Stanford takes a cautious approach in its 2017-18 Budget Plan

Tim Warner, vice provost for budget and auxiliaries management, presented Stanford’s 2017-18 Budget Plan to the Faculty Senate yesterday.

While its underlying financial condition remains strong, Stanford is taking a cautious approach to budgeting for the 2017-18 fiscal year, largely due to uncertainties in federal research funding and slow growth in endowment payout, Tim Warner, vice provost for budget and auxiliaries management, told the Faculty Senate on Thursday.

Speaking at the May 11 meeting, Warner said Stanford will make selective investments in key programs next year. But the university is also setting aside $20 million in general funds as a hedge against potential funding shortfalls and to give Stanford the capacity to respond to long-range planning initiatives.

Tim Warner standing before the Faculty Senate.

Tim Warner, vice provost for budget and auxiliaries management, presented Stanford’s budget for the 2017-18 fiscal year to the Faculty Senate on Thursday. (Image credit: L.A. Cicero)

Warner said the 2017-18 budget strengthens Stanford’s financial base, providing the foundation for some of the initiatives expected to emerge from the process that President Marc Tessier-Lavigne and Provost Persis Drell launched in April.

“The long-range planning process will have exciting implications a little later on in FY18,” Warner said.

The budget plan for the fiscal year beginning Sept. 1 includes increases in financial aid for undergraduate and graduate students, and salary increases for faculty and staff.

Warner said next year’s budget continues Stanford’s multi-year strategy to expand housing opportunities for students, faculty and staff. The Escondido Graduate Residences recently received design approval from the Stanford University Board of Trustees and site preparation is underway. This year, Stanford will open the first units in University Terrace, a community of 112 condominiums and 68 single-family homes for faculty.

In presenting the $6.3 billion budget to the senate, Warner said Stanford is in excellent financial condition, due to its underlying financial structure.

The budget plan will go next to the Stanford University Board of Trustees for approval at its June meeting. A formal budget document will be available on the Stanford Bondholder Information website following board approval.

Consolidated Budget for Operations

The Consolidated Budget for Operations includes all of Stanford’s anticipated operating revenue and expenses for the coming year, though the budgets for Stanford Health Care and Lucile Packard Children’s Hospital are separate.

Overall, the Consolidated Budget anticipates a 5 percent increase in revenue, with an ending surplus of $165 million on $6.3 billion in revenue.

The revenue increase is the result of a 12.6 percent rise in investment income and an 11.6 percent increase in health care services, moderated by a 13 percent reduction in revenue from SLAC National Accelerator Laboratory. The decline in SLAC’s budget is planned, as several construction projects approach completion. However, SLAC’s sponsored research is expected to remain stable and the $1 billion upgrade to its Linac Coherent Light Source is still on track.

Income from tuition is expected to grow 3.7 percent next year, due to a previously approved 3.5 percent increase in undergraduate and graduate tuition, as well as a slight growth in the number of graduate students.

Although Stanford faculty continue to be very successful in winning competitively awarded federal research funds, the uncertain state of the federal budget for research makes it difficult to predict sponsored research revenue. However, for the budget projections, total sponsored research revenue, excluding SLAC, is projected to grow 3.6 percent.

Stanford Medicine is projecting continued strong growth in federal research revenue, with a 5.8 percent increase in 2017-18. Federal research support in the non-medical schools and units is projected to be flat. However, there is considerable uncertainty about those numbers, given the precarious state of the federal budget.

Expenses in the Consolidated Budget are projected to increase 4 percent in 2017-18.

Spending on need-based financial aid, athletic aid and graduate student aid will rise by 4.3 percent in 2017-18. The increase will allow Stanford to maintain its generous need-based aid program for undergraduates, particularly for families with incomes below $125,000. Financial aid for graduate students will rise 4.5 percent, reflecting more generous graduate support in selected disciplines and a slight increase in the number of graduate students.

Stanford expects compensation costs to rise 7.8 percent next year, reflecting a strong salary program, a 3.6 percent overall increase in headcount and targeted salary enhancements.

The university has budgeted $1.7 billion for other operating expenses, an amalgam of graduate stipends, operations and maintenance, utilities, capital equipment, materials and supplies, travel, library materials, subcontracts and professional services.

General Funds Budget

General funds can be used for any university purpose and support many of the core academic and support functions of the university.

Stanford expects a general funds surplus of $26 million in 2017-18.

The $1.45 billion General Funds Budget includes $74.7 million in incremental allocations, most of which will cover inflationary costs. The remainder will fund a variety of high-priority purposes, including the following:

  • Endowment mitigation: Stanford has allocated $4 million to help schools that rely heavily on endowment payout to reduce the need to draw on reserves or reduce their budgets to address the shortfalls in endowment payout.
  • Faculty, academic and research support: Stanford has allocated $6.8 million in continuing support for the Faculty Development Initiative and the Faculty Incentive Fund to encourage ongoing recruitment of underrepresented minorities and women to the faculty. The allocation also replaces one-time funding in Environmental Health & Safety and the Office of the Vice Provost for Teaching and Learning, and enhances faculty child care programs.
  • New facilities debt and operations: This $1.7 million category reflects the costs of bringing new facilities online in the coming year. The most significant addition is the Bass Biology Research Building, which is expected to open in late 2018.
  • Administration: Stanford has allocated $5.9 million to fund several administrative programs, including part-time readers in undergraduate admissions and a student services professional in the School of Engineering.
  • Systems and security: Stanford has budgeted $2.5 million for Graduate Financial Planning System expansion, Stanford Web Services, the Office of Development and the Department of Public Safety, which will receive funding to add a sworn deputy position and to expand security patrols.

Capital Budget

Warner also presented a 2017-18 Capital Budget, which is part of a rolling multi-year plan that includes projects in progress or expected to begin over a three-year period.

The Capital Budget calls for $1.2 billion in expenditures in 2017-18, supporting a range of projects requiring $4.3 billion in total expenditures once completed. Expenditures will be significant under next year’s budget for several construction projects:

  • Center for Academic Medicine 1 Building, an administrative building for Stanford Medicine.
  • BioMedical Innovations Building, the first in a series of buildings that will replace several outdated and inefficient laboratory research spaces with state-of-the-art research facilities for Stanford Medicine.

Election results announced

In other business, Debra Satz, chair of the senate, announced that Elizabeth “Liz” Hadly, the Paul S. and Billie Achilles Professor in Environmental Biology, will serve as chair of the 2017-18 senate, and Michele Elam, professor of English and director of the interdisciplinary Graduate Program in Modern Thought and Literature, will serve as vice chair. Their one-year terms will begin in Fall Quarter 2017.

The minutes of the May 11 meeting, including the questions and answers that followed Warner’s presentation, will be available soon on the Faculty Senate website.