5-4-09: USC: USC’s 2009-10 Budget Guided by Prudence

USC’s 2009-10 budget, excluding health care services, will be $1.92 billion, pending approval by the Board of Trustees in June.

“In developing this budget, we are continuing to follow a prudent course in response to the nation’s economic downturn,” said Robert Abeles, interim senior vice president and chief financial officer.

“Our top priority is to ensure the quality of our educational programs and our services to students. We further seek to keep tuition as low as possible while also increasing financial aid, in order to help the parents of our returning and incoming students.”

Highlights of the new budget include:

• Undergraduate tuition and mandatory fees will increase by the smallest percentage since 1969; its 3.95 percent jump will bring next year’s tuition and fees to $39,183.
• The undergraduate financial aid pool has been increased by 8 percent.
• Administrative staff earning more than $57,000 per year will receive no salary increase. This affects all senior administrative staff, including all senior officers. Employees earning $57,000 or less will be eligible for raises at the discretion of the departments.
• The Academic Senate leadership has supported applying the same policy to faculty salary increases, to further the goal of keeping tuition as low as possible for students.
• The staff hiring freeze will continue until further notice, as will the procedures for requesting exceptions to the freeze. Academic recruitment will continue.

Abeles stressed that priority for approving exceptions to the hiring freeze will be given to departments that provide direct services to students, including advising, as well as departments involved in recruiting students and those responsible for student health and safety.

“Our goal is to minimize the impact of the economic situation on our students,” he said. “We’re also focused on helping parents affected by the downturn continue to be able to afford to send their children to USC.”

He added that the funding for unfilled positions will not be taken away from departmental budgets and that managers can decide whether to redirect these funds or to save them until the hiring freeze is lifted.

The recent purchase of two hospitals - USC University Hospital and USC/Norris Cancer Hospital - from Tenet Healthcare Corp. is unrelated to the finalization of the fiscal year 2010 budget for the remainder of the university.

“This was an accident of timing,” Abeles said. “While we may not have chosen this exact time to take over the hospitals, given the current economic climate, it’s an important investment for the university that is expected to reap long-term benefits by creating a world-class academic medical center at USC.

“We are using bond financing to pay the costs of acquisition and additional investments in the health care area,” he added. “Therefore this acquisition and subsequent investments will not impact the budget or operations of the remainder of the university. It is our primary goal to protect the academic mission of the university.”

The university has four major revenue streams: tuition, payout from the endowment, gifts and research funding. Patient care revenues will become a fifth major source of funds in fiscal year 2010 with the addition of the hospitals and the integration of the physician practices. Of these, tuition is the most critical, because USC, unlike many other universities, depends more on tuition to fund its annual expenses than it does on endowment payouts or other sources.

“While the negative investment results in our endowment are similar to those of endowments in other private universities,” Abeles said, “we are not as affected by this as are universities who are more dependent on endowment income for operating expenses and are thus forced to make more dramatic cuts.”


The income from gifts to the university has slowed, also in response to the economic environment. However, research funding has been increasing over the past several years and is expected to continue to grow in response to the federal stimulus package. While much of this revenue is restricted, it also includes indirect costs (for university facilities and services) and salary support for roughly 1,350 staff members.

In all of this, Abeles said, USC has reasons to be optimistic about its future. “At this point, admissions seem to be well on track to bringing in the number of new students we are expecting. In addition, our endowment has been well managed for years, and our investments have been prudent. Our assets are far more liquid than those of many other institutions, and our decentralized environment provides incentives for deans and others to make responsible financial decisions for their schools.

“In short, I fully expect that USC will successfully weather this period and will emerge stronger than ever.
However, continued prudence is appropriate

http://uscnews.usc.edu/university/uscs_2009-10_budget_guided_by_prudence.html