March 31, 2009

Hotel School Strives to Meet Budget Reduction

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Unlike the other seven undergraduate colleges, the School of Hotel Administration is particularly market-driven because of its status as a “tub college.” Although this grants the School more financial independence, the University’s policies — including an across-the-board 4.8 percent budget cut — still directly affect how the Hotel School manages its $60 million budget.
“We are responsible for our own expenses and have our own revenue streams while we pay certain charges to the University, but we operate financially with a bit more independence than the other schools and colleges,” said Michael Johnson, dean of the Hotel School and the E.M. Statler Professor.
As a result, University policies — such as the elimination of need-based student loans for family incomes below $75,000 — will directly affect the school. These changes will place a heavier burden on the School, as almost 70 percent of the $6.7 million in financial aid the Hotel School distributes is funded by the School’s own operation budget.
“We expect, with the two latest rounds of changes in the financial aid [policy] … by the time those changes are implemented, our financial aid budget will go up approximately another $1.5 million,” Johnson said.
The Hotel School receives $2 million from restricted endowment funds to support its financial aid. This amount will be affected by the 15 percent reduction in the University’s endowment payout rate in the upcoming year, according to David Strong, associate dean for business affairs.
The Statler Hotel, an inseparable part of the undergraduate education at the School, is “part of the base of our budget reduction,” according to Johnson. “­Revenues from the hotel are considered part of unrestricted funds upon which our budget cuts are based.”
Johnson said that because the Statler Hotel’s budget is included in the Hotel School’s unrestricted budget, “our budget cut is higher than our proportion of students would indicate … we pay a higher share than you would calculate just from looking at the size of our student body.”
According to Strong, expenses from the Statler Hotel make up 24 percent of the School’s costs. At the same time, 26 percent of the School’s revenue is contributed by Statler.
On the other hand, about half of the Hotel School’s revenue is generated from tuition. As Cornell is admitting 100 more undergraduates in the class of 2013, the Hotel School — which typically admits 165 students — will welcome five more students in its new class.
Johnson said that the deans at the Hotel School have begun preparing for budget cuts at an early stage.
“Dean Strong and [associate dean for academic affairs Steven] Carvell started the process very early on of what we call ‘scrubbing the budget,’ which is a metaphor for saying we are going to look very closely on how we are going to spend money in every single area,” Johnson said. “Back last fall, as soon as we knew budget cuts were at as many non-personnel areas where we could cut costs. A significant amount of saving is going to come from that process.”
The School is undergoing a “three-stage process” in an attempt to meet the 4.8 percent budget cut, according to Johnson. First and foremost, the school re-examines and trims its non-personnel budget.
Secondly, the school looks to see if it can save money through staff reduction. Johnson emphasized the importance of the two University-wide voluntary retire­ment programs, which were an­nounced in late February. Ap­plications for one of the programs, the Staff Retirement In­cen­tive Program, will be due today.
“Having people using that program is important for us to meet this year’s budget cuts. We are following very closely the number of people who apply to that program and hope that enough people apply to that program so that we don’t have to make staff cuts. But if [there are] not enough people who apply, then we have to make staff cuts.”
Faculty is the last resort in the grand scheme of budget cuts, according to Johnson. The Hotel School has hired eight faculty members in the past few years, but thanks to several retirements, the School now has 11 faculty lines left open. Although these positions will be filled eventually, the School currently has no plan to hire.
“We’re less in a position to reduce our faculty. It’s already slightly smaller. But we are more in a position that, given the current budget situation, the growth has to be more targeted,” Johnson said.
He added, “Ultimately we want to make sure our students continue to get an excellent education … so the last thing you want to touch is the faculty, because they deliver the in-class experience.”
The dean also said that there had been no comprehensive study as to whether more or fewer classes would be cut this year.
“Classes are cut every year if they are not demanded. We can’t afford to run under-enrolled classes,” he said.