After cuts, university to close FY2011 budget with a small surplus

Cost reductions first announced last spring have successfully stabilized the university’s finances, according to a recent analysis of the operating budget. The university expects to close out the 2011 fiscal year, which ends June 30, with a modest surplus.

“Although making cuts to the 2011 fiscal year budget was not easy, the effect has been to return the university’s finances to balance, which is what we had hoped for,” says Jim Lapple, vice president for finance and treasurer. The cuts, which were announced in March 2010 and went into effect in July, included a $3.7 million reduction in research spending and a $10.3 million reduction in non-science spending, including the elimination of 50 positions. The cuts became necessary after the global financial crisis caused a significant drop in the market value of the university’s endowment, which contributes about a third of the university’s operating funds. The reductions to research spending were made in consultation with a faculty budget advisory committee chaired by Mary Jeanne Kreek.

Since bottoming out in early 2009, the capital markets have somewhat stabilized. As of February 2011, the university’s endowment showed a positive preliminary fiscal year return of 13 percent. The university’s endowment spending formula, however, is calculated as a percentage of average market value over the previous three years. “This has the effect of tempering sudden increases and decreases in the endowment’s value, but also causes us to feel the effect over a longer period of time,” explains Mr. Lapple.

“After careful review of the university’s current finances and consultation with our Board of Trustees, I am pleased to announce that we will not need to implement further cost reductions at this time,” says Marc Tessier-Lavigne, the university’s president. “For the 2012 fiscal year, we will maintain the cost reductions that were put into effect last year and leave the current laboratory funding formula unchanged.”

In addition, the Board’s Finance and Operations committee has approved for the coming year an aggregate three percent salary increase pool, which will be awarded based on merit, and a 4.4 percent increase in the student stipend, to $33,000 per year.

“We were fortunate to be able to include in the upcoming year’s budget a salary and stipend increase that will help offset increases in the cost of living in New York and keep our compensation competitive with that of other local institutions,” says Dr. Tessier-Lavigne.