American University’s Board of Trustees unanimously passed the institution’s fiscal years 2010 and 2011 budgets.
The Feb. 27 vote was the culmination of an inclusive process headed by budget committee cochairs Provost Scott Bass and Vice President and Treasurer Don Myers that began in September and included two town hall meetings.
“The budget was prepared and thoroughly vetted through the entire university community in such a professional way, and laid out in such a clear and sophisticated way for the Board of Trustees, that even after a thorough discussion, it was unanimously approved with no dissension or disagreements on anything,” board president Gary Abramson said.
The budget, $456.7 million for fiscal year 2010 and $479.2 million for fiscal year 2011, allows for implementation of the strategic plan, and includes money for expanding academic programs and services, increasing salaries for faculty and staff, and hiring additional faculty. That AU’s budget includes increases, and not cutbacks, is unique among institutes of hiring learning in these lean economic times, Bass said.
“The board’s action today really allows us to say to the current students and to prospective students that not only are we stable as an institution financially in terms of our programs, but we’re going to be able to build over the next two years starting today in terms of the resources that are available to our students,” he said. “This is a major mark for the institution.”
Because AU generates the overwhelming majority of its revenue for the operating budget from tuition, and not its endowment, the downturn in the market has not affected it as much as other institutions throughout the country. Less than 1 percent of the new budget is dependent on endowment income.
“We’re proud of the fact that our endowment has grown substantially in the last two decades,” Myers said. “We have been very conservative in not putting a lot of the [endowment] revenue into the budget.”
The enrollment projections used in the budget are very conservative, Bass said. But even if enrollment falls short, there are several safeguards built into it to ensure its solvency. Those include a quasi-endowment, flexibility on spending, a tuition reserve, and the possibility of deferring filling new positions until September of each year until enrollment goals have been achieved.
“All of our applications and all the indicators are showing very positive trends,” Bass said. “On one hand so many of our colleagues and institutions are talking about substantial reductions. Being conservative in the good times allows us in these leaner times to really have the resources to build the institution.”
Included in the budget are a 5 percent increase for tuition, a 4.5 percent increase for residence halls, and a 4 percent increase for meal plans for each fiscal year. Tuition rates for the MBA and graduate business programs will increase 3 percent each year. The graduate tuition rate for summer 2009 will be frozen at the summer 2008 level and will increase 5 percent for summer 2010.
“We feel very comfortable with the range we’re doing and our competitiveness and our positioning for the product we offer in terms of where we fit with other universities in terms of price,” Bass said.
AU tracks 67 similar institutions and ranks 40th among them in cost, Myers said.
“We still feel that we’re at the midrange of where we’d like to be,” he said.
At every step along the way, the budget committee considered the university’s recently enacted strategic plan in deciding where to allocate resources, Bass and Myers said.
“The administration did a very good job in outlining how the new budget conforms to the strategic plan, and how the strategic plan is influencing everything we’re doing,” Abramson said. “It was a long tedious project, but what made it easier was all the homework that had been done in advance. There were two town hall meetings. Our student trustee representative said the students felt very comfortable in terms of having access to the process, our two faculty representatives felt the same way. By doing it in a very open, transparent way, it helps.”
A detailed budget report from President Kerwin will be distributed to the university community later this month, and will also be on the Budget Office Web site.