Inside Furman February, 2003

Furman facing a budget crunch
By David Shi

This academic year has been a successful and eventful one for Furman. The freshman class is one of our strongest ever, and the applications for next year are setting a record pace. Our professors and students continue to garner awards and national recognition, and visitors to the campus continue to compliment Furman on its beauty and hospitality. Such praise and accomplishments are the direct result of your hard work and energy. I want to thank you for your steadfast commitment and strenuous efforts on behalf of Furman. I also want to solicit your help as we face some stern financial challenges.

Late last month we received some sobering news related to our operating budget for this fiscal year. The Furman Fund, which solicits donations from alumni and friends to support the university's operating budget, has fallen short of its annual goal by $350,000. In addition, as of December 31, the investment earnings and market value of the university's cash balances fell short of projections by some $877,000. These shortfalls reflect the factors that are challenging all colleges and universities: the prolonged recession and accompanying layoffs, stagnant equity markets, and the war clouds looming over the horizon. The same economic forces have led the parents of Furman students to require $200,000 more in need-based financial aid than was budgeted this year.

Moreover, the continuing stock market malaise will probably cause the Duke Endowment to reduce its annual gifts to the university, which we receive in monthly installments. Finally, the state budget crisis has led to lower enrollments in our graduate education courses than we had predicted. Taken together, these developments have compounded the challenge of balancing our budget on June 30. The fact that so many other colleges are experiencing similar financial challenges does not make it any easier to absorb such budget pressures.

Furman has responded to these developments by asking vice presidents and directors to reduce budgets this spring and to focus on opportunities to generate additional revenue now and in the future. We have also postponed filling staff vacancies. Of course, the best news for all of us would be a recovering economy and rising stock market.

As always, we have been heartened by the resilience and ingenuity of our faculty and staff in dealing with such unexpected challenges. I have asked the vice presidents and directors to meet with their entire staffs to discuss these developments and answer any questions you might have. I can assure you that Furman will move with grace and confidence through this difficult time.

Higher Ed not immune to Recession

Even during the worst of economic times, employees in higher education - particularly those at prestigious private universities - feel somewhat insulated.

And with good reason. Unlike General Electric and Michelin, there have been no layoffs at Furman. Demand for our product grows each year along with our reputation and tuition.

Sure, most of us cringe when we receive the quarterly retirement account updates. But the classrooms are full, and the rhythms of the academic year remain unchanged.

So some were surprised earlier this month when Furman announced that significant belt-tightening measures would be needed for the university to complete the fiscal year (ending June 30) without a deficit. Certainly, reputable private universities weather a Recession better than most businesses. But there is still some storm damage, says Greg Rumsey, budget and analysis director.

Though much of Furman's operating budget is generated though fees (student tuition and housing fees), a sizable portion (more than 10 percent) originates from donors, endowments and other charitable sources that have been impacted by the sluggish stock market.

The Furman Fund, for example, which raised $1.9 million for the operating budget last year, will fall short of its original goal this year by about $350,000. Giving to the Paladin Club, which supports athletic programs, is also down. Sixteen members of the Richard Furman Society (donors that contribute $10,000 or more to Furman annually) that planned to contribute before December 31, have delayed their gifts. And the annual contribution from the Duke Endowment is expected to be approximately $1.1 million, down from $1.4 million last fiscal year.

Furthermore, Rumsey explains that each summer, the university invests roughly $20 million (funds generated mostly through tuition fees) into interest bearing, low risk accounts. These funds and the interest income they generate are allocated to the operating budget.

Rumsey said that the investment earnings and market value of these cash balances fell by about $877,000 between July and December. To maintain a balanced budget, department heads have been asked to return a small percentage of their budget to the operating budget.

Several maintenance projects and equipment purchases have also been deferred. The university also placed a freeze on all vacant positions until June 30.

In addition to these measures, Rumsey offers these cost-cutting tips:

· Delay equipment purchases and cancel unnecessary professional trips.
· Reexamine your budget to determine if any cost-cutting measures can be realized.
· Conserve energy. Rumsey says the university's annual electric costs are about $1.3 million. This bill could be reduced by about 8 percent if students, faculty and staff simply turned lights and computers off when not in use.