Stanford Report, May 30, 2014

Stanford's 2014-15 budget plan reflects strong fiscal position, targeted spending decisions

Stanford's budget for the 2014-15 fiscal year seeks to maintain the university's academic leadership and invest in key support structures while continuing to protect against ongoing national vulnerabilities in research funding, Vice Provost for Budget and Auxiliaries Management Tim Warner told the Faculty Senate on Thursday.

The budget plan for the fiscal year beginning Sept. 1 maintains Stanford's commitment to student financial aid and makes targeted investments in student services, administrative efficiencies and campus infrastructure. But it also funds expenditures necessary because of broader trends affecting Stanford, including in the areas of information security, research support and compliance with governmental regulation.

"The overall budget maintains and strengthens Stanford's overall financial condition, and it certainly enhances some of our support functions," Warner said. "Supporting research is a key challenge going forward, and we look forward to working with the deans to mitigate these issues."

Warner presented the $5.1 billion budget plan to the Faculty Senate on behalf of Provost John Etchemendy, who was unable to make his usual report due to recent back surgery. The budget plan will go next to the Board of Trustees for approval at its June meeting. A formal budget document will be available on Stanford's bondholder information website following board approval.

Overall, Warner reported, Stanford has recovered strongly from the recession of several years ago and is in excellent financial condition. Revenue increases in 2014-15 are expected to be particularly robust in the areas of investment income and hospital payments to faculty physicians in the School of Medicine. A lesser increase comes from tuition, which will rise 3.5 percent in 2014-15 under an earlier action by the Board of Trustees.

Research, financial aid, compensation

But the university's cautious approach to budgeting in previous years continues for the coming fiscal year, Warner said, largely because of the uncertain outlook for federal research funding. Though Stanford faculty continue to be very successful in winning competitively awarded federal research funds, direct costs of sponsored research at Stanford (excluding the SLAC National Accelerator Laboratory) still are projected to grow by only 1.3 percent in 2014-15 amid a general slowdown in federally funded research.

As a result, the budget plan allocates up to $5 million of the university's reserve to be used by school deans to assist faculty in bridging grant shortfalls – particularly to maintain support for graduate students when anticipated grants are delayed or not funded. Also in the area of research support, the budget provides new funds to support the Stanford Electronic Research Administration system and several shared research facilities such as the new Stanford Research Computing Center.

Student financial aid also remains a high priority for Stanford, with a 3.3 percent increase in funding budgeted. Consistent with its commitment to need-blind admission for U.S. undergraduate applicants, Stanford has increased funding for need-based undergraduate scholarships from $58 million in 2004-05 to $132 million in the 2014-15 budget. Stanford will provide a total of $256 million in direct financial aid to students under the new budget, including graduate and athletic support, plus an additional $253 million in support that will take the form of salaries and stipends for graduate students.

"We are supporting financial aid actively and aggressively," Warner told the senate.

The budget also includes a 7.5 percent increase for overall compensation costs in 2014-15, reflecting salaries, anticipated personnel growth and higher health care costs.

New investments of general funds

Overall, the Consolidated Budget for Operations anticipates a 6 percent increase in revenues, with an ending surplus of $160 million on $5.1 billion in revenues. Within the Consolidated Budget, the General Funds budget – which can be used for any university purpose and supports many of the core academic and support functions of the university – is projected to see revenue growth of 5.3 percent, with an ending surplus of $26 million on revenues of $1.25 billion.

The growth in general funds revenues allows for $70.7 million in additional spending of general funds in the 2014-15 budget. About half of that amount will cover inflationary costs. The remainder will fund a variety of high-priority purposes including the following:

• Facilities: An augmentation of $11.8 million for a variety of costs for new buildings, including utilities, operations and maintenance, and debt service.
• Security, privacy and compliance: An allocation of $3.6 million to support enhancements to Stanford's information security systems. Another $2 million will support compliance requirements throughout the university in areas ranging from information privacy to Title IX, along with augmentations to Public Safety and Environmental Health and Safety to enhance campus physical security.
• Student services: Funding for a transformed Career Services Center based on the recommendations of a steering committee for a new model of student career services, along with permanent funding for the Office of Alcohol Policy and Education and a variety of other initiatives for graduate and international students, student activities, residential affairs and financial services.
• Graduate student support: Increased funding of $2.2 million for teaching assistants in fields with substantially growing undergraduate enrollments. These funds initially will be directed to engineering and physics but can be shifted in the future as enrollment trends change.
• Faculty and library support: Continued support for the Faculty Incentive Fund as well as an increase for library materials and staff.
• Administrative efficiencies: Permanent funding for a variety of efficiency initiatives that have been running successfully on a pilot basis using limited-term funding, including centralized web services, a centralized human resources transactions group and increased strategic sourcing in procurement.

Capital budget

Warner also presented a Capital Budget for the university, 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 $655.4 million in expenditures in 2014-15, supporting a range of projects requiring $2.8 billion in total expenditures once fully completed. Among the projects receiving funding in the 2014-15 budget are:

• Completion of the Stanford Energy System Innovations (SESI), the new campus energy system that will reduce campus greenhouse gas emissions and water use;
• Completion of the McMurtry Building for the Department of Art and Art History;
• Continued work on the California Avenue faculty housing project;
• Expansion of undergraduate housing at Manzanita Park and Lagunita Court, as well as additional housing for Graduate School of Business students;
• Completion of the Roble Gymnasium renovation along with initial construction of Parking Structure 10, a new parking facility to be built underneath Roble Field;
• Construction of an office building at 408 Panama Mall; and
• Renovation of the Old Chemistry Building into the new Science Teaching and Learning Center, along with initial development of the Bass Biology Research Building to replace the current Herrin Hall and Herrin Laboratory buildings.

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