The next official to take charge of GW’s finances will inherit long-standing economic challenges at the University.
Mark Diaz, the new executive vice president and chief financial officer who will start in July, will assume ongoing administrative budget cuts, ballooning tuition and debt and a budget that relies heavily on revenue from tuition. As Diaz, who was announced as the new CFO last week, prepares to come to GW from the University of Miami, experts say he will have to balance budgetary pressures with the ambitious goals of University leadership.
He said in a release announcing his position that it will be his goal to “operationalize” the vision of University President Thomas LeBlanc, who Diaz worked under for more than a decade at Miami. LeBlanc has laid out a vision focused on research, the student experience and improving the “transactional” culture within GW’s workforce.
University spokeswoman Maralee Csellar said GW’s financial situation is strong, buoyed by encouraging credit ratings. The University was given the third-highest rating a university can receive from credit agencies S&P and Moody’s in recent evaluations.
“Since the University focuses on a long-term investment strategy, GW’s financial health should remain strong during the transition,” she said in an email.
She declined to address questions about the University’s fiscal challenges like budget cuts, debt and tuition reliance. She also declined to say how LeBlanc’s projects might impact the University’s financial plans.
GW is roughly 60 percent reliant on tuition to fund its budget. The University took in almost $1 billion from tuition and fees, while spending roughly $1.5 billion, according to fiscal year 2016 tax documents – the most recent data available.
Though GW reduced its debt by about $100 million in payments last fall, the University still owes about $1.5 billion, a number that has steady grown over the last decade.
But Diaz will begin work at a time when the University has reversed a previous financial downturn. Last fall, officials said GW had finished the year with its first surplus since 2012. In 2014, an expected drop in graduate enrollment spurred several rounds of budget cuts.
The University is in the middle of five years of planned budget cuts to all central administrative units. LeBlanc has not shown a willingness to end that plan, saying he will carry out the current five year financial outlook.
Diaz will oversee a financial strategy very different than Miami, which has a lower endowment but larger budget than GW and is less reliant on tuition revenue to fund campus projects.
Richard Vedder, a professor of economics, said GW will have to find a way to fund projects without significantly increasing tuition. Officials may have to decide whether to sacrifice student financial support for economic stability if resources dry up, he said.
“I suspect even if things are pretty good right now there are still going to have to be very cautious about expanding the use of resources,” he said.
Vedder said GW’s tuition, which has risen by about 3 percent each year for the last decade, is approaching about as high as many students and their families can realistically afford. The cost of attendance will approach $70,000 for next academic year.
“There’s a two-class kind of university system emerging across the United States: The class of the haves and the have-nots and GW is on the borderline,” he said. “It’s a challenge but it’s not an impossible challenge.”
Gabriel Serna, an assistant professor of higher education at Virginia Tech University, said the University may not be in position to embark on large construction projects because of its high debt load, which creditors also noted as a negative in GW’s financial outlook last year.
Heavy reliance on tuition may limit the amount of student support the University is able to give to students, he added. The University has sought to raise money for student support through fundraising, especially the $1 billion fundraising campaign.
“Because there’s such a heavy reliance, it limits the ability of admissions management folks to give tuition reductions to help lower tuition, for people who are trying to access GW,” he said.
Last year, the Board of Trustees approved the largest increase in the undergraduate financial aid pool since at least 2011.
Barbie Jefferson, the chief financial officer at Wofford College in South Carolina, said a university should evaluate budget cuts every year, especially when there is a new person in charge.
Across higher education, Jefferson said there is a lack of understanding about why the price of college has increased and students might be turned off by the high cost of tuition, which could ultimately affect the amount of tuition universities are able to bring in.
“A lot of times students are turned away because they go on the website and see college costs $50,000 so what they are missing is that for most people it may cost $30,000 with financial aid,” she said.