Communications and Calendars
Letters to the Faculty: February 14, 2011
I hope you will be able to join us for the upcoming meeting of the Faculty of Arts and Sciences, in the Faculty Room of Low Library, at noon on Wednesday February 16th. I have been meeting weekly with the Planning and Policy Committee of the Faculty of Arts and Sciences, which has this spring term so far evaluated and helped to shape enhancements to the Ph.D. program, considered the report of the Classroom Committee, launched our financial and organizational review of the Arts and Sciences, and discussed the budget for FY 12. In recent weeks, we have been evaluating the basic parameters of our budget both for the current and the coming year and in the context of a longer, 5-7 year, perspective. At the faculty meeting on Wednesday, we will accordingly provide a review of the $600+ million A&S budget, with a detailed analysis for the $500+ million of that budget that is most accessible to planning by my office, the deans, the chairs, and the PPC.
You will see that the gap between revenues and expenses over the past seven years spans two overlapping periods. Between FY05 and FY08, the economy was growing quickly, and the University had just begun the most aggressive capital campaign in its history. We accelerated faculty hiring and enhanced our financial aid, largely in anticipation of the campaign’s proceeds. Since FY09, the economic recession has caused a cut in endowment payout, a pause in the growth of current use giving, and unexpected increases in the cost of financial aid. Throughout this period, but especially during the last few years, Arts & Sciences has relied heavily upon higher student enrollment to close the gap in its operating budget.
Although higher enrollment has been sought in recent years in part for financial reasons, there is no doubt that the education we provide to our own students, as well as to the students of the other schools we serve – principally Barnard and Engineering – is worth far more than the price we charge, even at the full “sticker price” of these programs. There is also no doubt that the number of fully qualified applicants continues to grow far more quickly than the number of seats we plan to fill, even at these higher enrollment targets. As always, I am deeply grateful for the understanding and hard work of faculty and staff as we respond to the ever growing demands on our time and resources, and work to make all of our degree programs the best programs possible. I am especially grateful for the work of the Classroom Committee, chaired by Jean Howard, as it has developed recommendations that will increase the quality and utility of our classrooms and make the most efficient use of our existing stock of classrooms as we await the new Morningside spaces that will be made available because of the move to Manhattanville. We will discuss her report at Wednesday’s meeting.
As you might know, administrative structures were created in 1982 to more effectively coordinate resources and academic planning across the schools that constitute the construct called Arts and Sciences. Over the years, the University has introduced various changes in the administrative and budgetary relationships between the division’s constituent schools intended to fully integrate them into a single administrative unit in order to use resources more effectively and plan strategically for the future. Financial pressures resulting from two years of economic downturn make it more difficult than ever to accomplish core objectives within existing budget capacity; these challenges focus more than ever the need to develop more effective, more efficient, and more rationally integrated administrative structures and processes.
As I reported to you in my last letter, I have begun a research project to review the financial, organizational, and administrative structure of the Arts and Sciences. The Policy and Planning Committee is taking an active role with McKinsey & Company consultants as they work with us to assess the root causes of our financial challenges, including an economic analysis of how Columbia Arts and Sciences compares to its peers within other universities. We hope that this work will find administrative savings and improvements in a broader context of enhancing service levels and strengthening our financial base. We also hope to use the review to develop a longer term strategy in concert with the senior administration and the trustees to allow us to find better and more reliable forms of support for our educational and academic mission.
This review is also part of an effort to constitute more clearly the Faculty of Arts and Sciences as the basis for academic planning and governance, to secure the construct of Arts and Sciences as a coherent organization befitting its scale and significance as the single most central unit of the University, and to establish a better working relationship between the Arts and Sciences and the various units of the central administration.
Although there are some hopeful signs in the FY12 outlook – chief among them the reversal upward of endowment returns – some patterns continue to limit our ability to invest as we would like to do. On the positive side, thanks to endowment investment returns that were both less negative in FY09 than almost all peers, and more positive than peers in FY10, the payout from endowment will increase by 4.5%, a welcome relief after the fall by 8% in FY10 and 5% in FY11. About a tenth of our $500+ million core budget is funded from endowment income. However, this is just a small part of our financial base, and we continue to experience the downturn of the economy in relation to the needs of lower and middle income families, through financial aid expenses that will increase far more than our endowment income.
As you have doubtless heard (and you will be hearing more soon from the Provost’s Task Force on Benefits), the fringe benefits charging rate is falling significantly short of funding all of the benefits we consume. This will remain true even after another increase of a full percentage point in FY12 (the same increase set for FY11). The fringe increase consumes the equivalent of a point in the salary increase pools, and will increase A&S core expense by about $1.4 million next year. The University common cost charges, of which A&S pays $104 million in FY11, will rise by 5%. These charges fund general overhead , recent expansion on the Morningside Heights campus, and portions of longer-term investments such as Manhattanville.
Therefore, we begin our planning knowing that we have a significant gap that we must close in order to attain the target we agreed upon with the central administration. Further, since we authorized more faculty hiring this year than in the previous two, and since retirements and departures are down, we expect the number of faculty to grow by about 1% next year. This means that we will have to constrain the faculty and staff salary pool for another year, while limiting non-salary budgets to as low a point as possible, meanwhile adding administrative positions only by reallocating existing budgets and giving priority to revenue enhancing opportunities. At the meeting, we will present the preliminary guidelines that are needed by schools and departments so they can proceed with detailed planning and budget submission; over the next two months we will develop our other assumptions and targets in consultation with the Planning and Policy Committee.
I look forward to seeing you on Wednesday.
Nicholas B. Dirks
Franz Boas Professor of Anthropology and History
Executive Vice President for Arts and Sciences