STANFORD UNIVERSITY BUDGET PLAN 2017/18

Transcription

1 S TA N F O R D U N I V E R S I T Y STANFORD UNIVERSITY BUDGET PLAN 2017/18 B U D G E T P L A N / 1 8

2 Approved: This Budget Pla was approved by the Staford Uiversity Board of Trustees Jue 14 15, This publicatio ca be foud at:

3 STANFORD UNIVERSITY BUDGET PLAN 2017/18

4

5 EXECUTIVE SUMMARY iii EXECUTIVE SUMMARY To The Board of Trustees: It is a pleasure to submit my first Budget Pla as Staford s provost. This budget maitais our uiversity s pre-emiet academic ad research programs. It calls for selective ivestmets i high priority areas. It also stregthes our fiacial base, thereby providig the foudatio for the strategic iitiatives expected to emerge from the Log Rage Plaig process. Our approach i developig the 2017/18 Budget Pla has bee a cautious oe. Slow growth i edowmet payout ad ucertaity aroud govermet sposored research have created a plaig cotext i which we have reduced the growth of ew program ivestmet compared to recet years. At the same time, we have icreased our fiacial reserve positio should exteral fudig coditios deteriorate. We are cofidet this budget both furthers Staford s programmatic objectives ad maitais a strog uderlyig fiacial coditio. This documet presets Staford s 2017/18 Budget Pla for Trustee approval. The Budget Pla has two parts. The first is the Cosolidated Budget for Operatios, which icludes all of Staford s aticipated operatig reveue ad expese for ext year. The secod is the Capital Budget, which is set i the cotext of a multi-year Capital Pla. The budgets for Staford Health Care ad Staford Childre s Health, both separate corporatios, are ot icluded i this Budget Pla, although they are icorporated ito the uiversity s aual audited fiacial report. Highlights of the Budget Pla: The Cosolidated Budget for Operatios projects a surplus of $165 millio o $6.3 billio of reveues, $5.9 billio i expeditures, ad $243 millio i trasfers. We aticipate reveue to icrease 5.0% over the projected 2016/17 year-ed results. This results from a 11.6% icrease i health care services reveue ad a 12.6% growth i ivestmet icome, offset by a 13.2% reductio i SLAC sposored research activity, which is drive by a smaller costructio program compared to 2016/17. Overall, we are budgetig a 4.1% icrease i expeses, resultig from a 7.8% growth i compesatio coupled with a small reductio i other operatig expeses. The Cosolidated Budget icludes $1.45 billio i geeral fuds, of which $200 millio flows to the Graduate School of Busiess, the School of Medicie, ad Cotiuig Studies i accordace with previously agreed upo formulas. We aticipate a geeral fuds surplus of $26 millio, a figure higher tha last year but comparable to most years followig the recessio. We have also budgeted a $20 millio cotigecy agaist ucertaities i federal research, edowmet payout shortfall, ad iitial costs of iitiatives emergig from the Log Rage Plaig process. This surplus, coupled with the cotigecy, provides a appropriate cushio agaist reveue fluctuatio ad will allow us to address oe-time eeds throughout the year. This Budget Pla presets the projected 2017/18 results i a format cosistet with Geerally Accepted Accoutig Priciples, as reported i the uiversity s aual fiacial report. The projected Statemet of Activities shows a $115 millio surplus. The Capital Budget calls for $1.2 billio i expeditures i 2017/18. These expeditures are i support of a Capital Pla whose projects, whe fully completed, will total approximately $4.3 billio. Pricipal expeditures i 2017/18 will be directed toward:

