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French outlines staggering deficits

Published: January 30, 2009
Section: News


BUDGET BRIEF: Executive Vice President and Chief Operating Officer Peter French presented the university’s finances at a student forum. French explained that the faculty as well as the Board of Trustees viewed the same finanical presentation.<br /><i>PHOTO by Max Shay/The Hoot</i>

BUDGET BRIEF: Executive Vice President and Chief Operating Officer Peter French presented the university’s finances at a student forum. French explained that the faculty as well as the Board of Trustees viewed the same finanical presentation.
PHOTO by Max Shay/The Hoot

Executive Vice President and Chief Operating Officer Peter French briefed students on the university’s finances Wednesday morning following Monday’s announcement that the Rose Art Museum will close as a response to the university’s projected $23 million deficit in 2014.

Before Wednesday’s presentation, only the fiscal year 2009 deficit and fiscal year 2010 projected deficit had been made public to students. Wednesday, French shared that in addition to the current fiscal year’s $10 million deficit and next fiscal year’s projected $5.8 million deficit, the university faces a worsening deficit through fiscal year 2014.

French explained that while the university faces a $4 million gap in its total operating budget this fiscal year, it is projected to face a $9 million gap in FY2011, $16 million in FY2012, $22 million in FY2013, and $23 million in FY2014.

In light of these sobering numbers, French remarked, the administrating is “focusing on a long term plan to get us into balance.”

That long term plan may include the loss of 36 Arts and Science faculty over the next five years, third semester program beginning with the class entering in the fall of 2010, a reduction in doctoral programs, and the closing of buildings.

Such changes would “make progress” French remarked, “but it doesn’t close the gap.” Even with these changes, he said, “there is still an $11 million gap in fiscal year 2014.”

French’s presentation, which students were told was the same information that the faculty and Board of Trustees received, was intended to “define the current problem confronting [the university] within the context of” the university’s financial history.

“Structural imbalance has characterized the university since its founding,” he said. Brandeis has historically overdrawn its endowment, creating what French called an “unsustainable endowment draw,” while relying too heavily on philanthropy. Furthermore, French explained, the university has not been able to “put aside enough money into a savings account.”

The “catastrophe in the financial and credit markets” has only worsened the university’s “fragile financial condition,” French said. As of June 30, 2008, he explained, the university’s endowment was valued at $712 million. Six months later, the endowment’s market value plummeted to $549 million. “There are no gains in the endowment today to support endowment draw,” French added.

As such, the university must draw $42 million out of its savings account for this fiscal year and $40 million next fiscal year. After those draws, “the savings account is in essence gone,” French said.

“The true endowment value is resetting but doesn’t recover for some time,” French explained. “It will take multiple years to recover from this.”