FY2012 budget closes with modest deficit



The university’s fiscal year 2012 operating budget ended with a $6.8 million deficit, largely the result of reduced endowment spending over the past three years. But the shortfall was expected and has been covered with reserve money from prior year budget surpluses.


“The fiscal year 2012 budget was actually better than expected, in large part because of an increase in development gifts to the university,” says Jim Lapple, vice president for finance. “Such gifts increased 28 percent compared to 2011, reflecting both the generosity of the university’s donors and the outstanding performance of the Development Office.”

The university’s budget has been under some pressure ever since the financial crisis that began in 2008. Because of the way in which the university’s endowment spending is calculated, the effect of market losses from 2009 and 2010 are still impacting a major source of revenue for the operating budget. In addition, the university is now seeing a decline in revenue from government grants and contracts, down 13 percent from last year, as federal stimulus money is phased out. On a brighter note, income from competitive private grants and contracts is up nine percent.

On the expenditures side of the ledger, the situation is largely unchanged compared to fiscal year 2011. “The university has successfully preserved the cost containment and reduction initiatives implemented in 2010 and as a result the size of the deficit we are now seeing has remained manageable,” says Mr. Lapple.

Foreseeing the likelihood of deficits following the financial crisis, the university’s Board of Trustees voted in 2009 to create a “budget stability fund,” and surpluses from 2009, 2010 and 2011 were held in it specifically to offset the budget shortfalls that now exist. After applying $6.8 million from this fund to fill these gaps, the university has about $9 million remaining, a cushion that can be used for budget stabilization in the coming years.

It is not predicted to be needed in 2013, but the picture beyond that is unclear. “The university is currently projecting a balanced budget for fiscal year 2013, with continued strong fundraising and modestly improved endowment returns projected to keep up with expenditures even as government grants continue to decrease,” Mr. Lapple says. “Future budget stability largely depends upon ongoing cost discipline, strong endowment performance, continued success in fundraising and securing sponsored research grants.”