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12/10/96

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Rice outlines budget pressures for fiscal year 1998

When Provost Condoleezza Rice delivered her first budget presentation to the Faculty Senate three years ago, she expressed concern that there was no room in the budget for academic innovation.

"It looked like every single line in the budget had us spending every [dollar] that we could anticipate having," the provost said during her most recent budget report to the senate on Dec. 5.

The presentation, which she also delivered to the Board of Trustees at its Dec. 9-10 meeting, provided a preliminary look at the budget for the upcoming fiscal year.

By switching from an expense-driven budget to a revenue-constrained budget allocation process, Rice said, the university has been able to achieve what she calls "budget stability, where we can do academic planning on more than a one-year cycle."

This year's budget and future budgets include, for example, resources to support academic initiatives such as the Stanford Graduate Fellows and Stanford Introductory Studies, Rice reported.

"We are not in the process of budgeting and budget balancing for our health or for great fun," she said. "We are in the process of doing this so that we can create room to support academic innovation."

The budget for fiscal year 1997 (the 1996-97 academic year) also includes a $12 million unrestricted reserve to protect against shortfalls in income, particularly from cuts in government funding, which will continue to be an area of concern for fiscal year 1998, Rice said.

A major budget challenge for the upcoming fiscal year relates to how teaching and research assistants will receive their tuition money, the provost said.

Most graduate student research assistants and teaching assistants work half time. They are paid a salary and receive as a staff benefit the right to register for up to nine units of graduate study.

As part of the 1993 revision to rules governing research overhead costs, the federal government told Stanford that in 1997 it must stop "tuition remission" ­ the practice of charging tuition as an indirect cost to the university-wide benefits pool.

"This therefore becomes a general hit to the university," Rice said. "We've worked out a formula by which the university absorbs some of these costs and therefore can spread the remaining costs, we hope, in a tolerable way for principal investigators who have federal contracts. But this is a tremendous challenge."

The provost projects that the university will lose an estimated $8.2 million a year as a result of the federal policy change, "and that's base cost to the university."

Due to the economics of the region, Rice added, the university is "feeling for the first time real pressures in terms of recruitment and retention of staff." This is particularly true, she said, in the area of high-quality technical help in computing or in research labs.

"We are in an out-and-out competition with Silicon Valley, and that's, frankly, a competition that we are going to begin to lose," Rice said. In response to these pressures, she noted, the university is currently in the midst of analyzing staff salary pressures and the job categories that need to be addressed.

Other budget concerns, Rice said, relate to the current capital construction campaign. "The same hot economy that's producing salary staff pressures is now producing construction pressures as well," she said. "The construction market, which was a kind of buyer's market when we put together the capital plan and entered it, is now quite obviously a seller's market, so we expect that some of the project costs that we had estimated are, indeed, underestimated."

Rice prefaced her comments by saying this was a "first take" on what the fiscal year 1998 budget will look like.

"We don't have, in many cases, very firm numbers on some of the income categories. We most certainly at this point do not have very firm numbers on expense categories."

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-By Marisa Cigarroa-


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