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Stanford unveils plan to address budget shortfalls

STANFORD -- Stanford University will draw on reserve funds, cut spending and limit hiring to address budget shortfalls, the University announced Thursday, May 2.

Officials estimated those shortfalls at $20 million in the current fiscal year and $30 million in the next. (The Stanford Medical School, which has a separate budget, expects shortfalls of $9 million and $14 million.)

"This plan has been carefully worked out with the deans and other University officers in response to our new circumstances," President Donald Kennedy said. "It is designed to spare people and programs to the extent possible, and to preserve the quality of a Stanford education."

University officials said that no layoffs are expected to result this fiscal year from the actions announced Thursday and that they will do everything possible to avoid layoffs in the next year. They added that student financial aid will be maintained, and the tuition increase will be held to the previously pledged one percent above the expected rate of inflation.

In an address to the Faculty Senate and a written message to the Stanford community, Provost James N. Rosse announced the list of actions "to mitigate the impact of its new indirect cost rate on the University's operating budget for current and future years." The Office of Naval Research a week earlier unilaterally cut from 70 to 55.5 percent Stanford's provisional rate. Each percentage point equals about $1.25 million to the University's budget, and while a higher final rate is possible, it may be two years before that is determined.

"Because this reimbursement for indirect costs of research represents money that the University has already spent or committed to spend on things such as libraries, utilities, building maintenance and administrative services, a rate reduction of this magnitude sets before us a daunting financial challenge in the form of large budget shortfalls for the current and coming year," Rosse said. "It is, however, a challenge that we believe we can and will overcome."

While cautioning that the long-term budget outlook must be addressed, too, Rosse said the first priority was to solve the short-term problems. The University's objectives in that, he said, were "to reduce expenses as much as we can bear," limit disruption of academics and services, reduce hardship to individuals, and limit the use of reserve funds.

Stanford officials estimated that balancing the budget this fiscal year will require approximately $20 million, half of it from reserve funds, the other half to be found through six actions:

Next year's operating budget, which is to be unveiled in June, is facing a $30-million shortfall, Stanford officials estimate. To cover that, the University will commit an unspecified further amount of reserve funds, plus:

For the long term, the provost said, there must be changes in the scope and priorities of Stanford to deal with a tougher economic climate. Contributing to that climate are weakened returns on investments, restraints on tuition increases, a decline in the volume of sponsored research and likely limits on indirect cost reimbursement.

"The implications are clear," Rosse said. "Stanford University will have a diminished capacity in the future to continue all the activities it has currently undertaken. But while some opportunities will be lost, we can and must protect the essential quality of the institution."

The new Cabinet Committee on Budget and Strategic Planning, which has begun to meet, will reevaluate Stanford's priorities and develop specific proposals, Rosse said. The committee - which includes faculty, administrators and students - will communicate frequently with the Stanford community, he said, and present recommendations in the spring or summer of 1992.

The new cuts come after the University had already taken major steps to deal with financial challenges that began with major damage from the 1989 Loma Prieta earthquake and continued with the tougher economic climate. The savings steps included a "repositioning" program begun in February 1990 that cut $22 million from administrative and support services, and one-time savings of $8 million through budget holdbacks and the acceleration of repositioning announced in November 1990.

"There is no question that Stanford faces challenging times and tough choices," Rosse said.

"Yet there is no cause for pessimism. It is said that adversity is not without its comforts and hopes. In our case, it is the knowledge that Stanford's success and good fortune is by design, and not accident.

"The legacy of vision, determination and drive bequeathed by the founders to succeeding generations at Stanford has propelled this institution in a mere 100 years to become one of the leading universities of the world. It's an achievement that never happened so quickly anywhere, at any time. These same characteristics and values will now help us prevail over obstacles in the way of our future.

"It is my belief, and I hope yours," Rosse told the Senate, "that Stanford will emerge from this difficult episode leaner, yet strong and vital, with an undiminished commitment and spirit to fulfill our mission of research and teaching."



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