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Rice changes budget

By Margeux Clemmons and Cindy Dinh     2/5/09 6:00pm

In response to a 20 to 25 percent loss in the endowment's value, President David Leebron announced a 5 percent university-wide budget cut on funding from unrestricted sources last Wednesday during January's plenary meeting of the faculty. Deans and vice presidents will be responsible for including a 5 percent budget reduction individually in each academic school and administrative division's financial plans for the 2010 fiscal year, which begins July 1. The overall reduction amounts to approximately $13 million, 3 percent of the entire university budget and a $7 million increase over the budget cuts announced Dec. 1 last year. Portions of the budgets and endowment, which are restricted for certain uses, such as scholarships, will not be affected by the cut.

"Everybody's making reductions," Leebron said. "Nobody's immune from this. Deans and vice presidents may be deciding that there are certain programs that need to be suspended or discontinued, faculty slots that might not need to be filled or non-compensation expenses that need to be cut."

Faculty or staff salaries will not be reduced, though departments may have to leave positions unfilled to meet their budget targets if they do not have many costs outside those that are salary-based, Leebron said. Departments have been encouraged to seek additional funding outside of the Rice endowment and tuition fees, from philanthropic foundations, research grants and individual donors.

Other universities have also experienced a similar budget-reduction trend, and Rice's efforts to save money and avoid future disruption are on par with other comparable institutions, Provost Eugene Levy said. Leebron said that while Rice has not lost as much of its endowment as many other universities, it depends on its endowment to a greater degree.

The Rice endowment is currently valued at between $3.6 and $3.7 billion, Levy said. At the same time, the university budget has increased by 37.2 percent since 2004 and stands at $450 million for the 2009 fiscal year, according to Vice President for Finance Kathy Collins.

Salary increases for faculty and staff may not be possible this year, said Leebron, who along with Levy and several top members in the Office of the Provost recommended to the chairman of the Board of Trustees that they not be given a salary increase this year.

Typically, decisions have already been made around this time to allocate 2-3 percent of the total payroll to the pay-raise pool, which is then allocated to deans and vice presidents to offer pay raises to faculty and staff based on merit and promotions, Collins said.

In addition to the budget changes and the delay on the decision concerning pay raises, the staff hiring freeze imposed in late November was lifted last Wednesday.

"We ended it because the deans and vice presidents really need to be responsible about hiring for their schools and divisions because it affects how they manage the five percent reduction," Collins said.

Hanszen College sophomore Will Randall said lifting the hiring freeze is a good thing.

"It gives Rice a competitive advantage in recruiting new professors and staff that would otherwise likely be recruited by Ivy Leagues or other universities with money to burn," Randall said. "We should be able to pull in a better crop of researchers and professors."

Baker College junior Aurelia Chaudhury added that because the student body is increasing in size, gradually increasing the number of faculty in tandem is important.

Leebron said that although the university will be exceeding its target endowment spending for the year, between 4.5 and 5.5 percent, surpassing the absolute boundary of endowment spending at 6 percent is not an option. Additionally, decreasing growth in endowment spending is a general priority that the university will continue to pursue, he said.

"There's some good news out there," Leebron said. "As of the end of December, our annual fund was up over 15 percent. Our applications, right now, are up 14 percent, and so those are important indications of the strength and health of the institution."

Leebron also mentioned that revenue from the impending growth in the undergraduate student body will boost the budget. However, he said that scholarship costs will be increasing rather than decreasing because of the more lenient scholarship cutoffs that were introduced last month.

"Although in some ways this is a time when we need more money from tuition because the endowment's down and because there are only so many sources of funding, we realize that a lot of peoples' families are in worse financial circumstances than they were before," Leebron said. "So it's actually quite difficult to cut the cost in scholarships. And although there will be some tuition increase, it's probably not a time when we can have an extremely large tuition increase."

Randall said that although he understands there are going to be sacrifices and supports the administration's decision to give most of the responsibility of budget cuts to deans, he finds it strange that tuition is increasing at all during such economically difficult times. His father's small business was hit by the strain on the markets, he said.

Leebron mentioned that his own office will be making small changes to save money, such as double-sided printing and turning off computers at night.

"The only good side of an economic circumstance like this is it forces changes that are desirable for other reasons that people might have not even known were necessary," he said.

Still, Leebron said that additional steps might be necessary if the economy continues to decline.

"One thing that makes me nervous is that the financial markets haven't settled down, so this could get worse," Collins said.

"Or the markets haven't settled up yet," Levy added with a chuckle.

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