Tufts prepares for budget cuts in light of crisis

Anticipating a precipitous drop in its endowment resulting from the national economic crisis, the university is facing budget cuts in a wide array of areas.

Tufts' endowment is anticipated to decline by 25 percent this year, and administrators expect a decrease in giving. Meanwhile, the financial aid budget will need to rise by approximately 10 percent to guarantee assistance for all students currently enrolled.

In all, Tufts is bracing itself for $36 million in budget cuts for next year and is trying to spend $10 million less than originally planned this year to offset reduced returns on investments.

Apart from internal cuts, the Cummings School of Veterinary Medicine has received a $5.4 million cut in funding from the state government.

Administrators have repeatedly emphasized that the university's top priority is to meet students' financial needs. Retaining faculty is the second priority.

"We will balance the budget, but we will budget it by asking people to sacrifice," University President Lawrence Bacow said at a Tufts Community Union (TCU) Senate meeting Sunday night. "Everyone is going to have to sacrifice."

Revenue expected to decline

The university reports the value and performance of its endowment at the end of each fiscal year, but administrators assess it at the end of each month to help plan ahead.

"In the first quarter of 2009, we expect to use an average of values over the preceding several months to determine spending for the next fiscal year, which will begin July 1, 2009," Chief Investment Officer Sally Dungan told the Daily in an e-mail.

In an e-mail to the Tufts community, Bacow estimated that the endowment would decline about 25 percent in the coming year. This would translate into a loss of about $24 million of distributable income, he said.

About 13 percent of Tufts' operating fund comes from the endowment, according to a statement from the Investment Office.

"Moody's [Economy.com] has predicted an average decline of about 30 percent for endowments [at universities nationwide]," the statement said. "We typically do better than average and we hope that will be the case again, although there are no guarantees."

In addition to the fact that the endowment already faces a decline, some of its money may be legally ineligible for use, according to Provost Jamshed Bharucha. The endowment consists of many different types of funds, such as gifts given to endow professorships or capital projects.

"If the market value of that fund has dropped below the original gift, then we can't spend out of that fund at all, by law," he said.

Officials are working to determine which endowed funds are available and which will need new financing.

The university has four sources of revenue aside from the endowment: gifts, research revenues, clinical revenues, and tuition and fees.

Tuition, the school's most lucrative source of income, is the only portion of revenue that the university can directly control. But realistic assessments of families' capacities to pay will prevent tuition from providing a major financial boon next year. Still, the university will have to raise tuition to some degree, according to Bacow.

"We're not going to be able to raise tuition, given the economic situation, even close to what we had been expecting," he said.

Gifts to the university are also down. Although Tufts has raised $922 million to date in its Beyond Boundaries capital campaign and still expects to reach the goal of $1.2 billion by 2011, the annual fund has declined by 11 percent since this time last year, according to Christine Sanni, director of advancement communications and donor relations.

Still, those who are still giving are doing so at a higher level. The average gift to the annual fund is up by 20 percent since last year and is now $428.

The Cummings School is facing budget cuts both from the university and the state. Gov. Deval Patrick's budget cuts will have decreased the state's appropriation to the school by $5.4 million by fiscal year 2009.

"The staff, faculty and students of the Cummings School have been very creative and collaborative in their approach to this budget crisis," Cummings School Dean Deborah Kochevar said in an e-mail. "We have devised a list of high-priority reductions to our budget that begins to address the shortfall."

For instance, the Cummings administration has decided to suspend school-supported faculty sabbaticals while simultaneously encouraging more students to work extra rotations at clinics during their fourth year. This would generate more revenue for the school.

The school has even stopped providing bottled water in its buildings so that people will drink from taps instead. "This measure alone will save us more than $20,000 over the next year and a half," Kochevar said.

University explores budget cuts

Although the Cummings School was the only one to suffer state budget cuts, every department, center and institute within the university is reevaluating its expenditures in search of areas that warrant reductions. "We're combing through our budgets for any savings that we can find," Bharucha said.

Professor Enrico Spolaore, chair of the economics department, said that his department has taken measures to reduce costs and has become "extra cautious that everything we do is still really necessary." But at the moment, the economics department has not needed to enact a major budget cut and has continued to maintain a relatively typical level of activity.

Creating the university's budget is a complicated process, according to Vice President for Finance and Treasurer Tom McGurty. "Each school has its own budget process … There will be various check-ins along the way to see how the budget is developing and what the decisions are," he said.