Development of the Operating Budget

The budget for fiscal 2011 successfully meets the competing challenges of continuing to invest in the University’s academic programs and physical plant while moderating the increase in student charges. 

Gap Closing Actions

Last year, the budget message for fiscal 2010 reported on the actions needed to close a gap of $120 million compared with plan.  The actions included zero percent salary increases for all employees, use of accumulated fund balances in designated funds, and structural changes in expenses and revenues set forth in targets that were allocated to all schools, administrative and auxiliary.  Administrative and auxiliary units achieved their targets through re-engineering, generating annual savings of $66 million.  Although the re-engineering program formally ended as of the end of fiscal 2010, the University will continue to look for ways to improve administrative services while operating with improved efficiency.  Schools met their targets in fiscal years 2010 and 2011, and are on course to achieve the remainder of their targets in fiscal years 2012 and 2013.

Momentum Fund

Beginning in fiscal 2011, all schools will contribute one percent of gross tuition revenue for degree-granting programs to a "Momentum Fund" managed by the Provost.  The fund will enable the Provost to make selective investments in capital or other projects that will advance the University’s highest academic priorities.  


Although income from investments comprises only 4% of the University’s total operating revenues, endowment income is, at the margin, an important resource.  Viewing the future with an increased degree of caution, the University changed its planning assumptions for fiscal 2011 and future years’ total return on endowment investments to 6% from 8%.  The University continues to budget endowment income that is generally calculated as 5.0% of the endowment funds’ 12 quarter (three years) average market value.

In fiscal 2011, a small portion of the University's endowment – some 222 endowment accounts with a total market value of $119 million – was "underwater".  That is, when the Board appropriated funds for the fiscal 2011 budget, the market values of those endowment accounts were below the market values of the gifts that established the accounts.  At the time the Board approved the fiscal 2011 budget, New York State law limited the University’s ability to draw from underwater accounts to the amount of interest and dividend income, which equals about one percent of market value.  

The law that governs endowment management changed in September 2010 when the Governor signed the New York Prudent Management of Institutional Funds Act ("NYPMIFA").  The new law changes the rules regarding expenditures from underwater endowments, to allow spending in an amount that is greater than dividend and interest income, but also imposes new requirements on not-for-profit institutions with respect to managing investment funds.  The University is now engaged in the process of implementing this major change in law.  With respect to funds that are underwater in the fiscal 2011 budget, the University  will continue to adhere to the provisions of the old law through the end of the fiscal year.