Update on the University Budget

March 11, 2009

Dear Friends:

These days it seems like you cannot open a newspaper without reading yet another story about layoffs, bankruptcies, and foreclosures.  Virtually every sector of the economy is being affected, higher education included.  This steady drumbeat of bad news is certainly heightening anxiety.  Thus it is not surprising that many of you have written to me asking how Tufts is doing.

The bottom line is that we are faring reasonably well under the circumstances.  I would like to share with you in writing what I have recently communicated to faculty and staff in open meetings on all three of our campuses.

First, the good news.  Despite declines in current and anticipated revenues, we are projecting a balanced budget for both this fiscal year and FY2010.  We expect that our returning students will need more financial aid because of the economy.  To ensure that we can continue to meet their full demonstrated need, we have increased the financial aid budget by 12 percent.  This is the only expense in next year's budget that will increase as a matter of policy.  To our knowledge, no undergraduate has had to withdraw from Tufts due to financial distress.  We have been able to work with every family to keep students in school, even when both parents have lost their jobs.  Despite economic uncertainty, this year's applications were just a hair under last year's record.  We admitted our early decision applicants on a need-blind basis, and the class accepted to date is far and away the strongest academically that we have ever admitted to Tufts.  We have seen increased applications to many of our graduate and professional programs, and we have been able to maintain support for graduate student stipends and fellowships in spite of the budgetary pressures.

I promised you in my earlier messages that we would put students first, and we have.

We have been able to maintain our priorities because we have built a strong financial foundation over the last few years.  Even with a decline in value that is now projected at 30 percent, our endowment still stands at roughly twice its value just six years ago.  In addition, our alumni continue to support the university generously.  Despite the challenging economy, our annual fund is down only about seven percent year-to-year.  With more than two years to go, the Beyond Boundaries capital campaign has already achieved more than $950 million towards its goal of $1.2 billion.

Balancing the budget has not been without pain.  We have had to freeze salaries for all employees earning more than $50,000, and those earning less will see only very modest raises next year.  We have also had to lay off a small number of staff in some of our schools and in the central administration.  While a few other positions may be eliminated as we selectively downsize specific programs, we do not anticipate additional large-scale layoffs unless the economic situation gets significantly worse.

The fact that the overall university budget is balanced masks underlying deficits in a few schools.  Some of our schools face structural challenges that will require far more work before we can bring their budgets into sustainable equilibrium.  All of us in the central administration are working closely with the Deans to ensure that we preserve our core academic mission during these challenging times.

In this environment, nothing would please me more than being able to freeze tuition.  Unfortunately, the need to balance our budget means we cannot do so.  We have five major sources of revenue:  tuition and fees, income on the endowment, gifts for current use, research revenue, and income from clinical operations at the Dental and Cummings Schools.  Four of these five revenue streams are likely to decline next year.  (We are hoping to see some increase in research funding as a result of the recent stimulus package, but this will offer only modest relief to the general budget.)  Recognizing that many families are hurting financially, we have tried to contain tuition increases as much as possible.  Next year tuition and fees for undergraduates will go up by 3.5 percent, the smallest amount in 45 years.

Beyond FY2010, the university's financial picture is much less clear.  If things get worse, we will unquestionably have to look for additional savings.  Fortunately, if they get better, we should recover much faster than most of our peers.  At many of our sister institutions, endowment distributions are based on a 36-month trailing average value, effectively spreading the pain of any decline over three years.  As a result, those institutions will be making further cuts over a period of years even if the economy recovers.  Our budget for next year, on the other hand, takes into account the full impact of the decline in our endowment.  Except for the use of a relatively modest amount of reserves in the current year, we have already aligned our expenditures with our current revenues.  To put it another way, unless the economy continues to decline, there is no other shoe to drop at Tufts.

We are trying to manage conservatively through these extraordinary times.  We have had to make some tough decisions, but we are trying to do so in ways that recognize that people - our students, faculty, and staff – are the true foundation of the university's excellence.

Throughout this entire process I have been impressed by how everyone in the Tufts community has pulled together.  We continue to fulfill our core mission of teaching, research, clinical care and service in spectacular fashion.  Many of you have offered helpful suggestions on how we can operate more efficiently.  A number of our donors have actually increased their giving, recognizing that we need their support now more than ever.  And the students on our Medford campus are organizing a concert early next month to say thank you to our faculty and staff who during these difficult times are sacrificing so we can protect our students.  All of these actions make me proud to be President of Tufts.

You have my word that we will continue to try to be open and transparent as we navigate our way through this economic storm.  Thank you to every member of this special community for your patience and your understanding.

All the best,
Larry

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Lawrence S. Bacow
President
Tufts University