The hallmark of the past 15 years at Duke has been expansion: new departments, bold plans for a new campus and so many new buildings that many alums swear they don't recognize the place.
No more. With the economy in shambles, the University will have to cut around 5 percent of its annual budget, marking the first time it has had to actively cut in years. During the last recession, in 2001, Duke had to forgo some growth but did not have to make budget cuts.
"What you're going to see is Duke become a smaller place over time," Executive Vice President Tallman Trask said in an interview earlier this month. "We don't want to do that with a meat axe. We don't want to do it too quickly. Universities don't respond well to big slugs to the head."
Instead, officials will work to gradually shrink the budget by more than 5 percent per year, roughly $100 million, over about two years. Trask, the University's chief business and financial officer, said the total decrease could be in the $130 million range. To make that figure, Duke will push the timeline back for some projects and work to increase efficiency across the University.
Employee compensation-comprising some 60 percent of the annual budget-will likely be one of the first areas to be considered.
"We're going to protect employees," he said. "Hopefully it is through attrition [that we will cut costs], through deferrals of some expense and hopefully not through some massive disruptions."
Kyle Cavanaugh, who became vice president for human resources at the beginning of February, said discussions about hiring issues are taking place within each department.
"We've started very preliminary conversations about potential options, from efficiencies to potential process changes, we're looking at alternatives," he said.
There are currently some 2,000 unfilled positions at Duke, but that number ranges from posts that have been long unfilled to others that are necessary for day-to-day operations. It also counts everything from top-level white-collar positions to maintenance staff. In some cases, compensation is already budgeted, even if it is not being paid out.
Only truly essential positions, such as police officers and nurses, will be filled, Trask said. He added that Duke, unlike some other universities, has not had to resort to calling off faculty searches and hiring. But the ranks of professors may still contract.
"I think over three years the faculty will... get a little bit smaller," said Provost Peter Lange, adding that any changes will vary from school to school.
Lange said there may be fewer searches, but he expects fewer departures, as faculty members worried about nest eggs choose to push back retirement plans.
Trask also believes there are places to slim down operations. During the boom years parallel offices developed in some schools, but those must now be combined.
By setting uniform standards for University buildings on temperature controls, window-opening and hours of operation, Trask estimated Duke will be able to save between $500,000 and $1 million.
"It costs a lot of money on this campus to let people do whatever they want on campus in terms of buildings being open."
Those controls will apply to buildings already standing. But as Lange told Campus Council last week, there will be no new large building projects before 2011. Trask said the University's capital budget-which includes buildings-will probably be put "essentially on hold, at least for the foreseeable future."
Even with these changes in place, officials will likely need to make some hard choices. The annual endowment payout is based on a three-year average, and because the last three fiscal years have seen positive growth, Trask said the worst is yet to come.
"For next year we can hold the endowment payout dollar flat, but unless there is some significant shift in market performance, that can't be continued," he said. "The models become rather terrifying if you run them out with highly negative numbers."
Several factors limit choices. The University remains committed to financial aid, officials said, and they expect aid expenditures to increase next year, although there are not yet numbers to confirm this. If aid costs rise as endowment payout sinks, Duke will have to find money to cover it.
Adding more debt is also not an option. After issuing $500 million in bonds last month, Trask said he did not want to add any more debt. The effects of the University's existing debt are already being felt. Standard and Poor's analyst Marc Savaria pointed to Duke's nearly $1.86 billion in total long-term debt as one negative factor in rating the bonds AA+, one step short of the top AAA mark.
Trask said he was optimistic students would not bear the brunt of whatever cuts are made.
"I don't think students will notice the difference," he said. "We don't want to go out of the business of adding to excellence. That's not free."
The annual budget typically goes to the Board of Trustees in May.
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