January 16, 2003

Salary increases planned despite reduced resources

Financial pressures to require University-wide budget reallocations for Fiscal Year 2004

Facing a tight financial picture in Fiscal Year 2004, Northwestern has ordered budget reallocations University-wide, but modest salary increases are still planned for next year, University leaders said last week.

“We are facing a period of constrained resources, hopefully a short-term one,” said Provost Lawrence B. Dumas, chair of the budget planning committee.

Dumas cited lower revenues from the University’s endowment and investments as a major influence on planning the budget for next year. In addition, only moderate increases are expected in tuition and gift revenues and earnings on the University’s working capital.

At the same time, Northwestern faces unavoidable cost increases in property and liability insurance premiums, student health services and faculty and staff health benefits, Dumas said. The University also must beef up its research services support to keep pace with the increasing volume of research activity and comply with federal research guidelines.

“Based on these factors, we clearly need to develop our FY04 budget differently than we have budgets in recent years,” Dumas said. “Sound fiscal management has been a strength of Northwestern for many years and we intend to continue that tradition.”

As a result, the FY04 budget guidelines distributed recently to deans and administrative leaders call for the following:

• A requirement that all academic and administrative areas reduce their base budgets by approximately 2 percent to 2.75 percent. The funds released will go to help support unavoidable increases in expenditures.

• The infusion of a 2.5 percent increase in base budgets for staff and faculty salary increases. Individual increases will continue to be awarded based on merit and adequacy of current salary versus performance.

• The addition of a 2 percent increase in non-personnel budgets.

“These budget planning parameters mean that each unit will need to cut expenses in selected areas on a recurring basis and redirect resources to fund individual salary increases,” Dumas said.

The combination of falling endowment income and rising expenses is affecting universities nationwide. Some other major private institutions have implemented hiring freezes on vacant positions, cut operating budgets or eliminated positions.

Unlike other universities that also are facing tighter budgets, however, Northwestern does not plan to institute across-the-board hiring freezes or layoffs. Nevertheless, some departments may choose to eliminate positions in order to achieve the necessary cost savings.

In addition, Dumas said that major areas of the University that charge other areas for their services, such as Information Technology, Facilities Manage-ment and University Services, will be challenged to keep their internal charge rates as flat as possible for FY04.

“We regret that we have to take these steps, but we take some comfort in knowing that we are not alone in focusing on budget reallocations. Other universities are facing the same set of budgetary constraints,” Dumas said.

“We are happy that rigorous fiscal management at Northwestern continues to protect us from the magnitude of reallocation and cuts necessary at this time at many universities,” Dumas added.