The rockefeller university

University’s $325 million operating budget closes with $1 million to spare

by ZACH VEILLEUX

Strong fundraising, access to federal stimulus funds and better-than-expected royalty income led the university to close the 2011 fiscal year with a $1.1 million surplus, but the approved 2012 budget is in a deficit position, according to Jim Lapple, vice president for finance.

“The university’s financial picture was stable in 2011 — our faculty competed strongly for federal stimulus grants and we had an excellent year for fundraising — but we are continuing to feel the effects of the 2009 economic turmoil,” says Mr. Lapple. “For that reason, with the Board’s approval, we have aggregated the fiscal year 2011 surplus with surpluses from fiscal years 2009 and 2010 in a reserve fund that will be used to address projected shortfalls in future budgets.”

This reserve fund, now totaling nearly $16 million, will be critical to help stabilize the university’s budget as spending from the endowment continues to decrease, Mr. Lapple says. Spending from the endowment — which accounts for approximately one-third of the university’s overall revenue — is based on a formula that considers the 12 most recent quarterly average market value figures. “Because the formula incorporates a time lag of three years, the declines we suffered in fiscal year 2009 will still be most significantly felt in fiscal year 2012 and beyond,” Mr. Lapple says.

The university’s fiscal year 2011 revenues, which totaled $325.3 million, come from three primary sources: grants and contracts from the government and private sources; income from the university’s endowment; and private fundraising efforts. Although spending from the endowment was down significantly, reflecting steep losses suffered in 2009, an especially good year for private fundraising made up some of the difference (see chart, below left). Government grants were up compared to previous years as a result of federal stimulus spending, and private grants were down slightly. Income from other sources, including license and royalty fees paid for the use of university-owned intellectual property, was also up.

On the expenditures side of the ledger (see chart), which totaled $324.2 million, fiscal year 2011 saw an uptick in research spending — the destination of those stimulus dollars — and debt service, which rose, as expected, because of bonds issued to finance a portion of the construction of the Collaborative Research Center. Administrative costs held steady.
In fiscal year 2012, the university is projecting a $6.9 million deficit despite the fact that expenditures will be down significantly, to just $305.6 million. “As with fiscal year 2011, the main factors are stimulus funding, which is tapering off, and endowment income, which will decline eight percent, from $97 to $89 million,” says Mr. Lapple. “Since this is the last year in which the endowment losses from 2009 will be felt, we expect that endowment spending will stabilize, or potentially increase, in future years.”