printable versionModerate budget surplus is forecast
BY RAY DELGADO
John Etchemendy
The university experienced a "pretty good year" financially in 2005-06, thanks to strong investment returns and revenue increases from health-care services, but lower levels of research funding are predicted for 2006-07 and are a source of concern, Provost John Etchemendy said in his annual budget report to the Faculty Senate last week.
A $62.9 million surplus is forecast in the 2006-07 consolidated budget, which is expected to top $3 billion in revenues for the first time ever at $3.19 billion, a 7.2 percent increase from 2005-06, Etchemendy said. Expenses are estimated to be $3.06 billion, a 6.9 percent increase.
"The consolidated budget has a surplus of $63 million, which is very good," Etchemendy said. "But remember, it's only 2 percent of the $3.2 billion budget, so it's not a huge surplus. And most of it is ending up in restricted funds."
The consolidated budget, which covers the entire university except the hospitals (which are their own corporations), includes $809.3 million in general funds, of which $123.6 million flows to the Graduate School of Business, the School of Medicine, and the Continuing Studies and Summer Session programs based on previously agreed-upon formulas. After other transfers and adjustments, $675 million in general funds are allocated directly by the provost, a 9.6 percent increase from 2005-06.
Etchemendy noted that the Provost's Office fielded requests for funding last year totaling twice the amount of available general funds. This is "an expected challenge and, actually, a good challenge, because it shows that the schools are doing lots of things and want to do more," he added.
Investment income has been a boon to the budget, with a nearly 10 percent growth rate over the past five years, including a 12 percent rise—$586 million—in returns from the university's endowment. Revenue from health-care services is projected to increase by almost 10 percent to $354 million in 2006-07, due primarily to an 11.1 percent increase in the amount paid to the Medical School by the hospitals for the medical services of its faculty. Income from tuition is expected to rise about 5 percent to $544 million.
Although the budget shows a 4.2 percent increase in sponsored-research dollars, a majority of that increase is coming from new projects at the Stanford Linear Accelerator Center (SLAC), which is boosting its revenues by 17 percent. Direct-research revenues outside SLAC are expected to drop by 2 percent, however, due to a decline in research funding from federal agencies and to the completion of several large projects at the Hansen Experimental Physics Laboratory.
A new infrastructure-charge hike of 2 percent, which took effect in September 2005, is expected to boost revenues from $7.2 million in the 2004-05 fiscal year to about $35 million in the 2005-06 fiscal year.
The overall expense for salaries and benefits in 2006-07 is expected to increase by about 6.6 percent, with academic salary expenses increasing by about 7 percent due to a competitive salary program and a small increase in the number of faculty, the report said. Staff salary expenses are expected to grow by about 5.5 percent due to a merit program and staff growth. Benefits expenses are expected to decrease from 30.5 percent to 29.7 percent.
General Funds BudgetThe general funds budget, which consists of money controlled by the Provost's Office that provides substantial academic and program funding in addition to supplying the monies for the bulk of the university's administrative, compliance, fundraising and facilities costs, represents about 25 percent ($809 million) of the consolidated budget. The general-funds allocations controlled by the provost are expected to grow by about $59 million next year. Of that amount, $32.8 million will be allocated to new programs, with academic units receiving $12 million, facilities and other needs receiving $6.7 million, business affairs and systems receiving $5.3 million, student support initiatives receiving $3.6 million, the Office of Development and the Stanford Alumni Association receiving $2.7 million and compliance measures receiving $2.5 million. An additional $12.2 million will be held in reserve for future needs, Etchemendy said.
The growth of restricted and designated funds continues to outpace the growth of general funds, Etchemendy said. Meanwhile, the activities supported by restricted and designated funds rely on general funds for infrastructure. Increasing national and international competition for faculty also poses significant challenges stemming from escalating salaries, startup and retention packages and the high costs of housing in the Bay Area. To stay competitive, Etchemendy said, the university must invest increasing amounts in housing and salary programs.
Capital Plan and BudgetThe 2006-07 capital plan forecasts $2.2 billion in construction and infrastructure projects and programs that are currently under way or planned to begin over the next three years. The plan has grown significantly from the previous year's $1.3 billion due to the inclusion of several major initiatives: the new science and engineering quad, a new campus and parking lot for the Graduate School of Business, the Redwood City campus redevelopment project, a performing arts center, Panama Mall renovations and the initial phase of an undergraduate housing and dining master plan. The three-year plan will be funded from $357 million in current funds, $1.1 billion in gifts ($239 million in hand and $862 million still to be raised), $203 million in auxiliary and service center debt, $510 million in academic debt and $53 million from other sources. An additional $96 million of debt is required to complete prior-year projects no longer displayed in the three-year plan.