Even with Northwestern’s positive endowment returns and a more optimistic financial state than in past years, University President Henry Bienen and finance officials said several additional costs and the previous low financial performance tighten next year’s budget.
The constrained budget means that the money each school receives could be increased at a lower rate than past years, although universitywide budget cuts most likely will not be needed.
“The budgets don’t look great for next year,” Bienen told The Daily on Friday. “I hate to be a party pooper, but they don’t look great because we’re still living with the down market endowment. It will look better if the markets hold up, but I’m still feeling pressure.”
Bienen said the list of projects the university must complete before the budget is finalized in April is “vastly longer” than the amount of disposable money. The budget will be approved by the Board of Trustees in June.
The university’s $3.5 billion endowment grew by 8.1 percent during the 2003 fiscal year after losing money for three consecutive years. NU’s net assets also increased by 8.3 percent in the 2003 fiscal year after two years of decline, according to the university’s most recent financial report. But the positive affects of these returns won’t be felt for several years.
“I’m very pleased that our investment are doing better. In the long run, that’s the financial health of the university,” Bienen said. “But in the short run, it affects how much money we have to spend in a two to three year average because we use an averaging formula. We have a buffer against bad markets and good markets.”
As a result some of NU’s undergraduate and graduate schools will be looking more closely at spending in programs and faculty searches — a process that many officials said they almost always do even without a reallocation that requires them to reduce costs.
Adair Waldenberg, associate dean for business and finance for the Weinberg College of Arts and Sciences, said a tighter budget means “leveraging your resources” and prioritizing the needs of undergraduate programs and the number of faculty searches.
“You don’t want to get yourself in a bind in always just adding,” she said. “You want to make sure that the things you are already doing are the best ones you should be doing.”
Last year deans and vice presidents in various departments and schools slashed budgets between 2 percent and 2.75 percent as a result of the reallocation, which was one of the largest cuts in the past decade.
An emphasis on research infrastructure is one of the main factors soaking up available new money, in addition to increased health care costs for faculty and staff. According to Eugene Sunshine, NU’s senior vice president for business and finance, the university will spend at least $5 million more than it normally would on new programs and technology related to research.
“It’s a year where we’ve decided we have to make a larger than usual incremental jump in expenditures,” Sunshine said. “But it’s not new. It’s just this year is bigger than prior years.”
These constraints are not unusual, Sunshine added, but the culminating costs of each have taken its toll on the university’s budget.
“(Formulating the budget) is always challenging,” Sunshine said. “There’s always many more items that you’d like to spend money on that are worthwhile relative to what the revenue for the university is.”
For the School of Music, which recently recommended eliminating its organ program to allocate resources more effectively, tighter budgets mean looking critically at commitments to make sure the school has funding to support them, said Rene Machado, an associate dean of the school.
“It’s not looking to cut costs,” Machado said, “but to use our resources as effectively as possible.”