January 28, 2013

Cornell: Balanced Budget in Contract Colleges’ Future

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After several years of diminished state funding, Cornell’s contract colleges will operate with a balanced structural budget by the end of Spring 2013 –– which means that they will no longer be spending more money on consistent expenditures than they take in.

State appropriations to the University’s contract colleges — the School of Human Ecology, the School of Industrial Relations, the College of Agriculture and Life Sciences and the College of Veterinary Medicine — have decreased by nearly 20 percent, or about $31 million, to $122 million after the financial crisis in 2008, according to Elmira Mangum, vice president for budget and planning.

However, last week New York Gov. Andrew Cuomo (D) put forth a budget for the 2013-14 fiscal year that preserves this year’s spending levels on education. Next year will mark the second year of unchanged funding for State University of New York colleges, which includes Cornell’s contract colleges.

Prior to these two years, Cornell suffered four years of steep budget cuts, according to Ronald Seeber, vice provost for land grant affairs.

“With the budget proposal Cuomo put forward last week, we have now had two years of flat funding,” he said. “It doesn’t seem like much, but it follows four years of pretty steep budget cuts.”

State funding to Cornell’s contract colleges fell from about $135 million to about $123 million from the 2010-11 to 2011-12 school years.  However, Cornell plans on receiving a similar amount of $123 million from the state in 2012-13, according to the University’s Budget Plan.

In 1985, the state provided 55 percent of the budget for the School of Industrial and Labor Relations. Currently, the state funds nine percent of the ILR School’s $66 million budget, according to ILR Dean Harry Katz.

“We, of course, have had to diversify.  What has become the largest share [of the ILR school’s revenue] over the long run is tuition revenue,” he said.

Tuition and other fees currently account for about 55 percent of the ILR school’s budget, according to the University’s budget plan.  Growth in average class size from 700 students to 900 students over the past 15 years and increasing in-state tuition for contract colleges have caused this change, according to Katz.

“In the last three or four years, where we have had [endowed college] tuition increase by five or six percent … in-state tuition has actually increased by … seven or eight percent,” Seeber said.  “It’s a short-run measure; there’s a lot pressure to not raise tuition at these levels.”

However, funding the contract colleges through tuition hikes is unsustainable, he added.

“We simply won’t be able to raise tuition at the rate we have in the past few years,” Seeber said. “The cost of higher education will not be solved on the backs of its tuition-paying students.”

Katz echoed his sentiments.

“We realize that we cannot keep increasing tuition,” he said.  “This has us turning more aggressively towards other revenue streams.”

For the ILR School, this has meant aggressively pursuing gifts, Katz added.

“We receive annually $12 to $14 million [in gifts]; most of that we put into our endowment,” he said. “When I first came [to Cornell in 1985], we were raising three to four million [dollars].”

ILR’s initiative is in line with the University’s efforts to boost endowment, Katz said.  Cornell’s endowment has increased by nearly 16 percent from 2010 to 2011, according to the budget plan.

“We invest [much of the donations] in the form of the endowment,” Katz said.  “What we use on a current-use basis is the payment from endowment, and that is definition of sustainable.”

Cornell’s success in balancing the structural budget can be attributed to streamlining the University’s administration process, including shrinking the size of the faculty, according to Seeber.

“[In 2009], we had a voluntary retirement program that had allowed a lot of employees to leave the University in very favorable conditions,” he said. “The state of New York also had a voluntary retirement program that allowed employees to retire favorably.  So we have reduced our [faculty] employment pretty significantly.”

A smaller faculty and administrative body has been crucial to the College of Agriculture and Life Sciences’ success in reining in spending, according to CALS Dean Max Pfeffer.

“There were a handful of years after the big crash [in 2008] where we only made a couple of hires,” he said.  “Recently, donations have allowed us to hire a couple more faculty. Right now, we have reached an equilibrium of a sort.”

CALS has also reviewed the organization of its land grant mission — providing education, applied research and outreach to benefit the citizens of New York State — in the wake of the state funding cuts, Pfeffer said.

“We have, in the past year, conducted a comprehensive review of the facilities and are in the process of viewing some facilities where we might reduce operations in some and maybe shutter some,” Pfeffer said.  “We have closed our animal waste facility and we are planning to consolidate some research facilities.”

Pfeffer said he is cautiously optimistic about the University’s fiscal future.

“We see some budget stability out into the future,” he said. “With that said, we don’t plan on seeing rapid increases in revenues because the state is still struggling to balance its budget.”

The balanced budget represents a campus-wide effort, Mangum said.

“The urgency was felt by everyone on campus,” she said.  “And everyone participated in getting there.”

Original Author: Justin Rouillier