Campus & Community / Magazine Feature

Budget reflects solid foundation, new challenges

The University’s fiscal-year 2007 budget shows strong financial underpinnings, and DU will increase its operating margin from $3 million to $5 million, according to the budget proposal approved in June by the Board of Trustees. The purpose of the operating margin increase is to build reserves as a hedge against unexpected financial challenges, says Provost Gregg Kvistad.

Increasing the bottom line to $5 million will not involve departmental reductions, Kvistad says. And it is an achievable goal thanks to DU’s culture of fiscal accountability, he says. The budgeted operating margin has been $3 million in each of the past three years, and the University exceeded that target every year. DU had a surplus of $22.5 million for 2006.

“Our budget process is very tight, and our management of resources at the unit level is excellent,” Kvistad notes. “What [the $5 million operating margin] means is that we have marginally less flexibility at the central level to accommodate changes midstream. … We have less of a planning reserve than we have had in other years.”

Tuition is the largest revenue source—nearly 80 percent—in the $307 million revenue budget, with room and board, auxiliary enterprises, sponsorships and institutional revenue such as interest income also contributing significantly to the bottom line. Academic programs garner the largest share of spending—nearly 41 percent.

“This is a growth budget,” Kvistad says. “We have made serious, direct, strategic investments in all areas of the University, particularly in academic units, continuing what we’ve been doing recently—making investments in academic quality.”

And improving academic quality at DU, Kvistad says, is an ongoing effort. Applications for the 1,100 seats in next fall’s first-year class are 13 percent higher than last year, and the grades and test scores of students applying to DU have increased markedly over the past two years.

Academic investments in 2007 will include $1.24 million for the Cherrington Global Scholars Program and $1.5 million for the Marsico Initiative.

“We’re in the process of adding 24 tenure-track positions in the arts and sciences as a result of the Marsico Initiative,” Kvistad says. “Not all are coming on line this year, but a good number of them are, and the important thing is that this is aimed at intensifying the academic experience for our students. We are not adding positions because of increased enrollments.” 

Other noteworthy academic-support investments include $610,000 for Penrose Library, nearly $472,000 for the Faculty Scholars Fund, $286,000 for the Campus Life Initiative and $230,500 for diversity initiatives.

Bright spots also include 16 consecutive years of budget surpluses, successful athletics and arts programs, and a record endowment value of $224.3 million as of March 31.

Meanwhile, the University’s continuing dependence on tuition revenue poses a challenge—particularly as DU caps enrollment in the coming years. 

“We are reaching our capacity in terms of volume increases of students,” Kvistad says. “We are already there at the undergraduate level and in some of our graduate programs. There is also significant pressure to limit our tuition-rate increases.”

As the academic strength of DU’s applicant pool improves, students are better able to shop around for the best financial aid package, he says.

“To continue down the path of pursuing academic excellence, we will need to increase our flexibility by means of different revenue streams, and that primarily means working with the endowment and annual giving,” he says. 

To that end, the 2007 budget allocates more than $1.2 million for University Advancement. Over the past four years, University Advancement has added 19 new employees, bringing its workforce to 52 full-time equivalent employees. Increasing annual donations and major gift capacity will be their top priorities.

Other institutional challenges include rising costs for energy, employee health coverage, and property and casualty insurance, according to the budget proposal.

“All of us will have our work cut out for us,” Kvistad says. “Fiscal accountability is not someone else’s job—that’s a job for all of us.”

This article originally appeared in The Source, July/August 2006.

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