In an email sent to the Northwestern community Thursday morning, University President Michael Schill, Vice President and Chief Financial Officer Amanda Distel and Provost Kathleen Hagerty announced the first review of the University budget model in at least twenty years.
This review comes amidst rising financial pressures, the statement said, including expenses related to “labor contracts, employee benefits, federal legislation, potential changes in federal policy, compliance, research administration, security and litigation.”
NU faced several unpredictable expenses in 2024. The University negotiated a new contract with Northwestern University Graduate Workers in February, which led to increasing the minimum stipend for graduate workers with subsequent raises in coming years. Additionally, NU agreed to pay a $43.5 million settlement in a class-action lawsuit against 17 universities accused of considering financial need in admissions that were reportedly “need-blind.”
By reviewing the budget model, the University hopes to ensure financial stability and improve budget efficiency by reviewing how financial resources are allocated, according to the statement. Other goals include increasing financial transparency, aligning resource allocation more closely with the mission of the University and encouraging innovation.
Constraints on both primary sources of unrestricted revenue for the University — tuition and the endowment payout — also played a part in motivating the review.
Schill told The Daily in an October 2024 interview that the University was trying to balance snowballing expenses while preventing tuition from rising dramatically.
“If you look at our health care costs, if you look at our litigation costs, if you look at salaries, all of these things are going up, and they’re going up faster than tuition. … We’re going to be in a tight budget situation for the foreseeable future,” Schill told The Daily.
Also included in the report was the annual University financial update for Fiscal Year 2024, a year that ended with a positive operating performance of $54.6 million, up from $8.6 million last year. Most of this profit will be retained by schools and units for pre-decided uses and investments, rather than general use.
Additionally, NU’s FY 2024 net assets increased to $15.6 billion, a $690.5 million increase mostly attributed to philanthropy and growth of the endowment. This increase was indicative of the “second-most-successful” fundraising year in University history.
This year’s fundraising and budget marks a win for the University after dealing with a budget deficit announced in 2018. NU resolved the deficit by drawing $100 million from its endowment in the following two years.
A significant amount of FY 2024 resources were allocated toward total compensation for faculty and staff through annual increases, faculty recruitment and retention pools and incremental resources to support increasing costs for employee benefits. Funding beyond that was allocated in part to increases for graduate student stipends and benefits. The University also continued to invest in student financial aid, with scholarships and fellowships totaling more than $618.3 million.
In the statement, NU acknowledged that FY 2025 may include some unknowns that could have an impact on finances. Ahead of these unknowns, NU is “working proactively to prepare for various potential impacts.”
Distel introduced the budget reform project to the Faculty Senate on Wednesday night.
“We really want to increase transparency and understanding in the process. We want to incentivize entrepreneurial activity,” Distel said. “Our model doesn’t do that in all areas of the University right now, and that’s important to Northwestern culture.”