6 iv EXECUTIVE SUMMARY u $329 millio for Staford Redwood City Phase 1. This is part of a multi-year project to build a admiistrative campus i Redwood City at a total cost of $569 millio. It is expected to ope i 2018/19. u $171 millio toward the ew Escodido Village Graduate Resideces. u $119 millio towards the $257 millio ChEM-H ad Staford Neuroscieces Istitute Research Complex. u $104 millio towards the Ceter for Academic Medicie 1 buildig. u $104 millio towards the BioMedical Iovatios Buildig. STRATEGIC CONTEXT The cotext i which we have developed the 2017/18 Budget Pla has bee shaped by several factors: Slow Growth i Edowmet Payout For the past two years edowmet returs have uderperformed our log term expectatio. Cosequetly, eve after icorporatig our smoothig formula, growth i edowmet payout has bee below what is eeded to maitai the purchasig power of our edowmet fuds. Sposored Research Ucertaity There is cosiderable ucertaity aroud govermet sposored research. While Staford has fared well durig past periods of declie i research, we are cocered about the outlook ad are workig actively to advocate our positio. Housig Costs A robust local ecoomy has helped tremedously to support the philathropy from which Staford has beefitted over the years. However, that strog ecoomic growth cotiues to place severe pressure o the costs of housig ad trasportatio. These are ot ew issues for Staford, but they show o sigs of slowig. Strategic Plaig The Log Rage Plaig process lauched this sprig will coclude i 2017/18 with a set of strategic directios for Staford. This is a excitig time for the uiversity as we look to create a shared visio for the future. Growth of Staford Medicie Staford Medicie (the Medical School, Staford Health Care, ad Staford Childre s Health) will cotiue o its growth trajectory of recet years with off-campus cliical expasio ad with the ew adult hospital scheduled to ope i late Cliical reveue flowig to the Medical School is the fastest growig icome source i the budget, ad it is ow the secod largest source of reveue for Staford. Chages i govermetal health care policy ad the trasformatio of biomedicie to precisio health cotiue to shape this rapidly evolvig eterprise at Staford. These factors have helped defie our major priority areas for the 2017/18 budget: Stregtheig ad Shorig Up the Base Budget I aticipatio of future strategic plaig iitiatives, a cetral priority i the 2017/18 budget process was o closig gaps or partial fudig i the existig budget. We made selective base budget allocatios i areas where oe-time fudig had bee a cotiued meas of support. I additio, i several schools we provided fudig to address the shortfall betwee the 1.6% growth i edowmet payout ad the 3.5% average aticipated growth i expese of a typical edowmet fud. Competitive Compesatio Providig a strog ad highly competitive compesatio program for faculty ad staff is a major priority i the 2017/18 budget. We recogize the challeges may of our faculty ad staff face i this very high cost area. Over the years, Staford has made substatial

7 EXECUTIVE SUMMARY v efforts to ehace our housig programs, particularly for faculty. But the challege remais. I partial respose, we made supplemetal salary allocatios i this budget to address issues of market competitiveess, iteral salary equity, ad retetio. Buildig Fiacial Reserves It has bee our geeral practice sice the 2010 recessio to carry a $25 millio geeral fuds surplus to protect the budget agaist potetial reveue shortfalls. I 2016/17, due to lower ivestmet icome, we reduced that budgeted surplus to $15 millio. For 2017/18 we have restored the budgeted surplus back to $26 millio ad created the $20 millio base budget cotigecy oted earlier. Slowig the Pace of New Program Ivestmet I light of the ucertaities aroud research ad the expectatio of strategic iitiatives emergig from the Log Rage Plaig process, we have reduced fudig for ew iitiatives, compared to the budget proposals of recet years. Housig This budget cotiues our multi-year strategy to expad housig opportuities for studets, faculty, ad staff, as the cost of housig cotiues to be Staford s greatest challege. We are addressig it with several aggressive iitiatives: u We have begu a 2400-bed graduate studet housig complex i Escodido Village. u The Uiversity Terrace Faculty Homes are opeig, with the full 180-uit complex to be available by the ed of caledar u Staford is buyig homes ad apartmets i the local area uder the $500 millio Housig Acquisitio Iitiative approved by the Trustees. u We are pursuig a proposal with the city of Melo Park to build additioal faculty ad staff housig at 500 El Camio Real. u Next year Staford will provide approximately $23 millio i subsidies for off-campus apartmets for graduate studets. While these iitiatives will ot address all of the housig eeds of Staford studets, faculty, ad staff, they are havig a positive impact ad will cotiue to improve the situatio over time. FINANCIAL RESERVES Staford has three pricipal categories of fiacial reserves: Expedable reserves We project Staford s expedable reserves will stad at $4.5 billio at the ed of 2017/18. Of that amout, $3.5 billio is a combiatio of restricted ad urestricted expedable fuds, ad uspet restricted edowmet payout. The remaiig amout is split amog plat, studet loa, ad agecy fuds. These reserves cosist of thousads of fuds held across the uiversity, largely cotrolled by idividual faculty, departmets, programs, ad schools. Tier I Buffer We project the Tier I Buffer will stad at $1.46 billio by the ed of 2017/18. The Tier I Buffer comprises the uiversity s urestricted fuds fuctioig as edowmet, the payout from which supports the geeral fuds compoet of the Cosolidated Budget. The majority of the buffer s fuds are geerated by the ivestmet returs o a subset of our expedable reserves. The Tier I Buffer acts as a backstop to maitai the face value of those expedable fuds, which are ivested i the merged pool. Tier II Buffer The Tier II Buffer is estimated to be $1.06 billio by the ed of 2017/18, which is close to its omial value before the recessio. Like the Tier I Buffer, this fud is geerated from excess ivestmet returs from expedable reserves, ad is ivested as fuds fuctioig as edowmet. The payout from the Tier II buffer, however, is used at the discretio of the presidet.

