| President Scott
S. Cowen
University Progress Report
Tulane University
July 13, 2006
As we begin a new fiscal year
I want to update you on the university's financial position and fiscal
year (FY) 2007 priorities. An overview of Tulane's financial situation
was reported by the Senate Committee on Budget Review to the University
Senate on June 12, and while I won't repeat the entire report here, I
will highlight a few key segments.
When we close the books for the fiscal year that ended June 30, we anticipate
the university will have an operating loss within the range of what we
projected last fall. This range is from $100 to $125 million.
However, based on what we know today, we anticipate being on the low end
of this range. In addition to this operating loss, we also sustained property
damage of at least $160 million, plus an estimated $125 million in lost
research assets, library and fine arts collections, and building contents.
These estimates are in line with our previous projections.
The university had insurance policies in effect at the time of the storm.
To date, we have received $105 million in insurance recovery, which we
have used to pay the contractors for the repairs to the property damage.
As all of you know, dealing with insurance companies is a slow and painstaking
process, and the amount and timing of any additional payments from insurance
are uncertain. We have funded the remaining operating and
property losses with the proceeds from the $150 million bond issue we
arranged last fall as interim financing. Finally, we have
received a nominal amount from FEMA to date - $80,000 - and cannot predict
the amount and timing of any future FEMA payments. Be assured, however,
that we will continue to be extremely aggressive in pursuit of FEMA and
insurance recoveries.
The university's endowment, which now stands at $891 million, including
charitable funds, has performed well this year, growing at an annualized
rate of 13 percent through May. Our fundraising staff, though small
in numbers and hampered by losing several months to the storm, met our
goal of $75 million. Research funding also looked strong through
June 30 with an estimate of $120 million being awarded to Tulane this
year in comparison to $137 million last year. All of these successes
are already factored in our projected losses for FY 2006.
As we begin the new fiscal year, we are forecasting an operating loss
of $31 million (which represents approximately 5 percent of our $580 million
annual operating budget). This projection is $11 million higher than we
originally forecast last December. The difference primarily results
from lower auxiliary revenues due to lower total student enrollment, reduced
clinical activities and higher than anticipated costs in areas such as
insurance, utilities and contracted services. The $31 million is
also $3 million higher than what we reported to the Senate in June, and
is attributed to additional reductions in projected clinical revenue.
Operating losses could have been as high as $75 million without the development
and implementation of the Renewal Plan.
Preparing the budget for this year has been a challenging process because
we are working with so many variables that are mostly out of our control,
such as the pace of recovery and repopulation of New Orleans, the state
of medical care in New Orleans and the effect it has on our clinical operations,
and the perception of New Orleans in the eyes of all of our constituencies.
The normal rules of thumb we would use in financial forecasting are no
longer valid and we are using our best judgment in making our forecasts.
As of this writing, we are comfortable that we can cope with the higher
budget deficit for this year; therefore, we do not anticipate having to
make any more personnel or programmatic reductions.
Moving beyond fiscal matters, we continue to work to ensure that our students,
faculty and staff have the best possible conditions in which to spend
their time at Tulane University. The turnover of faculty for this academic
year is less than anticipated and we have been successful in recruiting
full-time faculty in needed areas. As previously announced, we have
established a research enhancement fund that should be of great assistance
to the faculty in the next few years. In addition to this
encouraging news, we also had over 93 percent of our full-time undergraduates
return to Tulane in the spring and a high percentage is expected to return
in the fall.
Our first-year undergraduate class will number about 1,000 and we will
add about 150 transfer students, which means our full-time undergraduate
population will be a little over 5,100 students. This represents
a 23 percent reduction in the pre-Katrina full-time undergraduate population,
which is consistent with the Renewal Plan and in line with our previous
projections.
Even though our total full-time undergraduate population is in line with
our projections, the incoming undergraduate class is smaller than we expected.
The effect of negative press coverage about the recovery of New Orleans
is the single largest factor in our reduced numbers. Our Admission
Office did a survey of accepted students who chose not to attend Tulane
and two-thirds of them expressed concern about the city. The smaller
size of the incoming class also reflects our unwillingness to significantly
abandon our academic standards for new students. Even though we
will be smaller, we anticipate that we will remain one of the most highly
selective universities in the U.S. In addition, our undergraduate
population will realize significant benefits from our smaller size in
terms of the percentage of full-time faculty teaching undergraduates,
and the increased number of opportunities for undergraduates to participate
in academic and community-based programming. Finally, enrollments
in our professional and graduate schools are consistent with our original
projections.
In the next few months, we will begin work on the budget for FY 2008 with
the expectation that our financial condition will continue to improve.
The growth of our endowment and our fundraising results combined with
our strong research showing and the higher than anticipated retention
of faculty, staff and students all bode well for the future.
We will also have a full year to recruit students compared to our experience
last year. Even though we are a smaller and more focused institution,
we have a sound and differentiated academic platform on which to build
for the future. This platform will make it easier and more cost
effective for us to fully recover.
I am very optimistic about the future of our teaching, research and community-based
programs and a large percentage of our time this year will be devoted
to both short- and long-run strategic thinking and planning. The
possibilities are endless and we need to use this opportunity borne out
of tragedy to further develop an exciting and compelling vision for the
decades ahead while we are stabilizing our current situation. This
year, I will focus our attention on a number of objectives -- http://www2.tulane.edu/president_objectives_2007.cfm
-- that will help us achieve these goals. These objectives should
come as no surprise to you but I wanted you to see them nonetheless.
Someone said to me recently that it's a measure of how things are in New
Orleans today when you say “it's been an unbelievable year”
and you are guilty of understatement. I don't need to recount to
you what we all have been through, both as individuals and as a university.
We have lost some of our valued students and colleagues along the way.
I know you all join me in thanking them for their contributions to Tulane
and wish them well in their future endeavors.
Meanwhile, those of us who remain at Tulane University share a bond of
togetherness as we approach what I think is a very bright future once
we get beyond the next few challenging years. I have no doubt things
will continue to significantly improve and those remaining will realize
the benefits.
Personally, I am very committed to the recovery of New Orleans and the
university and to continuing to guide us through this process. I
am blessed with an incredibly dedicated and talented senior team, faculty
and staff. Together we will fully recover from this disaster and be a
stronger, wiser and improved university as a result of Katrina.
There is no challenge too difficult to overcome and anything other than
success is not an option.
I know I have written a very long message today but these are issues of
importance to everyone at Tulane. As always, I welcome your feedback
and questions.
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