Even Tulane University, New Orleans’ richest educational institution, isn’t immune to the financial pressures facing higher education.
The 13,500-student university has hired a Chicago consulting firm to find ways to close an annual cash deficit of nearly $20 million and to make the 181-year-old school more efficient.
At the same time, Tulane is preparing to launch its first major fundraising campaign since 2008.
News of the deficit came as a surprise to some faculty members, who first learned about it in a Jan. 13 message from Tulane President Michael Fitts. At a Faculty Senate meeting a few weeks later, several professors pressed Fitts about how and when the deficit came to light and why they weren’t notified about it sooner.
Fitts told the group that he’s aiming to close the gap and rethink the ways the school prepares its budgets, according to minutes of the meeting.
To cope with the deficit, Tulane hired the consulting firm Huron Education to “identify ways we can improve our efficiency and effectiveness and increase revenues,” Fitts said in his January message to the Tulane community.
“The goals of this initiative are twofold: to solidify our financial position by eliminating our annual operating cash deficit of $15-20 million; and to develop a new budgeting system that is better suited for our future plans,” he said.
Huron is expected to come up with 100 or more cost-cutting proposals for Tulane officials to consider.
Fitts said he’s not sure if layoffs will be among them, but he noted that he’s “not putting anything on or off the table.”
The reason for the deficit is simple, he said: Tulane has spent more than it has taken in.
“It’s a function of a lot of different projects on campus, both maintenance and buildings,” he said. “What we’ve been facing is literally more money going out than revenues coming in, so the purpose here is to really help us think about ways we can improve revenues on campus and balance the budget over a short period of time.”
Fitts formed two committees of administrators and faculty to work with Huron to tackle two tasks: first, studying Tulane’s operations for ways to make them more efficient and generate additional money, and second, revamping the school’s budgeting process.
The consultants will “look at everything,” Fitts said, while acknowledging that simply hiking tuition or tapping into the school’s endowment won’t be enough. “I certainly don’t want to predict that a response to this would be increasing tuition — we have a very high tuition — but we’re looking at all sorts of ways of doing new programming, providing services more efficiently,” he said.
Both reviews are expected to wrap up this summer. The goal, Fitts said, is to put Tulane on better financial ground and to develop a new, decentralized budgeting plan.
“We are doing what any top institution would be doing: thinking about what we want to be 10, 20 years down the line,” he said of the two reviews. “We have a number of exciting initiatives we want to go forward on, and we want to make sure that going forward we have the resources.”
Tulane’s financial challenges, though real, are not as great as those facing other local institutions.
Loyola University announced late last month that it will reshuffle its academic programs as part of a long-range plan aimed at coping with the university’s sagging enrollment and its multimillion-dollar deficit, its second major shake-up since Hurricane Katrina in 2005.
And university leaders across Louisiana are bracing for $211 million in cuts to higher education spending that were included in Gov. Bobby Jindal’s proposed budget for the coming fiscal year — on top of hundreds of millions of dollars in cuts in the past few years.
To help stanch the bleeding, Jindal is considering tuition hikes for some programs, implementing new student fees and giving tax breaks to businesses that donate to schools.
The latest proposed cuts are a big loss but not as much as some had feared — up to a 60 percent reduction in state funding. Under that scenario, the University of New Orleans might have had to declare a financial emergency for the second time in a decade, while Southern University at New Orleans might have closed altogether, leaders at New Orleans’ two public four-year universities warned in recent weeks.
Fitts, who said he was aware of the Tulane deficit when he became president last summer, wants to decentralize Tulane’s budgeting process so that individual departments have a bigger role in managing revenues and expenses. It’s part of an effort to get more areas of the university participating in developing the overall spending plan and considering ways to improve efficiency, he said. It’s an approach other institutions have taken, and Fitts hopes to have it in place by the 2016-17 fiscal year.
Fitts’ said his predecessor Scott Cowen was headed in that direction before Katrina hit, upsetting lots of plans.
In an update last month on the review’s progress, Tulane officials said one budget model being considered would encourage deans to implement innovative programs by diverting revenue from successful initiatives back into their school rather than into the university’s overall coffers.
Still, despite the deficit, Tulane officials have cut their share of ribbons in recent months to celebrate the completion of new projects. College football returned to Uptown last year for the first time in decades with the opening of Yulman Stadium, the university’s new $73 million, 30,000-seat stadium. And in the fall, Tulane opened a new dormitory, the 256-bed Barbara Greenbaum House at Zimpel Street and Broadway.
Tulane has about $8 million left to raise to pay for the stadium’s cost, Fitts said. The school is in the process of reviewing figures to determine how much it cost to run the stadium in its first year.
“We’re still closing the books on this season,” he said. “It was a unique season, because obviously we were doing a lot of things the first year that we wouldn’t necessarily be doing in future years.”
Meanwhile, as Tulane quietly solicits donations for its fundraising campaign — which will aim to raise at least $1 billion to, among other things, improve financial aid and build more housing and another dining hall — Fitts wants to put the deficit behind him before the ambitious effort gets too far along.
“You definitely want to launch a campaign with a balanced budget,” he said. “You don’t look at campaigns to close deficits.”
Follow Richard Thompson on Twitter, @rthompsonMSY.