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MEMORANDUM
March 9, 2015

TO: American University Community
FROM: Jeffrey A. Sine, Chair, Board of Trustees
SUBJECT: Winter 2015 Board of Trustees Meeting
______________________________________________________________________________________

On March 5 and 6, the American University Board of Trustees held its late winter meeting and took a number of important actions relating to leadership, facilities, and budget.

Leadership
The board elected a new chair, Jack Cassell, and vice chair, Marc Duber, to lead the trustees effective May 2015. Jack Cassell’s long commitment and connection to AU is inspiring to many. Marc Duber has been instrumental in helping shape our strategic thinking for our campus plan, both in terms of facilities and real estate. We are fortunate to have such capable and passionate advocates for AU leading the board into the future.

Facilities
The board passed a resolution to authorize the CFO, Vice President and Treasurer to proceed with a process to plan for a new science building as contemplated in the 2011 campus plan. A preliminary program statement, shared with the board by the College of Arts and Sciences, would co-locate natural sciences programs such as biology, chemistry, environmental science, and neuroscience in the new building.

University Budget
The board approved a budget for the next two years that carefully balances the most important needs of its constituents, focuses resources on our strategic priorities, and consolidates the progress we have made to transform the institution.

Developing the university budget is always a balancing act. We weighed many competing factors and considered challenging external conditions, including stagnating family income and wages, rising national student debt, new costs for employee health care and benefits, and a very competitive market for talented faculty, staff, and students in our local region. A tuition-dependent institution like AU is mindful of all of these competing interests but is especially sensitive to enrollment considerations.

This budget adjusts our ambitious revenue expectations in several categories to more accurately match our revenue performance. Though we have exceeded high expectations in terms of undergraduate enrollment, we have been less than successful in meeting heightened expectations for growth in other categories, most especially graduate enrollment.

Determined to address these competing interests and challenges, the board made several important choices in its final budget approval:  

  • Limited price increases to levels well below competitors, supporting the university’s continuing commitment to address affordability and reduce average student debt:  
    • Approved a 3 percent increase in tuition and fees for fiscal year 2016 and preliminarily targeted a 3.5 percent increase for fiscal year 2017, within budget guidelines approved by the board in November 2014. When factoring in lower increases for housing and meal plan, the total cost of attendance will increase by 2.5 percent for fiscal year 2016 and 3 percent for fiscal year 2017. 
    •  Allocated 30 percent of tuition revenue for financial aid, the large majority of which will be dedicated to need-based aid. 
  • Supported an enrollment model that calls for 100 additional freshmen in fall 2017.  
  • Reduced all base budgets by 1 percent in fiscal year 2016 and fiscal year 2017.  
  • Maintained a commitment to performance-based awards for faculty and staff with approval of a pool of 1.5 percent of all salaries for cash bonuses in fiscal year 2016 and a similar amount for base increases in fiscal year 2017. Cash bonuses in the first year will enable recognition of high performance while allowing some budget flexibility.  
  • Approved the use of supplemental funding from the tuition management reserve and revenue from the income on AU’s quasi-endowment to maintain quality and invest in strategic priorities.


This budget protects important commitments to maintain AU’s momentum, while being sensitive to the burden of costs for students, and recognizes the faculty and staff whose performance makes AU the institution it is today. The sacrifices that students and families make to save, borrow, and invest in AU tuition must be met by our commitment to maintain progress on affordability and debt reduction, reduce costs, and use some of our reserves to protect the institution from reductions that would otherwise be warranted.

We are grateful to the University Budget Committee for conducting a thorough and inclusive process. Their recommendations clearly aimed for the lowest possible budget increase, set realistic revenue projections, and maintained investment in important priorities.

We also acknowledge the input of the community, particularly our students, whose advocacy held great weight in considering this budget plan. We appreciate the spirited debate that yielded recommendations reflecting balance of a wide variety of interests and concerns, yet keep us moving forward.