8 vi EXECUTIVE SUMMARY CONSOLIDATED BUDGET FOR OPERATIONS The table o the ext page shows the mai reveue ad expese lie items for 2017/18 ad compares those umbers to our curret projectio of fial results for 2016/17. Some highlights of both icome ad expese follow. REVENUE Studet Icome This figure is the sum of tuitio ad room ad board icome, ad is expected to grow by 3.8%. Tuitio icome is projected to grow 3.7% over the projected 2016/17 actuals as the result of a 3.5% icrease i the udergraduate ad graduate tuitio rates ad a slight growth i the umber of graduate studets. Room ad board icome is projected to icrease 4.3%, due to the 3.5% room ad board rate icrease, growth i meal plas, ad the re-opeig of the Schwab Residetial Ceter. Uiversity Sposored Research Sposored research reveues (excludig SLAC) are expected to grow by 3.6%, while idirect cost recovery will icrease by 4.2%. Direct research i the School of Medicie will cotiue its strog growth, icreasig at 5.8%, while o-medical grat fudig will be flat. SLAC s reveues are expected to declie by 13.2%, due to a lower costructio budget tha i 2016/17. Whe SLAC is icluded, total sposored research reveue is expected to decrease by 2.7% over 2016/17 projected year-ed results. There is cosiderable ucertaity aroud these umbers, give the precarious state of the federal budget. We will be moitorig the situatio closely as the year ufolds. Health Care Services Reveue from health care services is projected to icrease by 11.6% i 2017/18. This reveue cosists pricipally of paymets from the hospitals to the School of Medicie for faculty physicia services. Health care services reveue has bee the fastest growig elemet of the Cosolidated Budget over the last decade, with a compoud aual growth rate of 11%. The 2017/18 growth is drive by cotiued expasio of Staford Medicie s cliical activities throughout the regio. Expedable Gifts Staford has ejoyed very strog fudraisig results i recet years. Cosistet with the estimate from the Office of Developmet, we expect expedable gift reveue to be flat i 2017/18. Ivestmet Icome This category cosists of edowmet payout ($1,243.4 millio) ad other ivestmet icome ($275.8 millio), pricipally from the Expedable Fuds Pool (EFP). Edowmet payout is projected to icrease by 5.7%. The payout growth to a typical edowmet fud is oly 1.6% for 2017/18, but overall payout growth is higher due to additios to edowmet pricipal ad growth i real estate icome i 2017/18. The Expedable Fuds Pool payout is growig sigificatly i 2017/18. By Trustee policy, EFP payout is based o the total retur of the pool i the prior year, up to 5.5%. I 2015/16 that retur was just 2.5%, promptig a reductio i payout i 2016/17. We are expectig the full 5.5% retur i 2016/17, which will produce the sigificat icrease i the EFP payout for 2017/18. EXPENSE Compesatio We aticipate total compesatio to icrease 7.8% over 2016/17 year-ed results. The icrease is the result of a strog salary program, a 3.6% overall icrease i headcout, ad the targeted salary ehacemets metioed earlier. Fiacial Aid The costs for eed-based fiacial aid, athletic aid, ad graduate studet aid will icrease by 4.3%. This icrease allows Staford to maitai its geerous eed-based aid program for udergraduates, particularly for those families with icomes below $125,000. It also reflects a 4.5% icrease i aid for graduate studets, reflectig more geerous graduate support i selected disciplies ad a slight icrease i the umber of graduate studets.

