled by fall. Salaries of senior management will remain level until at least July 2010.

Other expected savings will come from “retasking” the University’s residential computer labs and reducing the amount of free printing now offered to students. Paper versions of many college bulletins will be replaced by online versions.

The University has also slashed capital spending, meaning monies for improvements to buildings and infrastructure. Last year’s budget called for $246.5 million in capital spending. The revised plan brings that number down to $163 million. Student Village II is complete and ready for occupancy, and some projects (renovations to rehearsal facilities at CFA and to classrooms at the Metcalf Science Center) will continue, but most others are on hold.

The University has also moved to shore up its investments. After its investment banker, Lehman Brothers, went bankrupt, and its bond insurer, AIG, teetered on the brink, the University went directly to banks to secure letters of credit and shifted assets into government-guaranteed investments.

Still, the tumbling stock market has taken its toll. Boston University’s endowment has lost roughly 30 percent of its value, down from about $1.2 billion a year ago to about $840 million today. The relative good news is that unlike some schools (such as Harvard) whose earnings from massive endowments have sustained annual budgets, BU’s operations do not rely as heavily on investment earnings.

What follows are key snapshots, medium-sized details of a very big budget. No single number tells a full story, but viewed together, the figures reveal an outline of next year’s Boston University, the boundaries of a fiscal map.

Income

Total income
2010: $1.97 billion
2009: $1.91 billion

Total expense
2010: $1.91 billion
2009: $1.86 billion

Total tuition
2010: $914 million
2009: $891 million
Percent raise, 2009-10: 3.75
Average 3-year percent raise: 4.39

Student aid
2010: $237 million
2009: $237 million

Financial aid and enrollment contingency
2010: $9 million
2009: $3 million
(This budget reserve can be deployed to help give additional financial aid as needed or cushion an enrollment shortfall if fewer students attend than expected, a possibility given the recession.)

Expected enrollment (expressed as equivalent full-time students)
Charles River Campus
2010: 21,614
2009: 21,837
Medical Campus
2010: 2,366
2009: 2,385

Study abroad
2010: 800
2009: 742

Total enrollment
2010: 24,780
2009: 24,964

Other sources of revenue

Fees
2010: $78 million
2009: $75 million
(By far the largest amount, $39 million to $40 million, is in the form of payment by students in the study-abroad program.)

Sales and services
2010: $80 million
2009: $75 million
(Most of this is from clinical services, i.e., dental and medical care and physical therapy.)

Expenses itemized

Instruction and research
2010: $440 million
2009: $430 million
(This figure includes all direct operating expenses for the schools and colleges, including faculty salaries.)

Faculty and staff benefits
2010: $158 million
2009: $148 million
(Benefits, for example, the University’s share of health-care insurance, are in addition to salaries.)

Administrative
2010: $85 million
2009: $81 million
(This includes items like liability insurance, audit and legal fees, payments in lieu of taxes, as well as central administration salaries.)

Academic plant
2010: $105 million
2009: $104 million
(This includes all building expenses for academic activities, including utilities.)

Electricity
2010: $25.8 million
2009: $25.3 million

Natural gas
2010: $9.8 million
2009: $8.2 million

Fuel oil
2010: $4 million
2009: $7 million

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