My inauguration in April was a wonderful event — surely a major milestone in my life and, I hope, in the life of the University. To all of you who attended and those who sent expressions of support and good will, thank you so much. Your trust in me means a great deal.
I am fortunate to take over the reins of our University at a time when so many tremendous things are happening. We have wonderful students, faculty and staff, and a truly beautiful campus. Our alumni are becoming more engaged in the life of the University, and we are financially stable after years of determined effort.
The University is poised for a major leap forward into the ranks of the greatest universities in America. Such a leap can bring tremendous benefits to our students, faculty and alumni, and to those we serve beyond the campus. My job is to make certain that we make that leap and land safely.
We do face barriers to progress, however, and many of them are financial. Although we are stable, DU is still “tuition-driven” in the sense that most of our operating revenues come from tuition. Salaries and fringe benefits comprise the majority of our expenditures and continue to increase, particularly as we compete with top universities for faculty members. We’ve covered the additional costs with new revenue generated from growth in the numbers of our students and increases in our tuition rate.
We don’t want to grow much beyond our current enrollment, though, because we believe that the size of the University and our overall 12-to-1 student-to-faculty ratio are just about right for real academic excellence. And, as we focus on student diversity and compete for top students with the best universities in the country, we must limit our reliance on tuition increases. Although we’re now able to attract the very best prospective students and faculty, our ability to bring them to DU will ultimately be limited by our financial resources.
To beat this dilemma, we simply must develop other sources of support beyond tuition.
For most great private universities, that additional support comes from large endowments. DU’s endowment stands at $224 million, but many of America’s top institutions have endowments of several billion dollars, and earnings from these funds can make a significant contribution to operating expenses. At Dartmouth, for example, endowment earnings and current gifts comprise 29 percent of the operating budget. Nearly half of the operating budget of Harvard’s College of Arts and Sciences comes from interest and endowment earnings. This translates to substantial resources, far beyond net tuition revenue, for both students and faculty.
At DU, endowment earnings comprise just 3 percent of our revenue. Still, for each student’s education, we spend 23 percent more than the net tuition that we receive per student — testimony to our effective use of the other revenue streams that we do have. But compare that to 60 percent at George Washington or 126 percent at Tufts. These percentages are strongly correlated with endowments at these institutions. At Princeton, which has the largest endowment per student among U.S. universities, the amount spent per student is nearly eight times the net tuition received.
We’re going to have to build our own endowment as we increasingly compete with universities like these for both students and faculty.
Over the course of the last few years, we’ve worked hard to build the quality of DU. We have great strength in the University community and our programs are top-notch. Now it’s time to build a strong financial foundation beneath that quality, one that can sustain our momentum over these critical years and ensure that we make that great leap forward successfully.
As always, your comments and thoughts are most welcome.