9 EXECUTIVE SUMMARY vii CONSOLIDATED BUDGET FOR OPERATIONS, 2017/18 [IN MILLIONS OF DOLLARS] 2016/ / /18 CHANGE FROM 2015/16 BUDGET PROJECTED CONSOLIDATED PROJECTED ACTUALS JUNE 2016 ACTUALS BUDGET ACTUALS Reveues Studet Icome % 1,005 1,050 1,046 Uiversity Sposored Research 1, % SLAC Sposored Research % 1,034 1,177 1,123 Health Care Services 1, % Gifts ad Net Assets Released from Restrictios % 1,406 1,284 1,349 Ivestmet Icome 1, % Special Program Fees ad Other Icome % 5,680 5,881 5,965 Total Reveues 6, % Expeses 3,123 3,323 3,359 Compesatio 3, % Fiacial Aid % Debt Service % 1,541 1,781 1,781 Other Operatig Expese 1, % 5,118 5,594 5,625 Total Expeses 5, % Operatig Results 408 (346) (166) (187) Trasfers (243) Operatig Results after Trasfers 165 2,990 3,238 3,206 Begiig Fud Balaces 3,358 3,206 3,359 3,358 Edig Fud Balaces 3,524 Other Operatig Expeses This substatial expese item is the amalgam of graduate stipeds, operatios ad maiteace, utilities, capital equipmet, materials ad supplies, travel, library materials, subcotracts, ad professioal services. These expeses are projected to declie by 2.6% i 2017/18, drive largely by SLAC s reduced costructio activity. Exclusive of SLAC, these expeses will grow by 3.3%. SCHOOL INITIATIVES Staford s pricipal academic uits, the seve schools, will advace their agedas i 2017/18. A few highlights of their plas are: Graduate School of Busiess (GSB) Uder its ew dea, Jo Levi, the Busiess School has lauched a year-log strategic plaig process focusig o the future of maagemet educatio ad the future of research. The GSB cotiues to expad its ivolvemet globally; the Staford Istitute for Iovatio i Developig Ecoomies (Seed) will ope a ceter i souther Idia its third such iteratioal operatio. Earth, Eergy & Evirometal Scieces (SE3) The school is pursuig a set of goals that emerged from a strategic plaig effort last summer. The goals focus o egagig all Staford studets i gaiig kowledge of our plaet; expadig collaboratios iside ad outside the uiversity; acceleratig the impact of the school s research; ad advacig plaig for a ew facility.

