For the second year in a row, Webster University is making mid-year budget adjustments. The university is predicting a $6 million shortfall for the Fiscal Year (FY) 2014, which ends May 31. Webster’s total budget for FY14 was $221.4 million.
After selecting where mid-year cuts will occur, Webster Provost Julian Schuster and Chief Financial Officer Greg Gunderson said the university will focus on structurally re-aligning the budget for FY15. Both presented and answered questions about the budget at a Faculty Assembly meeting on Thursday, Feb. 6. Schuster said the budget process for FY15 will look different.
“Our business model, as it operates currently, needs to change,” Schuster said at the meeting.
The university came up $12 million short while balancing its current budget. It took care of half of that by more wisely managing expenses. Webster saved another $4 million by changing its early retirement benefits plan.
According to a Webster Today post, pre-65 retirees will pay 100 percent of their medical benefits. Currently, the university pays a portion of the monthly premium, depending on the employee’s age and time at Webster.
Gunderson said the law required the university to set aside money for that program, which Schuster said not many used.
That leaves $2 million left for the university to make up in targeted mid-year reductions. Schuster emphasized that the reductions would not lessen the university’s academic enterprise. Gunderson said in a Journal interview that the entire university community, including administration, will be frugal.
“Frugality applies across the organization,” Gunderson said. “We are all stepping up.”
Faculty Senate President Gwyneth Williams described Schuster as honest and transparent. She said she opened the door during the Faculty Assembly Meeting for faculty to ask hard questions.
Williams said the conversations between faculty and administrators regarding the shortfall are more contextual than the conversations were last year when the shortfall was announced.
“I think we’ve had much fuller conversations now about how there need to be structural changes,” Williams said. “I think people are now seeing it as part of a bigger challenge that is endemic to higher education and that is going to need bigger more permanent answers.”
Gunderson said at the Faculty Assembly meeting that Webster’s intention for its FY15 budget is to reset the base of the budget to fit within existing revenue.
At the meeting, School of Communications Professor Joe Schuster asked why Webster budgeted for a growth in revenue after the shortfall last spring.
Gunderson said the university set revenue targets last year based on what it expected new programs to achieve, which resulted in budgeting for a revenue growth in FY14. Then the university set aside half of that budgeted revenue growth, which left Webster budgeting between a 2 and 2.5 percent growth in FY14. Julian Schuster said the budget process needs to be different for FY15.
“Next year’s budget will be fundamentally different than this year’s budget,” JulianSchuster said at the meeting. “Otherwise we will have the same conversation next year. We will budget more than we will get in revenue and then we will go to cuts.”
When forming a budget, the university first sets tuition rates, then it makes enrollment projections. From those two elements, it forms a budget and allocates the funds.
For FY15, the university will cap its enrollment projects at the actual enrollment numbers for FY14 for planning purposes.
“Clearly that budget (FY15) will be a smaller budget than this fiscal year’s budget because we’re reassessing our enrollment projections in light of national enrollment trends for graduate students and we want to be more conservative,” Gunderson said in an interview with The Journal on Feb. 4.
Student tuition dollars make up 95 percent of Webster’s revenue. While undergraduate enrollment was up this past year, graduate enrollment had declined. That decline in graduate enrollment contributed to Webster’s current shortfall projection.
At Webster, 75 percent of all graduate enrollment decline comes from two programs: The master’s of business administration and master’s of counseling.
Graduate students are responsible for about 75 percent of Webster’s revenue while undergraduate students make up the remaining 25 percent.
The Council of Graduate Schools reported a persistent decline in M.B.A. and law-degree enrollments, according to a 2012 article in The Chronicle of Higher Education.
A Moody’s Investors Service 2011 report stated “Many public and private universities with both undergraduate and graduate programs have been relying on graduate-student enrollment to help build net tuition revenue as various pressures encumber undergraduate net tuition-revenue growth.”
Moving forward, the university will increase recruitment, tighten programs and launch new programs that are in demand in the U.S. Julian Schuster said Webster will also evaluate its external campus locations.