The University will delay rolling out parts of its decade-long strategic plan, setting back transformational programs officials hoped would boost GW’s presence, after missing its revenue target this year.
Officials had to use funding — which could have launched new parts of the strategic plan — to keep existing programs running, Provost Steven Lerman said in an interview last week. GW brought in less revenue than officials had projected this year, marking the second year in a row that the University didn’t meet its expected revenue in the first half of the fiscal year.
“The funding for many of those things was projected to come partly out of budgets, as well as philanthropy,” Lerman said. “And the extent to which one has to use the resources to simply run the place, there’s less resources to invest in the short term strategically.”
Since approving the plan two years ago, GW has already moved to bring down barriers to students transferring between colleges and open new research institutes. Officials cut $8.2 million that had been set aside for funding the plan last semester, after running a roughly $20 million deficit the previous year.
When the plan was approved, officials did not outline the order in which ideas could launch. Instead, they focused on implementing new initiatives each year.
Last summer, the University launched its $1 billion fundraising campaign, which will send development officials across the globe to pitch ideas laid out in the strategic plan. Donors will typically set aside their gifts for a particular cause, so the implementation of certain aspects of the plan could be subject to what donors find most interesting.
Academic and administrative departments have had to squeeze their budgets this year — and are planning to do so again next year — to make up for less revenue and larger-than-expected expenses in some areas, like travel, training and online programs.
Most divisions are seeing about a 5 percent budget cut, Lerman said, though there are some areas that “can’t or shouldn’t get cut,” like traveling for admissions recruitment purposes.
“Certainly, we’re not doing a version of sequestration,” he said. “We’re not saying everybody cut 5 percent whether it makes sense or not. We’re asking each of the leaders to develop plans, and, again, we haven’t finalized those plans.”
The challenges of projecting revenue
Officials make projections for how many students they expect to enroll in each program based on the previous year’s enrollment and how many students they expect to attract in the coming year, Lerman said.
For graduate program enrollment projections, they look at the total number of credit hours that students are taking in a year, rather than a headcount of the number of students enrolled in a school, he said.
Since graduate programs differ in the number of credits required and how much tuition costs for each program, the University must consider the different requirements of programs to understand how much GW can expect in tuition revenue, he said.
GW relies on tuition for about 66 percent of its revenue, according to a recent Faculty Senate report.
The net total of full-time graduate students across the University declined by just five students this year, while the net total of credit hours taken by graduate students increased by 344 hours, according to data from the Office of Institutional Research and Planning.
Still, the University’s total graduate enrollment has grown by 5 percent since 2010, when 10,562 graduate students enrolled at GW.
The number of credit hours for all graduate students decreased in the GW Law School, the GW School of Business and the School of Engineering and Applied Science. Tuition for master’s programs in those schools are some of the most expensive at the University.
Tuition for the global MBA program is about $90,000 for a 21-month program, or $1,621.62 per credit, which would make it one of GW’s most expensive graduate programs. Ninety-nine students started the two-year, full-time program in the fall.
But in the five-year-old School of Nursing, one of GW’s fastest-growing schools, tuition for master’s programs is $920 per credit, one of the least expensive rates, and the number of credits required differs across programs.
Enrollment in the Graduate School of Education and Human Development also declined, but most of the school’s programs charge $1,475 per credit hour.
If a school sees enrollment increase, its budget will typically grow to add new faculty and resources for the additional students, Lerman said.
“From a University-wide perspective, you’ve got to add both numbers up based on the tuitions,” he said. “If you get more credit hours in the less expensive program and a corresponding reduction in a more expensive program, then actually the revenue is less than the other way, and we use that in our estimations.”
Weathering extra expenses
The lower-than-expected revenue was also coupled with overspending in areas like travel, training and start-up costs for online programs.
Expenses for “purchased services” were high, Lerman added. The category is a broad group of costs, some of which are necessary and some can be cut, he added.
Divisions have dialed back training and travel costs wherever possible, he said. Some areas, such as admissions, still have the green light to travel, but officials are videoconferencing into more meetings and completing more trainings online, rather than sending groups of employees around the country.
Joseph Cordes, an economics professor and chair of the Faculty Senate fiscal planning and budgeting committee, said the increase in University-wide expenses outpaced revenue growth last year. Revenue grew 4.1 percent in fiscal year 2014, while expenses grew 7.8 percent, according to a report he presented to the Faculty Senate in January.
That could be concerning, he said: Expenses growing at a faster rate than revenue on a perpetual basis is “unsustainable in the long run.”
“You have to undertake steps to get them back in line. That divergence I would say – that is a principal cause of all the belt-tightening that’s going on,” Cordes said.
Lerman and Executive Vice President and Treasurer Lou Katz are now planning the budget for the next fiscal year, but Lerman declined to say whether departments would still be strapped for funding during an interview last week. A memo he sent to academic heads in January said cuts would likely extend into the next fiscal year.
Paul Swiercz, the chair of the management department and a Faculty Senate member, said the coming years will be a test of whether the University can deliver on investments, like constructing the Science and Engineering Hall and renovating the Corcoran school’s building. The senate should continue to “ask questions and demand transparency,” he said.
“It’s always a struggle, but I don’t think we’re in a problem zone around transparency,” he said. “But we could always use a little bit more, particularly [with] questions around administrative overhead and how we’re allocating to different initiatives.”
Using online programs as a model
The setbacks come as programs in the Milken Institute School of Public Health and the School of Nursing are proving successful and giving officials models for how to build revenue growth areas. Lerman said he’s now focusing on expanding professional online programs, which allow graduate students to work during the day and schedule their studies on their own.
“We need to look at master’s programs that are professionally oriented, and I think today’s master’s students want the flexibility of being able to study in the evenings and shift their study times because most of them are going to be working,” he said.
While online programs typically come with high start-up costs, especially for programs that are created with the help of a third party, Lerman said he’s still confident they will pay off eventually.
The University launched an in-house design shop in 2014 to work with faculty who are starting online programs so they don’t need to work with a third-party company. Many of the new programs that could be rolled out in the next year are in growing fields such as health care administration and cybersecurity.
Other departments have floated five-year programs to keep students on campus longer or new programs to lure a different type of student to campus, which would also increase tuition revenue.
Cordes said he planned to ask Paul Schiff Berman, GW’s vice provost for online education and academic innovation, to speak at an upcoming fiscal planning and budgeting committee meeting and explain the high overhead costs of starting online programs.
The growth in online program costs could be from different causes, he added.
“It could be because they cost more than projected. It could also be because more online programs were in effect starting to be put together than projected, or a combination of a two,” Cordes said.
Charles Garris, the chair of the Faculty Senate executive committee, said it can be difficult for new program directors to judge how many students they will attract during their first year. For example, if faculty expect a program to lure 500 students, and it only enrolls 300, the program could still be considered a success to the faculty, while GW’s finance officials might not agree, he said.
Faculty are “gritting our teeth” as budgets are crunched, he said, and hoping that new programs will draw a different type of student.
“Sometimes you get people who are very excited about initiating something new and they do well, they do very well, but they don’t quite do as well as expected, and that can knock the budget off,” he said.