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.
A final product will be presented to the Board of Trustees in May for approval. Until that time, no decisions are final, he said.
Bacow had a meeting on Nov. 8 with the trustees. According to Linda Dixon, the secretary of the trustees, Bacow listed several items that account for the $36 million he is expecting to cut. His talk instilled confidence, Dixon said.
"The trustees felt that the university was in good hands … and stepped back," she said.
In addition to reaching out to the trustees, Bacow has made an effort to keep the Tufts community abreast of the university's economic situation. He has attended numerous meetings with faculty and staff, spoken to the TCU Senate and sent two e-mails to the entire community.
"He's been very open and transparent about the challenges we're facing because of the economy," Dean of Student Affairs Bruce Reitman said.
One option for reducing the budget is to freeze salaries for the coming year, possibly excepting those who earn under $50,000 annually. The faculty and staff have taken this prospect in stride, according to Bharucha.
"Obviously, faculty and staff are concerned about their own financial conditions and would love to see raises," he said. "Even though it's not easy for people to accept a salary freeze — and academic salaries are not high to begin with — the response that we've been hearing from the faculty is that they are completely supportive of students being the top priority."
Many U.S. universities have recently implemented freezes, but Spolaore said that if they continue in the long run, the unlikelihood of salary raises might jeopardize the caliber of faculty willing to stay.
"If it was more than a temporary measure, then the quality of the faculty would go down. That would be a real problem for Tufts," he said.
Part of the appeal of a salary freeze, though, is that it would enable the school to avoid firings, according to a number of sources. "Layoffs would be worse [than a freeze]. I appreciate the attempt to preserve jobs," Spolaore said. "We have to make sure that we do not … fire people that we need."
Still, not every job is guaranteed. "I don't want to have to lay off people, especially given the economy," Bacow said. "But if things get worse, we could be looking at layoffs."
Tufts has instituted a "flexible-hiring freeze," said Bacow, explaining that the university will only hire people for positions deemed critically important. "Each open staff position is being reviewed very carefully," Bharucha said.
New capital projects, including the construction of a biology engineering lab, will remain on hold. "We've had to pause the planning until the financial situation improves," Bharucha said.
Projects underway are not in danger of being halted. "[A] recent bond issue provided long-term financing for a variety of capital projects … currently underway on all three campuses," McGurty said. "We fully expect these projects will be completed."
The university also hopes to chip away at costs by reducing faculty travel. "We have increased teleconferencing and videoconferencing [on the Grafton campus] to reduce time and energy expenditures associated with trips to Boston, Medford and other venues," Kochevar said. "Our administrators and others across the university have curtailed discretionary travel and returned these savings to operating budgets."
Financial aid, other priorities stand out
Bacow and other officials have consistently established that the first priority for Tufts is to meet the full financial need of current Tufts undergraduates. This means that the financial aid budget will go up by $3 million to $4 million next year, according to Bacow.
The school resets this budget each year based on the economy and unemployment rates. It is generally increased during recessions, according to Director of Financial Aid Patricia Reilly.
"We've been working really hard to try to estimate what we think the increased need is going to be next year," Reilly said. "It's hard to do that because the situation seems to keep changing weekly."
Reilly said that her office has been in close contact with senior administrators throughout the crisis.
Need-blind admissions, which has been the unofficial policy for two years, may not be possible for the Class of 2013, but the admissions office is still hoping to abide by it. "It is our intention to read applications and select the next freshman class with need-blind admission practices," Dean of Admissions Lee Coffin said in an e-mail to the Daily.
But the admissions office will not know whether it can use need-blind admissions until late March, when it will determine the need of the incoming freshman class and the availability of funding for financial aid.
"We will endeavor to be completely need-blind, but we cannot commit to that because there's uncertainty as to how much financial aid that's going to require," Bharucha said.
The university's second priority is to maintain the current size of its faculty, which potential salary freezes could facilitate.
Despite the more stringent hiring policy, searches for new faculty are going ahead as scheduled, for the time being. Each summer, deans authorize hiring plans for departments, in most cases to replace faculty who have left. Searches are then conducted during the year, with hiring happening in the late winter or spring.
"As of now, we are proceeding with those searches to hire those faculty," Bharucha said. "But we recognize that should the financial situation deteriorate, it may be necessary for us not to fill some of those positions."
Spolaore said that the economics department is looking to expand its faculty with two new assistant professorships, positions that he said are greatly needed in light of the increasing number of students who are taking economics courses.
"I'm very grateful to the administration that this hasn't been stopped," Spolaore said. "We're told that unless the situation becomes worse, much worse than it is … we should be able to maintain the spots that have been approved."
Most of the budget cuts are designed to have minimal effects on students, as preserving the quality of Tufts' academics is another priority of the administration. "In our planning during this crisis, our top priority is our students," Bharucha said. "That's why we tried to find cuts in other areas."
Still, students will not be immune to the budget cuts. Support may be withdrawn for the abroad trips of student groups, such as the orchestra, Bacow said. If the situation becomes dire enough, even aspects of the "core academic mission" might have to go, including the Summer Scholars Program and provost scholarships for graduate students.