10 viii EXECUTIVE SUMMARY Graduate School of Educatio (GSE) The GSE has lauched its ceteial year advacig several strategic priorities. Oe such area focuses o learers i peril, those studets who are disadvataged by either social or biological causes, or both. The school has recetly completed the early phases of a ew buildig plaig process ad will expad the effort i 2017/18. Also, the GSE will further develop its partership with local school districts i the comig year. Egieerig The school welcomed a ew dea this sprig, Jeifer Widom, who has served i several key leadership positios i the school. Egieerig cotiues to pursue several strategic iitiatives that emerged from the SOE Futures plaig process completed two years ago. There is a strog focus o computatioal research, particularly i computer sciece. Humaities ad Scieces (H&S) Recet growth i faculty ad facilities have placed H&S i a positio of great stregth, but have tighteed its fiacial situatio. Future faculty growth will be targeted to ehace diversity ad to fulfill iitiatives i Neurosciece ad ChEM-H. H&S cotiues its efforts to icrease studet iterest i the humaities ad social scieces through ew feeder programs for high school studets ad placemet programs for graduates. Law Staford Law School is i the midst of a geeratioal shift i its faculty, with 17 ew members joiig the faculty over the past several years. There is a icreased focus o iterdiscipliary research ad teachig. Several ew faculty have joit appoitmets with other schools at Staford. Medicie Staford Medicie cotiues to develop its strategy for leadig the trasformatio of biomedicie to Precisio Health. This approach leverages the art ad sciece of medicie to predict ad prevet disease before it occurs ad cure it if it does. The Medical School s research programs remai strog through recruitmet of high potetial ad prolific ivestigators as well as ivestmet i pilot grats to spur ew research directios. GENERAL FUNDS BUDGET A focal poit of the budgetig process is the developmet of the geeral fuds compoet of the Cosolidated Budget. The $1.25 billio i geeral fuds i the o-formula uits ca be used for ay uiversity purpose ad sustai may of the core academic ad support fuctios of the uiversity. As show i the chart o the ext page, base geeral fuds additios will total $74.7 millio i 2017/18. About 40% will cover icreases i cotiuig costs for salaries, beefits, o-salary costs, ad the operatig costs of facilities. We set aside $20 millio as a geeral cotigecy. As 2017/18 ufolds, this moey may be used to respod to potetial chages i federal research fudig; to provide capacity to address iitiatives emergig from the Log Rage Plaig process; ad to address potetial shortfalls i edowmet payout. The remaiig $22.6 millio will be split amog edowmet mitigatio, ehacig existig programs, covertig certai oe-time expeses to the cotiuig base budget, ad a small amout for fudig ew programs. These purposes are further delieated below. Edowmet Mitigatio ($4.0 millio) As oted earlier, we allocated fuds to cover the shortfall betwee the icrease i edowmet payout of 1.6% ad the growth i expese supported by a typical edowmet fud of approximately 3.5%. These allocatios, directed pricipally to those o-formula schools relyig heavily o edowmet payout, reduce the eed for those schools to draw o reserves or to make budget reductios to address the shortfalls.

11 EXECUTIVE SUMMARY ix 2017/18 BASE GENERAL FUNDS ADDITIONS: $74.7 MILLION [IN MILLIONS OF DOLLARS] Market-based Adjustmets 32.1 Edowmet Mitigatio 4.0 No-Salary & Facilities Cotigecy 20.0 Base Coversio 6.8 Program Ehacemet New Programs Salaries & 5.8 Beefits 19.9 Icremetal Allocatios 18.6 Admiistrative Support 5.9 Other Academic/Faculty Support Other icremetal allocatios as described below iclude Systems ad Security, Studet Support, ad New Facilities Debt ad Operatios. Faculty, Academic, ad Research Support ($6.8 millio) We cotiued our ivestmet i the Faculty Icetive Fud ad the Faculty Developmet Iitiative to ecourage ogoig recruitmet of uderrepreseted miorities ad wome to the faculty. We allocated base geeral fuds to replace oe-time fudig i Evirometal Health & Safety ad i the admiistrative offices of the Vice Provost for Teachig ad Learig. Ehacemets were also made to the faculty child care programs. Admiistratio ($5.9 millio) This category adds fudig i a umber of admiistrative areas, icludig: part-time readers i the udergraduate admissios office; a studet services professioal i Egieerig; expaded capacity i Developmet; ad icreased staffig i Uiversity Commuicatios. Systems ad Security ($2.5 millio) We are addig fudig for the ADAPT system i Developmet, the Graduate Fiacial Plaig System expasio, ad for Staford Web Services. This category also reflects the additio of a swor deputy positio i Public Safety ad the expasio of security patrols i parts of the campus. Studet Support ($1.7 millio) Some of the key items fuded i this category iclude: staffig ad operatioal costs i the Office of Commuity Egagemet ad Diversity withi Studet Affairs; fiacial aid for master s studets i the Graduate School of Educatio; ad supplemetal fudig for research assistat tuitio allowace. New Facilities Debt ad Operatios ($1.7 millio) This category reflects the costs of brigig ew facilities olie i the comig year. The most sigificat additio is the Bass Biology buildig, which is expected to ope i late 2018.

