5-8-09: Duke: Trustees Approve Flat 2009-10 Budget

Continuing its efforts to respond to the tight economy, Duke University’s Board of Trustees on Friday approved a flat $1.8 billion budget for the 2009-10 fiscal year beginning July 1.

The new budget includes a previously announced 3.9 percent increase to $49,895 in the standard total for undergraduate tuition, fees, room and board. The budget also calls for an increase in undergraduate financial aid of 17.1 percent, making it the highest percentage increase of any component in the budget.

The budget projects no major changes in revenues or expenditures compared to the current fiscal year. The administration has announced a number of pending and ongoing initiatives that should result in lower expenditures than those reflected in the budget.

Earlier this year, Duke officials said they would pursue a number of cost-saving steps to offset an expected $125 million budget shortfall over the next three years as a result of declining endowment returns and fundraising, mirroring national trends.

Toward that effort, the university has announced there will be no salary increases in 2009-10 for university employees making more than $50,000 per year. Employees making $50,000 and below will receive a one-time, $1,000 payment.

In addition, Duke is curtailing external hiring, eliminating vacant positions, making internal reassignments and instituting a retirement incentive program for some university staff. Faculty hiring will continue on a strategic basis, at a slower pace than in previous years.

Duke also is holding off on new construction until it identifies and secures the external funds required for projects. Planning for certain developing projects, including New Campus, will continue, but the start of construction will be deferred.

Duke has already undertaken a number of cost-saving measures, such as those involving energy costs, contract work and phone service, and is continuing to pursue others.

The new budget includes a current fund operating budget of about $900 million, other operating funds of about $325 million and sponsored funds -- such as those awarded by the government for research projects -- of about $600 million. The budget includes the School of Medicine and the School of Nursing, but excludes Duke Hospital and other components of the Duke University Health System, which are budgeted separately.

This year’s budget incorporates an accounting change that moves student financial aid from an expense to a reduction in revenue. This accounting change reduces by approximately $200 million the size of the operating budget when compared to last year. University officials and the board agreed the change better reflects Duke’s financial status. The administration similarly adjusted 2008-09 totals for revenues and expenditures in the current year budget presentation to promote consistency across the two years, and to provide relevant percentage changes for board consideration.

The new budget includes $114 million -- a 17.1 percent increase from the 08-09 budget -- to support Duke’s undergraduate financial aid program. About 45 percent of undergraduates receive financial support to attend Duke, the vast majority of which is need-based aid. The annual average need-based grant to a financial aid recipient for the 2007-08 academic year -– the most recent year for which final totals have been calculated -- was $26,685.

In December 2008, Duke completed an initiative that raised more than $308 million in new endowment funds to strengthen its financial aid programs. The initiative helped make possible a series of changes, announced in 2008, that expanded financial aid for undergraduates. Families making less than $40,000 a year are not expected to pay tuition or contribute to the costs of room and board and other expenses. Loans have been eliminated for students from families making less than $60,000 and significantly reduced for all others receiving need-based aid.

Duke admits U.S. undergraduates based on their academic accomplishments and potential without regard to their ability to pay and then meets all of their demonstrated financial need. Only about two dozen private institutions in the nation maintain “need-blind” policies for admissions and financial aid. Duke also provides need-based aid to a limited number of international students.

In addition, the new budget calls for a 6.7 percent increase in financial aid for graduate and professional students.

Under the new budget, income from tuition and fees from Duke’s eight schools and Trinity College will account for 17.2 percent, or $314 million, of the revenues. An additional $812 million in revenue is projected to come from grants and contracts, including indirect cost recoveries of $168 million, which cover about 70 percent of the costs Duke incurs to provide the infrastructure to support research. Other revenues of $705 million will come from gifts, endowment income and other sources.

On the expense side of the budget, salary and wages -- which includes limited hiring of new faculty and staff -- will increase by about $4 million, or less than 1 percent, over the current year’s budget.

The budget includes support for academic priorities as developed through Duke’s strategic planning process. These priorities include sustaining faculty excellence, maintaining the quality of the student experience and continuing Duke’s fundamental commitment to affordability.

“In the face of this global recession, it is important for us to think creatively and ambitiously about how we can continue to support our most critical priorities, such as continuing to strengthen our faculty and making it possible for any outstanding undergraduate to attend Duke,” said Provost Peter Lange, the university’s top academic official.

“We are enlisting the help of as many people as possible -- faculty, staff, students, deans and other administrators -- as we determine how we can continue to establish our unique institutional identity.”

Executive Vice President Tallman Trask III said the budget reflects the high priority given to financially supporting the institution’s strategic goals.

http://www.dukenews.duke.edu/2009/05/budget09.html