Three years ago, the University forecasted a budget deficit of about $122 million, but Day Hall administrators now say they look forward to closing that gap almost completely by the end of Fiscal Year 2012 on June 30 — one year ahead of schedule .
According to Elmira Mangum, vice president for budget and planning, several unexpected increases in revenues helped the University reduce the deficit.
“The market is recovering faster [than originally projected] overall and we have a lot more current use annual gifts … [which] helped with meeting the budget for ongoing annual costs,” Mangum said. Current use annual gifts are donations that Cornell is allowed to use immediately, unlike restricted gifts that are often tied to a specific project, building or department, or has timing constraints on when the funds are allowed to be withdrawn.
“The original plan [in 2009] had the endowment growing back a little slower, and [the increase in current use annual gifts] was one of the other major things that is helping us to recover a little sooner than we thought,” Magnum said.
Magnum cited the endowment’s quicker than expected recovery as one of the primary reasons for the increase in revenue streams.
“Last fiscal year, where the endowment [return] was close to 13 percent, our planning thought the endowment would recover much slower rate, at seven percent or 8 percent,” Mangum said.
If the endowment gets a higher than expected return, the University can draw more money from the fund, and therefore decrease the deficit to a greater degree than originally planned.
“The year before that, when the endowment’s return was almost 20 percent , which was another year where we thought it was going to continue to slide,” Mangum said. “The investment strategists and the changes made by the investment committee worked wonders … the recovery is much faster.”
Increases in current use gifts, which University fundraisers said they have been stressing to alumni donors in recent years, have also helped the endowment grow back more quickly than originally projected, according to Mangum. Cornell’s endowment dropped by 27 percent in value in the six months that followed the stock market crash in 2008, which has limited the University’s ability to use the endowment to pay for the budget deficit.
“The increased giving allowed us to drop the endowment payout a year earlier” than originally planned,” Mangum said. As a result, the University could “let the endowment grow back to pre-crash levels and resume ‘larger’ payouts sooner.”
Raising revenue from recurring sources, such as tuition, also helped mitigate the budget shortfalls, according to Mangum.
“Increases in tuition and fees and increases in giving have helped us retain the world class faculty that we have because they still have to be competitive with their peers in terms of salary increases,” Mangum said. “Moderate increases in dining costs, housing increases and increases in tuition and fees have allowed us to downsize … and take out some of the ongoing recurring costs.”
Cornell has also been able to reduce its deficit by cutting costs through organizational restructuring over the past three years, according to Mangum.
“The biggest [cost cutting] we did was we contained our operations through organizational restructuring,” Mangum said.
Among the cuts have been reductions in the number of employees at the University, she said.
“Cornell’s employee base was down 10 percent when they originally thought it was going to be five percent, or around 400 people,” she said.
According to the Division of Planning and Budget, Cornell will be able to reduce $201.8 million of recurring costs — expenses that are predictable on a long term basis — through Fiscal Year 2013.
A number of individual colleges departments have been faced with budget cuts in recent years –– such as the Department of Theatre, Film and Dance –– or eliminated entirely, such as the Department of Education. Many of these changes have provoked dissent across campus.
However, Mangum said that the administration’s method of making cuts is aimed at protecting the University’s academic integrity.
“Our priorities were always colleges first, academic support second and then administration,” Mangum said. “That’s why you see a lot of reductions in the administrative areas, which represents a larger relative reduction than the other two categories.”
Mary Opperman, vice president for human resources, said that downsizing –– the University has eliminated about 800 positions since 2008–– has greatly affected current employees.
“We’ve been measuring quality of services … and obviously some services are affected. You have fewer people then you’re not going to be able to offer the same services,” Opperman said. “Almost every area of the University is smaller than what it was before … from the staff’s standpoint, they are working so hard to minimize the impact on the students and customers.”
Opperman also cautioned against the negative impact of increasing workloads on a strained staff.
“For the staff, the impact has been on them. They’ve been working so hard and it’s been very difficult for them. They are feeling stressed … and we are worried about that, their well-being and workload,” Opperman said.
One important source of cost reductions is the Administrative Streamlining Program, which is aimed at ensuring that the University is functioning as efficiently as possible, according to Mangum.
“The Administrative Streaming Program, which is a thing that Cornell had engaged with a consulting firm, has helped define and capture organizational savings,” Mangum said. “The whole idea of a streamlining effort is you can still deliver the same quality of the same services for less money.”
According to John Adams, assistant vice president for ASP, the program will permanently reduce the budget by $38 million in Fiscal Year 2011, $19 million in Fiscal Year 2012 and $20 million in Fiscal Year 2013.
Adams offered a different perspective for the impact of restructuring efforts on University services.
“In general, I don’t think services have been affected, but people who have been here for a long time probably would argue against that,” Adams said. “Part of what’s happening is there have been investments in technology enhancements to help offset [the reduction in staff].”
“For example, we are bringing in a new human resources software package and that will free up a number of positions to do other things,” Adams said. “Right now, in order to get something done you have to have somebody else to look for you, whereas in the future you would be able to do that yourself, and that will free up somebody who would be sitting at a desk and keying in things all the time.”