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University feels pinch of tight housing, labor markets

The Silicon Valley boom is beginning to hit the university in its pocketbook, Provost Condoleezza Rice revealed in her 1997-98 budget report to the Faculty Senate on May 29.

In a preview of a report that she will present to the Board of Trustees this month, Rice said that the budget generally represents "good news," with a projected $1.4 billion budget for the next academic year that includes a surplus. The budget maintains a reserve of about 1 percent of the consolidated budget.

But tight local housing and job markets are making it more difficult to recruit faculty and staff, she said, and both graduate and undergraduate students are applying in greater numbers to live on campus because of the surrounding residential rental market.

In light of the booming regional labor market, Rice said, she has assumed in the university's budget for the next academic year that both faculty and staff salaries will grow by an average of 3.5 percent. This is the first time since 1992-93 that the university has projected staff salaries to grow by as much as faculty salaries ­ that year the rate was 4 percent.

Academic departments recruit faculty members from a national market, and they have been hurt for some time by the region's higher housing costs, Rice said. Junior faculty, in particular, have been living farther and farther away from campus in order to find affordable housing.

Now the market is also affecting the university's ability to fill staff positions, she said, which are normally held by people drawn from a more local or regional labor pool. Some job categories, such as computing, are particularly difficult to fill, she said, and the university will be looking at what can be done to adjust in those areas.

Graduate students also are living at greater distances from campus, said education Professor Michael Kirst. He asked if the university had any plans to expand graduate housing on campus.

There is no plan at the moment, Rice said. The university is also short on space for 231 undergraduates. Undergraduates are guaranteed an on-campus room, but there is a shortage for fall because a greater proportion of undergraduates applied recently for on-campus housing.

Below-market-rate housing, which is included in Stanford's development plan now being considered by the city of Palo Alto, would help with the junior faculty crunch, Rice said.

"We have a housing problem in general," she said. "We have to go back and address the entire housing picture. Maybe we can do that this summer."

Not really a surplus

As for the overall budget, Rice said that the expected surplus will be mostly in restricted funds, "so don't get ready to spend this money."

She outlined a number of assumptions on which the projected budget is based. In addition to the 3.5 percent salary figure, she said, tuition revenue is expected to grow 4 percent, with continuation of the need-blind admision policy.

The budget also assumes a half percent increment over the normal endowment payout rate of 4.75 percent to continue seismic safety upgrades and infrastructure expansion programs. Rice said the budget assumes that research volume will not change and that income from research will keep pace with inflation. The university also will change from a single benefit rate for all employees to separate rates for faculty/staff, postdoctoral students and temporary employees.

The preliminary budget also projects that overall, real expense growth will again be held to 1 percent ­ not the 2 percent that has been more typical for Stanford and other institutions of higher education in recent decades, Rice said.

She discussed several challenges for the 1997-98 budget and stressed the importance of budgeting reserves to cover changes beyond the control of the university. One major change is the removal of tuition remission for students from the staff benefits pool, which added $7 million in costs to the university's general fund and will be an ongoing base cost.

The provost also told the senate that the university is prepared to consider "academic program investments" in a competitive process. She called junior faculty the "bread and butter" of the institution but said that departments that could make strong cases for how a senior person would substantially enhance their program would have a chance of getting funding. "I urge you to talk to your deans," she said.

Capital budget

Addressing the university's ongoing program of renovations and new construction, Rice showed a chart of the university's capital plan that indicated that capital expenses will peak in 1998 at around $285 million and then go steadily downward to less than $50 million in 2002.

She warned the senators, however, that other capital needs will arise so she doesn't really expect the steep drop-off. Continuing technology investments and laboratory upgrades will be needed, she said. "Science is moving at a quick pace and code requirements make it difficult to open new labs and renovate old buildings." The university is reviewing these needs, she said, and it may be that departments in the future will have to build new lab space together. "Building a little at a time is extremely expensive," Rice said.

Professor Patricia Jones added that her biological sciences department had discovered that it was prohibitively expensive to upgrade existing facilties, given new code requirements.


By Kathleen O'Toole