12 x EXECUTIVE SUMMARY CAPITAL BUDGET AND PLAN The Capital Budget ad three-year Capital Pla are based o a projectio of the major capital projects that the uiversity iteds to pursue to further its academic missio. The three-year Capital Pla spas 2017/18 through 2019/20; the Capital Budget represets aticipated capital expeditures i the first year of the pla. The three-year pla icludes projects that were iitiated prior to 2017/18, as well as the full cost of projects startig withi the rollig three-year period through 2019/20. The Capital Budget ad Capital Pla are subject to chage based o fudig availability, budget affordability, ad evolvig uiversity priorities. The three-year Capital Pla icludes $4.3 billio i costructio ad ifrastructure projects ad programs. The projects oted above, whe fully completed over the multi-year period, comprise the bulk of the Pla. It also icludes a umber of smaller projects ad several ifrastructure programs aticipated over the legth of the Pla. ACKNOWLEDGEMENTS I this, my first Budget Pla, it is a great pleasure to ackowledge the help ad support of may people. The Budget Pla is the product of a great deal of work o the part of maagers ad budget officers at every level of the uiversity. I thak the budget officers ad leadership i the schools ad admiistrative uits for their efforts i support of the budget process. There are two hardworkig advisory groups that assist me i formulatig the geeral fuds budget ad capital pla. The Uiversity Budget Group cosists of Margaret Bradeau, Harry Elam, Adrea Goldsmith, Judy Goldstei, Patti Gumport, Rosemary Kight, Rady Livigsto, Kam Moler, Steve Olso, Serea Rao, Daa Shelley, George Triatis, ad Tim Warer. This group met from late September through March, ofte twice a week, to review submissios ad requests from the various budget uits ad to advise me o the fial allocatios of geeral fuds. Support for the Budget Group, ad for the creatio of this documet, is provided by the budget office staff, cosistig of Kayte Bishop, Jacy Crapps, Neil Hamilto, Betsy Lewis, Mike Lig, Serea Rao, Davis Reek, Mark Rickey, ad Daa Shelley, uder the able leadership of Tim Warer. The Capital Plaig Group cosists of Jack Cleary, Mega Davis, Stephaie Kalfaya, David Leox, Bob Reidy, Craig Taaka, Bob Tatum ad Tim Warer. Craig guides the capital plaig process with remarkable efficiecy, with excellet support from Howard Leug. Fially, a special persoal thaks to both Tim Warer ad Joh Etchemedy. Tim has bee a patiet teacher as I lear the complexities of the Staford budget. Joh cotiued as a Special Advisor ad participated i the budget process after he stepped dow from the provost positio ad helped at every step with the craftig of this budget.

13 EXECUTIVE SUMMARY xi REQUESTED APPROVAL AND ORGANIZATION OF THIS DOCUMENT The Budget Pla provides a uiversity-level perspective o Staford s programmatic ad fiacial plas for 2017/18. We seek approval of the plaig directios, the pricipal assumptios, ad the high-level supportig budgets cotaied herei. As the year ufolds, we will provide periodic variace reports o the progress of actual expeses agaist the budget. I additio, we will brig forward idividual capital projects for approval uder ormal Board of Trustees guidelies. This documet begis with a overview of budgetig at Staford, followed by four chapters ad two appedices. Chapter 1 describes the fiacial elemets of the pla, icludig details of the Cosolidated Budget for Operatios ad the projected Statemet of Activities for 2017/18. Chapter 2 addresses program directios i the academic areas of the uiversity. Chapter 3 provides a similar view of the admiistrative ad auxiliary uits. Chapter 4 cotais details o the Capital Budget for 2017/18 ad the Capital Pla for 2017/ /20. The appedices iclude budgets for the major academic uits ad supplemetary fiacial iformatio. Persis S. Drell Provost Jue 2017

