Steps to Support BU’s Financial Health
March 26, 2025
Dear Members of Boston University’s Faculty and Staff,
Over the past few months, we have communicated with you about the University’s budget. As we move through the budget process, we want to be transparent about our findings and the steps we will take to address our short- and long-term financial health.
Overall, our University has a strong financial foundation. However, we are not immune to the realities affecting many of our peer institutions. There are a variety of pressures on our budget, many of which have built over time, and other challenges that have emerged more recently.
Immediately, we will take steps to balance the budget. We will adjust upcoming enrollment targets, look for additional revenue opportunities, and decrease spending. In addition, we have made the very difficult decision not to provide annual merit increases this year for faculty and staff. We know that merit increases are important to our community members and that this news is difficult. We did not enter this decision lightly, but it will allow us to mitigate potential layoffs. Yet, these broad solutions are not enough. Later today, we will share specific instructions with department leaders regarding budget reduction targets, and in the coming months, we will examine our budget model and further hone the University’s strategic vision.
Budget Information
While we have communicated frequently about the budget, we know that many of you may be surprised and have questions. With that in mind, we want to share some detailed information that may provide helpful context.
The University develops its annual budget with a goal to cover expenses and set aside enough in reserves for planned strategic investments. This basic and prudent practice has allowed us to pursue new ideas and seize opportunities that have contributed to our progress through the years. These reserves are critical to sustaining the University’s competitive position and maintaining the quality of our academic and research programs. They are used for the day-to-day operations of the University and to support current or future commitments and investments, including faculty start-up packages and recruitment, academic initiatives, research centers, revenue-sharing agreements with schools and colleges, laboratory and classroom renovations, and other capital projects.
Since Fiscal Year 2022, Boston University’s reserves have dropped significantly, and they are expected to drop even further this year.
There are several reasons for these declines:
- Inflation has had a significant impact on our expenses, which have grown much faster than our revenues since pandemic restrictions were lifted in 2022.
- Master’s degree enrollments are down compared to budgeted targets, as they are at colleges and universities across the country. Last fall, our master’s programs missed revenue targets by $38 million, based on lower enrollments due to fewer applicants and unusually low yield. Unfortunately, this is a trend that we and many of our peers must continue to account for moving forward.
- Salaries and wages have increased more than anticipated.
- Stabilizing the University’s new Student Information System has been costly. This year, we anticipate spending $13 million in one-time funding to realign the project and get it back on track. Additionally, we will allocate $2.7 million annually to maintain the system’s optimal performance.
- We are graduating one of our largest classes of undergraduate students, admitted in the fall of 2021, which has helped to offset inflationary pressures in recent years. Further constraints on our housing inventory, due to the renovation of Warren Towers over the next three years, will limit our ability to accommodate similarly large classes in the immediate future.
We will have an opportunity to answer questions about our finances during the Spring Town Hall for staff on Monday, March 31, and later that day at the Faculty Assembly.
Next Steps
Given these factors and national uncertainties, it is likely that universities will face more budgetary challenges in Fiscal Year 2026 and beyond. Thus, following the immediate steps described above, we will begin strategic planning and a close examination of our budget model. As you know, we are not alone in the financial challenges that face higher education. Many institutions are taking steps to prepare for potential shortfalls. We, too, must be deliberate about our operations and make decisions that best promote our highest priorities to achieve the future we envision.
Looking Ahead
While these times are challenging, we cannot retreat. Boston University’s commitment to helping society is more important than ever. If we are to continue leading in research, scholarship, teaching, learning, and service, we must take this moment to rethink how we operate, allowing us to achieve even greater success.
We are entering a critical period that will require creative thinking and innovative approaches to reach our current and future goals. Many efforts are already underway, such as our vision to strengthen our partnership with Boston Medical Center. This collaboration will help us reduce duplication, streamline processes, and leverage our important role in Boston’s healthcare landscape.
As a bold and dynamic institution, we are known for overcoming challenges and making things happen. Our culture of creativity and innovation will continue to serve us well, as it has in the past. We remain confident in our future because of you—our dedicated faculty and staff—who are vital to our shared mission. Thank you for everything you do for our community.
Sincerely,
Melissa Gilliam, President
Gloria Waters, University Provost and Chief Academic Officer
Nicole Tirella, Senior Vice President, Chief Financial Officer, and Treasurer
*3/26/25 This message was sent to faculty and staff.