Review of University Budget Reveals Projected Deficit of $3.2 Million

Provost of Academic Affairs Joseph Morreale and Executive Vice President of Finance and Administration Rick Whitfield presented a review of the audited 2005 budget and the projected budget for fiscal year 2006, which revealed an oversight of $2.5 million, paving the way for an $8.6 million deficit for fiscal year 2005.

Whitfield, who was hired by the University in November 2004, began by explaining the major changes that took place in fiscal year 2005; most of which were isolated to technological changes, such as the switch from the ISIS system to the Banner system, more commonly known as Project SPARTA, but also include his hire and the hire of William Black, vice president for Enrollment Management.

Shortly after Whitfield's arrival, Moody's Investment Services downgraded the University's credit rating from stable to negative, which was the third consecutive downgrade of the University's bond status. In order to re-establish a stable credit rating, Whitfield refinanced $40 million of the University's short-term debt to long-term debt. By doing this, the high interest rate of 6 percent was lowered to 3.3 percent, which according to Whitfield "bought us time-four years."

Currently, the University is posting a $60 million working capital, one which is mostly tuition dependent, meaning that the University receives a large sum of money at times when tuition is due and the months in between are "lean times," Whitfield said.

The budget committee predicted a total expenditure of $252 million for the fiscal year 2005; however, at the close of the year, the University had spent $260 million. The additional expenses incurred were mostly due to an increase in operational costs Whitfield said.

Additionally, the face of enrollment has changed steadily over the course of the last two fiscal years. The University missed the target for enrollment for Fall 2004; it exceeded its Fall 2005 target by 700. However, by missing the target enrollment in Fall 2004, the University lost $15.5 million in tuition and fees and $400,000 in the expected Housing budget.

The Patriot Act also aided in the failure to meet enrollment targets as it diminished the likelihood of international students applying and enrolling due to significantly stricter visa restrictions. "Six hundred international students did not return because of the Patriot Act," Morreale said. "These students usually pay full tuition and receive small amounts of financial aid, if any," he continued.

Similarly, the type of domestic students showing interest in the University has also changed. Morreale said, "We exceeded enrollment by 700 students, but the revenue wasn't there because we lost much more full pay students and gained 50 percent of discount students."

Although both administrators claimed to be pleased with the diversity of students on campus, they said it was necessary to compensate for students receiving such a large amount of financial aid by making changes in the University's marketing strategies. Thus, one of the goals for fiscal year 2007 is to aggressively pursue the international market.

Moreover, according to Morreale, "a breakdown in communication between the budget office and the provost's office" allowed the provost's office to overspend on faculty. Because the University had been offering an early retirement plan, many faculty members opted into it creating the need for a larger adjunct faculty.

Calling it a "curious error" when asked to specify how the budget committee noted this miscommunication happened in fiscal '05 but failed to expect its repercussions in fiscal '06, Morreale said, "I was spending, and they were not recording. The good news is we have hired a lot of faculty, improving the faculty to student ratio."

In the current fiscal year 2006, the University has numerous initiatives to remedy the large debt incurred in fiscal '05. The administration plans to analyze and address the fact that despite meeting enrollment targets, the University is not receiving the expected amount of revenue as graduate enrollment is down and discounted programs are on the increase. Subsequent to the audit findings of '05, the once projected $4 million surplus for '06 has been reconfigured to include the $8.6 million deficit of '05. The new projected outcome for '06 is a $3.2 million deficit.

To combat the deficit, the University will apply contingency plans and practice prudent budgeting. Additionally, to target the changes in enrollment, Black and his office will comb the European market for students and attempt to establish a better connection between the offices of Enrollment Management and the respective deans of each school so they may target certain types of students specifically.

Morreale said the three areas where enrollment will focus its attention are graduate students, both graduate and undergraduate students in nursing, and liberal arts students as Dyson College of Arts and Sciences has the highest current enrollment.

Morreale said, "We are committed to a balanced budget for fiscal year 2007."

Top administration officials have given this time period in the University's history a variety of names: Frank Monaco, director of IT, calls it the "Trough of Disillusionment"; Whitfield awards it a much more optimistic point, "the Valley of Discovery"; Morreale considers it the "Mountain Peak of Demonstration."