14 xii EXECUTIVE SUMMARY

15 TABLE OF CONTENTS xiii TABLE OF CONTENTS EXECUTIVE SUMMARY...iii INTRODUCTION: BUDGETING AT STANFORD...1 CHAPTER 1: CONSOLIDATED BUDGET FOR OPERATIONS...3 Cosolidated Budget for Operatios...3 Geeral Fuds Evirometal Health ad Safety (EH&S) Projected Statemet of Activities CHAPTER 2: ACADEMIC UNITS Overview of Academic Uits Graduate School of Busiess School of Earth, Eergy & Evirometal Scieces Graduate School of Educatio School of Egieerig School of Humaities & Scieces School of Law School of Medicie Vice Provost ad Dea of Research Vice Provost for Udergraduate Educatio Vice Provost for Graduate Educatio Vice Provost for Teachig ad Learig Hoover Istitutio Staford Uiversity Libraries SLAC Natioal Accelerator Laboratory CHAPTER 3: ADMINISTRATIVE & AUXILIARY UNITS Admiistrative Uits Major Auxiliary Uits CHAPTER 4: CAPITAL PLAN AND CAPITAL BUDGET Capital Plaig Overview Staford s Commitmet to Housig...70 The Capital Pla, 2017/ / The Capital Budget, 2017/ Capital Budget Impact o 2017/18 Operatios Capital Pla Project Detail APPENDIX A: CONSOLIDATED BUDGETS FOR SELECTED UNITS APPENDIX B: SUPPLEMENTARY INFORMATION...103

16 xiv TABLE OF CONTENTS

17 INTRODUCTION: BUDGETING AT STANFORD 1 INTRODUCTION: BUDGETING AT STANFORD Budgetig at Staford is a cotiuous process that takes place throughout the year ad occurs at early every level withi the uiversity. The cycle starts with plaig that cosiders programmatic eeds ad iitiatives, cotiues with the establishmet of cost drivers such as the approved salary program ad frige beefits rates, ad is tempered by available fudig sources. Staford s budget is a amalgamatio of thousads of smaller budgets, icludig everythig from a idividual faculty member s budget for a sposored grat from the Natioal Istitutes of Health, to the budget for the Departmet of Psychology, to the budget for the School of Egieerig, to the total of the Cosolidated Budget for Operatios. These budgets are created ad maaged by the areas that are govered by them, with oversight by the provost, the chief budget officer of the uiversity. There are geeral priciples ad guidelies to which the budgets must adhere, but schools ad other uits are allowed tremedous freedom i the developmet ad executio of their budgets. FUND ACCOUNTING Staford s budgets are developed ad maaged accordig to the priciples of fud accoutig. Reveue is segregated ito a variety of fud types, ad the use of the reveue is govered by the restrictios of the fud. For example, each expedable gift is put ito a idividual fud, ad the recipiet must use the fuds i accordace with the wishes of the door. Gifts of edowmet are also put ito separate fuds, but the corpus itself is ot usually spet. A aual payout o the edowmet fud is spet, ad as with gift fuds, oly i accordace with the restrictios imposed by the door. The segregatio of each gift allows the uiversity to esure that the fuds are spet appropriately ad to report to doors o the activities that their fuds support. Moies received from govermet agecies, foudatios, or other outside sposors are also deposited i separate, idividual fuds to esure strict adherece to the terms of the grats ad/or cotracts that gover the use of the fuds. No-gift ad o-sposored research reveue also reside i fuds, but this type of reveue may be commigled i a sigle fud. Departmets may choose to combie urestricted moies ito separate fuds for a particular program, for a capital project, or to create a reserve. Staford s cosolidated reveues by fud type are show at the right. BUDGET MANAGEMENT At the ed of fiscal year 2015/16, Staford had roughly 23,000 active expedable fuds ad more tha 8,000 edowmet fuds. So how does Staford budget ad maage all these fuds? It goes without sayig that the uiversity uses a sophisticated fiacial accoutig system to set up the idividual fuds, to record each fiacial trasactio, ad to track fud balaces. But early all of the decisio-makig for the use of Staford s fuds 2017/18 CONSOLIDATED REVENUES BY FUND TYPE Grats & Cotracts 22% Auxiliaries & Service Ceters 6% Restricted 22% Geeral Fuds 23% Desigated 27%

