One year after President Richard Brodhead’s “Message to the Duke Community” announced a smaller Duke, a new memo from the president paints a picture of the University’s finances that is relatively less grim.
In an e-mail to faculty and staff Friday morning, Brodhead presented a recap of the administration’s efforts to cut the University’s deficit by $100 million over three years. The message, titled “Financial Update,” also revealed that benefits-eligible employees making $80,000 or less annually will receive a one-time payment of $1,000 for fiscal year 2010—which runs from July 2010 to June 2011. The pay freeze that was implemented last fiscal year is still in effect for all employees. This marks an increase in the number of employees receiving the bonus—to approximately 70 percent of University employees, Brodhead said in an interview.
“Duke simply cannot make permanent salary increases at this time without aggravating our future budget problems and jeopardizing jobs,” the e-mail reads.
Employee benefit packages—which provide health, life and dental insurance, tuition reimbursement and a retirement plan—will not be affected this calendar year, though potential changes for next year would be determined as necessary, Executive Vice President Tallman Trask said.
“I’m hoping we can avoid [cutting benefits] by cutting other items,” he said.
Last year’s salary freeze allowed for a one-time $1,000 supplement for those making $50,000 or less, which saved the University about $18 million, Brodhead noted in his e-mail. The freeze and payment for next fiscal year will save Duke an estimated $20 million, Trask said.
Much like Brodhead’s “Message to the Duke Community” last March, this year’s e-mail does not detail changes that will affect employees of the Duke University Health System, as they follow separate procedures. DUHS employees will be notified of salary adjustments later this year.
Employees whose contracts are dictated by agreements with a collective bargaining unit—including bus drivers, labor union Local 77, food service workers and housekeeping staff—will face changes in accordance with their respective contracts. Approximately 500 employees fall under this category, Trask said.
A smaller deficit
This time last year, University officials estimated that Duke faced a $125 million budget deficit and created a three-year plan to reduce that deficit accordingly.
Brodhead announced last month, however, that recent calculations based on the market rebound left the University’s deficit closer to $100 million instead.
As of June 2009, Duke’s endowment was valued at $4.4 billion, down from $6.1 billion the previous year. Over the last calendar year, the endowment earned more than $400 million, Trask said, noting that it has increased by 11 percent over the last six months.
The $25 million decrease in deficit is derived from the 5.5 percent payout from this $400 million increase. Endowment spending has constituted about 12 to 13 percent of the University’s operating budget in the previous two fiscal years.
Additionally, although the overall number of donors has increased, the number of people making large contributions—amounts of more than $10 million—has decreased, Trask said.
But for now, as a result of cutback efforts such as freezing capital projects like the construction of New Campus and renovating the West Union building, reducing expenses across departments, offering early retirement packages and not filling vacancies, the University is about halfway toward eliminating its budget deficit one year into its three-year path.
And through early retirement incentives and natural attrition, Duke has trimmed more than 450 people from the workforce, avoiding large-scale layoffs. Approximately 400 were retirements, Trask noted.
“We should be very pleased with the progress we’ve made, it has not been easy,” Brodhead said in the interview. “We have to continue to work on this or we’re just taking it out on the future.”
Still, officials are looking for places to cut costs while protecting faculty positions, academic programs and financial aid.
“Everything else is on the table,” Trask said. “It depends on what happens, what choices we get. Some vacancies have to be filled and others don’t have to be filled.”
Trask added that he does not think significant layoffs will be necessary because officials “know enough and have gotten far enough” to eliminate the deficit without involuntary downsizing.
With two more years left in the University’s plan to entirely eliminate the budget deficit, officials are anticipating significant progress through continued administrative cuts and strategic vacancy management.
“We’re getting there, but we still have a long way to go,” Trask said.
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