KATIE GOODRICH | EDITOR IN CHIEF
Butler University’s budget is in the red.
$10 million in the red.
Next year, the university will take another “strategic loss” of $2-3 million, according to an April 4 email from Bruce Arick, vice president for finance and administration.
The largest class in Butler’s history is graduating, and they are taking their tuition money with them. Lower-than-expected enrollment numbers also hurt the operating budget, which relies largely on undergraduate tuition.
The announcement of the financial situation prompted Faculty Senator Bill Watts to draft a resolution that passed unanimously calling for transparency and discussion from the administration.
“I was surprised the number was so large,” he said. “I have felt over the years that our forecasting was pretty good, so to be off like this, it was a bit of a shock.”
Two financial presentations were done in response to the resolution to explain the budget and the process taken to create it.
Arick said the hardest part about putting together a university budget is the speculation and number of variables involved.
“You don’t have repeat customers,” he said. “What other industry operates that way? You are constantly going after a new set of seniors with college aspirations.”
The number of incoming first-years remains in flux until the first day, so surprises can come at any moment. Then the cycle of new “customers” or students in Butler’s case does not begin again for another year.
“We are especially sensitive to incoming class sizes,” Arick said. “The graduating class also affects the budget, but it is more fixed.”
Watts said faculty are acutely aware of the importance of recruiting and accurate predictions.
“If the class is smaller than expected, it becomes a four year problem,” he said.
Arick said this year’s graduation will not cause major problems.
“From a budget standpoint, is it going to have a dramatic impact? No,” Arick said. “Will it have some impact? Yeah. It will have some.”
A combination of circumstances created the budget deficit, including the large graduating class, a small junior class, increased amounts of financial aid given by the university and a $2 million revenue loss from the transition from Schwitzer Hall to Fairview House.
The Board of Trustees approved an almost percent tuition increase for next year. Students will pay about $2,000 more per year, which will net Butler $8.9 million more dollars for the next budget.
The emphasis on prediction of incoming classes also means the budget involves lots of educated guesswork.
“We can look at history and our trends,” Arick said. “But that can also be thrown out too. You never really know until [first-years] walk on campus.”
The administration in expecting one of the largest, if not a new record, of first-year students in the fall.
The administration provides faculty with weekly projections about the number of students, and this week they are expecting 1,092 in next year’s class. The target is 1,100.
The number will fluctuate as more students put down deposits and others back out.
Watts said the deficit did not stem from mismanagement on anyone’s part.
“I would not seek to assign blame,” he said. “I think a number of things came together, and that caught everyone off guard.”
Arick also did not express extreme concern with the situation.
“There is always going to be unknowns in this business,” he said. “I have a lot of confidence in the financial model used to project our revenues and expenses.”
However, the budget will be in deficit again next year, but only to the tune of $2-3 million.
“We are budgeting more conservatively next year,” Arick said. “We will have a small projected deficit that we would expect to manage. We run almost a $180 million budget, when you’re talking about a couple million dollars, it’s a fairly small percentage.”
Lauren Tieman, senior accounting and finance major, said the number is overwhelming.
“To a normal person looking at that number, you are just shocked because it seems like a lot of money,” she said. “If you work for a large company, the number probably doesn’t seem as big.”
Arick said the university is in a growth, which means running a deficit is a “strategic loss.”
“If we need to take some risks on the front end with a small deficit, we are willing to do that,” he said. “It is a timing thing. You are investing ahead of your revenue streams to create the environment and opportunities that are right.”
Building a new residence hall, a new business building and other campus improvements will attract more incoming students which will then help balance the budget, Arick said,
Tieman said she understands the thought process behind this, but the changes are not things she wanted to see as a prospective student.
“Part of the reason I chose Butler was because there was no construction on campus,” she said. “I loved being able to go everywhere on the beautiful campus.”
Watts said he was comfortable with the idea of a “strategic loss,” after years of being strict about keeping the budget balanced.
“There is wisdom in that, but I also think it is good to think in a more long-term frame,” he said. “The willingness to run a deficit for a few years seems to be wise in this context. It seems to me that there has been some real thought that has gone into minimize the deficit and to protect academic programs.”
Arick said this growth is meant to improve Butler’s national recognition to then produce
“reasonable surpluses” for decades to come.
Butler went through a similar growth and deficit trend in the 1990s, which turned into surplus budgets in the 2000s.
In order to manage this trend, the university cut almost 4 percent from next year’s budget.
Watts said the College of Liberal Arts and Sciences usually cuts department budgets that pay for office supplies and parties for students.
“The budgets aren’t handsome to begin with that does cause some pain,” he said. “Cutting budgets is necessarily painful. On the whole, I am convinced we are handling things well in terms of the long term health of the institution.”
Arick said the deficit will not affect faculty and staff, but they will have to deal with the changes.
Watts said there will be more students in core courses, because they are cutting sections of those classes.
“We don’t wanna have to do these things,” he said. “It seems to me that probably given the overall situation those are the best sorts of cuts to make.”
Arick said the entire situation is something he would rather not have.
“Would I prefer to be not projecting a deficit? Absolutely,” he said. “But it is a manageable number that we are comfortable with. ”
Tieman said she would not want to work for a company projecting a deficit as large as Butler’s.
“It makes me nervous,” she said.