18 2 INTRODUCTION: BUDGETING AT STANFORD is made at the local level, cosistet with the decetralized ad etrepreeurial spirit of the uiversity. Ulike a corporatio, Staford is closer to a collectio of disparate, autoomous busiesses with widely varyig cost structures ad resources. As such, each pricipal ivestigator is accoutable for the resposible use of his/her grat fudig, each gift recipiet must esure that the gift fuds are used i accordace with the door s wishes, ad each school must fulfill the expectatios for teachig ad scholarship withi its available resources. Schedule 21 i Appedix B shows expedable fud balaces by academic uit ad by level of cotrol. BUDGET CONTROL The primary cotrol o local uit budgets at Staford is available fudig. Except for geeral oversight ad policies goverig the appropriate ad prudet use of uiversity fuds, the cetral admiistratio does ot place additioal limits o spedig. For example, if a faculty member eeds to hire a postdoctoral fellow to help carry out a particular research project, ad if grat fudig is secured to cover this expese, the uiversity does ot secod-guess this decisio. Coversely, two importat budget matters are cotrolled cetrally: faculty billets ad space. Because the majority of Staford s fudig is uder the direct cotrol of a faculty member, a departmet, or a school, these etities are able to support programs as log as they maitai a positive fud balace. This, however, does ot mea that the programs must operate with a surplus durig ay particular fiscal year. I fact, a deficit is usually reflective of a plaed use of prior year fud balaces. A simple example of this is whe a departmet receives a gift of $5.0 millio to be spet over five years. If the fuds are spet evely over the time period, the program will show a surplus of $4.0 millio i the first year ad will geerate a edig fud balace of $4.0 millio. I each of the ext four years, this program will receive o reveue, will exped $1.0 millio dollars, ad will thus geerate a aual deficit of $1.0 millio while drawig dow the fud balace of the gift. The Cosolidated Budget for Operatios, the aggregate of all of Staford s smaller budgets, is therefore ot cetrally maaged i the corporate sese. Noetheless, a great deal of plaig goes ito the developmet of the idividual uit budgets that aggregate ito the Cosolidated Budget of the uiversity. DEVELOPMENT OF THE CONSOLIDATED BUDGET AND THE ROLE OF GENERAL FUNDS Aother key elemet i the developmet of the uits budgets ad the Cosolidated Budget are uiversity geeral fuds, which are fuds that ca be used for ay uiversity purpose. Geeral fuds play a particularly importat role i the overall budget, because they cover may expeses for which it is difficult to raise restricted fuds, such as admiistratio ad campus maiteace. The mai sources of geeral fuds are tuitio icome, idirect cost recovery, urestricted edowmet icome, ad icome from the expedable fuds pool. Each school ad admiistrative uit receives geeral fuds i support of both academic ad admiistrative fuctios. The process for allocatig geeral fuds is cotrolled by the provost ad aided by the Budget Group, which icludes represetatio from both faculty ad admiistratio. The critical elemets of the process are a forecast of available geeral fuds, a thorough review of each uit s programmatic plas ad available local fudig, ad a assessmet of cetral uiversity obligatios such as buildig maiteace ad debt service. Balacig the eeds ad the resources is the ultimate goal of the Budget Group. The geeral fuds allocatio process is described i more depth i Chapter 1.