February 13, 2004
To: The Baruch Community
From: David Dannenbring, Provost and Sr. Vice President for Academic Affairs
Subj: Budgetary Concerns
I am writing to share with you the status of the college’s budget predicament and the
efforts that are being taken to face the challenges ahead. While I am confident that
we can restore the financial health of the institution, it is clear that this will not be
accomplished without your help. Indeed, this will not be without some pain and we
will all need to work together to ensure that the substantial progress we have made
with regard to the college’s academic health is maintained and extended. I believe
that is important for you to have a full understanding of why we got to where we are
and how we propose to deal with these concerns.
In its simplest terms, the budget deficit we now face is the result of two related
structural problems. First is that the CUNY budget allocation model preserves
historic inequities and does not respond quickly or adequately to changes in
enrollments. The second problem is that CUNY’s tuition revenue policy has evolved
too slowly to cushion the financial ramifications of our enrollment decisions. Thus,
when the College increased its enrollments in the late 1990’s our budget did not
increase adequately to support this growth, and we were forced to use reserves to fill
in the budgetary gap. When we subsequently decreased our enrollments, the
revenue fell faster than costs, leaving us with a budget deficit.
With our enrollment standards and admissions largely managed by the University,
and under pressure to add revenue, the College grew over the course of the late
1990s (to a high of almost 16,000 students in 2000). Unfortunately, because of
historic under-funding compared to many of the CUNY senior colleges, we simply
did not have the faculty or staff to properly serve such a large student body. Classes
were overcrowded, long waiting lists formed, and an increase in the time to
graduation left many students frustrated. The problem was particularly disturbing as
we began planning for the upcoming AACSB accreditation of the business school,
where student/faculty levels rose above the maximum allowable level.
In early 2001, CUNY gave the senior colleges greater autonomy over the
admissions process. Knowing that CUNY’s traditional budgeting process might not
support this, we embarked on a process of managed enrollment decline. With
CUNY’s cooperation, we began imposing tougher standards. As a result, our
average SAT scores and graduation rates rose, along with improvements in the
student and faculty classroom experience. Clearly, our decision to decrease
enrollments was an educationally sound one, but the loss of revenue hurt us
financially more than was anticipated.
A few years ago, the University set limits on how much the revenue target could shift
in any given year. Unfortunately for Baruch, these limits took effect just as our
enrollment trend was reversing. As a result, although our enrollment this fall was
almost exactly that of our enrollment in Fall 1998, our revenue target was $4.9
million higher than it was that year (in terms of 1998 tuition rates). Over the last four
years Baruch has remitted about $20 million more than it would have, had the new
policy been in place. While the college supported adoption of this policy, the timing
was inadvertently disadvantageous to us. Had this policy been put in place just two
years earlier, we would have a balanced budget today.
Of course, budget matters are always complex, and our situation is no exception. In
addition to a simple decrease in the number of students we enroll, we have also
experienced a change in our enrollment mix that has resulted in lowering tuition
revenues even further. The unforeseen events of September 11, 2001, the SARS
epidemic, and the subsequent tightening of immigration regulations, resulted in the
loss of hundreds of international students. Enrollments in our MBA program have
also been hurt by the recent downturn in the economy.
Similarly complex is the path to our fiscal stability; we have already implemented a
number of painful steps to cut costs. Unfortunately, more will follow. At the beginning
of this fiscal year the projected deficit was approximately $6 million. Through
vacancy savings and austerity measures, we reduced our deficit by more than half.
CUNY has committed to providing additional help. The remaining gap will be closed,
but not without necessarily painful impacts to program budgets at the College that go
right to the heart of our mission.
Throughout the fall semester, a series of conversations among College and
University leaders took place that defined and explored the problem. These included
discussions at Cabinet meetings, multiple presentations to the Faculty Senate,
meetings with University fiscal leaders, a presentation to the Baruch College Fund
Executive Committee, and budget orientation and initial revenue/expenditure
adjustment recommendations by an integrated committee of faculty, staff, and
student leaders. While conversations with CUNY Central are slated to continue, the
College must move forward decisively and immediately to devise a budget plan that
will get us in balance by the end of FY 2005.
To accomplish this, Vice President Specter and I have created an ad hoc College-
wide budget planning committee, chaired by Terry Martell and Arthur Downing, and
including Stan Altman, Myrna Chase, John Elliott, Robert Myers, Dave Gallagher,
Sam Johnson, Mary Finnen, Mary Gorman Hetherington, and David Potash. The
purpose of this group is two-fold. First, it is to develop recommendations for
prioritized Tax Levy expense reductions and Tax Levy revenue enhancements that
will result in a balanced budget by the end of FY 2005. These recommendations
may be specific or generic, and impacts may be broad or targeted as the group sees
appropriate. Secondly, it is to create a strategic enrollment policy specific to each
enrollment category that will provide additional Tax Levy revenue with a minimum of
associated cost. The work of this committee is time-critical due to the risks and
sensitivities associated with the College’s budget and potential hiring and
reappointment commitments. A preliminary report is due by the end of February, with
a final report expected in mid-March.
Despite our current budgetary shortfall, we should not lose sight of the record of
progress Baruch has achieved in recent years. The College continues to attract
increasingly better-prepared students. In the past two years, the average SAT for
registered freshmen has risen 42 points to 1098 and the high school grade point
average for this group has risen from 84.7 to 85.5. These gains were achieved while
at the same time we significantly increasing the size of our entering freshmen class.
We should also be proud of the rapid improvement in one of the most basic
measures of student success, that of graduation rates. Two years ago, our six-year
graduation rates stood at 37.7%. Our current six-year graduation rate is 52.7%, and
with a five-year rate of 48.8%, we expect another significant increase next year.
Furthermore, in the last two years along, our fall-to-fall freshman retention rate has
improved from 84% to 89%.
As we work toward a solution to our financial difficulties, I ask for your support in
these efforts.
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