Strategic Budget Initiative Update
March 4, 2021
To the Stony Brook community,
After what has been a long and anxious year, I hope we are all feeling a renewed sense of hope about the future. The COVID-19 vaccine rollout is starting to scale, vulnerable members of our community are getting protected, and we are anticipating a Fall 2021 that lets us return to campus and see each other (in person!) once again. Projected levels of state support for next year are looking better than our previous forecasts, although they are still down from pre-COVID levels. We are making significant steps toward identifying opportunities to increase revenue, reduce costs, and remove barriers to our success going forward through the ideas generated by the Strategic Budget Initiative.
While Stony Brook has much to be grateful for and look forward to, it is important that we remember that COVID did not create our financial problems, and the end of the pandemic will not mean that these issues have been resolved. Stony Brook remains reliant on state support and tuition rates over which we currently have little to no control, and the foundational challenges that make our budget unsustainable still remain to be addressed. They include:
- Declining State Support: State support is likely to remain $7 million below where we started before COVID. In addition, the gap in funding for New York State’s mandated Tuition Assistance Program (TAP), the so-called TAP Gap, creates an approximately $9 million deficit each year. TAP is set at 2010 tuition levels and SBU makes up the difference for our TAP-eligible students.
- Unfunded Contracted Salary Increases: Similarly, unfunded salary increases add roughly a further $10 million budget obligation each year. This number compounds annually — $10 million, $20 million, and $30 million, and so on. We need to determine how to fund these increases.
- Decline in Net Tuition Revenue: Net tuition revenue for this academic year has declined by $19.5 million, driven by a significant COVID-related drop in international enrollment and out-of-state enrollment. We expect out-of-state enrollment to increase marginally, but we believe that international enrollment will remain sluggish for the next few years. This change in student mix will lead to an expected tuition shortfall in FY21/22 of about $20 million.
More fundamentally, SBU’s tuition rates remain considerably below those of our regional research university and AAU peers. We have worked closely with Chancellor Malatras to recognize the unique contributions and needs of research universities and to allow increased flexibility to set tuition in a way that better supports our goals while protecting our Pell- and TAP-eligible students. For planning purposes, however, we need to assume that tuition will be flat.
These systemic challenges have been compounded by COVID. The COVID impacts are substantial and it will take a number of years for us to recover. I have outlined a few of these related issues below.
- Decline in Fees/Auxiliaries: Due to the COVID-related decline in residential students and associated decline in revenue for auxiliary services like housing and dining, we are facing $60 million in losses. Additionally, in support of our research mission, we made the decision this year to waive fees for our PhD graduate students who also receive tuition waivers. The annual cost of this fee waiver is $3.6 million.
- Offsets: Some of these declines have already been offset by other changes. The reduction in spending and hiring has resulted in roughly $34 million in savings, however, some of those savings were merely delays in spending. As normal operations begin to resume, expenses will increase again. The latest federal coronavirus relief bill includes some support for students and institutions of higher education. It will, however, only cover about one-half of our total academic- and research-related COVID costs.
More detail about our finances is available on our website, but the bottom line is that we are projecting an approximate $40 million operating deficit in FY20/21 across academic operations, taking our reserves to unsustainably low levels, about $46 million, the lowest it has been in five years and far less than the minimum recommended level set by SUNY.
Strategic Budget Initiative
I realize this is sobering news, but I am highly confident in you and in our collective ability to persevere and innovate. We will work together — challenging each other to look with fresh eyes at old problems and relying on our experience and critical thinking to deal with new ones. That is exactly what we are seeing in the progress of the Strategic Budget Initiative, with hundreds of faculty and staff collaborating across five task forces and multiple focused working groups. It is both inspiring and heartening; and it’s why I have such confidence in Stony Brook’s future.
More detailed information on the work of these groups is available on our website, but in summary, the opportunities fall into three categories:
- Revenue Opportunities: Opportunities in which SBU is underperforming compared to our peers, or essentially
leaving “money on table.” For example:
- increasing utilization by third parties of our phenomenal campus facilities
- expanding continuing professional education opportunities
- Cost Savings/Efficiencies: Areas in which we can simply make our work life easier, allowing us all to focus
on more value-added activities. For example:
- streamlining and simplifying HR and recruitment processes
- consolidating the number of vendors to secure more favorable terms and pricing
- Strategic Enablers: These are potentially transformational enablers that will be foundational to meeting
our broader strategic objectives. For example:
- evaluating tuition-sharing models to encourage innovation and interdisciplinarity
- creating program “incubators” to fast-track new programs and courses
In terms of next steps, working groups will submit their final plans and supporting analysis by mid-March for review by the relevant task force. The Financial Sustainability Steering Committee will prioritize these opportunities and then send them to the Executive Committee — which includes University, Medicine and Senate leadership — for review and approval by the end of April for implementation in FY21/22.
At this point in time, it is too early to assign a dollar figure to the cumulative contributions of the Strategic Budget Initiative to SBU’s financial health next year. We expect approximately $5 million of projected cost reductions for FY21/22, an amount that should increase over time. Suggestions for revenue generation will take time to implement.
I would ask that as we address these structural issues together, we also think about what each of us can do in our own departments as we begin next year’s budget process. Please look for places to save. Consider how your priorities may have changed and if your existing resources are supporting strategic objectives. Every department, division, and school has the power to make a difference — and those differences will add up.
So, I’d like to close this message on a note that is both optimistic about what we can achieve together and realistic about the headwinds we face. Thank you all for your commitment to this university. I look forward to sharing more information with you as our budget for next year starts to coalesce and we continue to build toward a brighter and stronger future for Stony Brook University.