DePaul reports $43 million in budget surplus

DePaul reported more than $43 million in operating income in fiscal year 2014-2015, budget documents reveal. The significant surplus comes as the university projects thin operating margins amid enrollment declines in the years to come.

The number resulted from a mix of conservative budgeting, an unexpected increase in tuition revenue, an uptick in gifts from donors and significant savings in operating expenses, per the budget documents. 

“Generally as a philosophy within the budgeting process, you try to budget conservatively,” said Executive Vice President Jeff Bethke. “So, in the ideal world, you wouldn’t have variances either way, but the real world doesn’t work that way. Generally, you want to build a budget that is more likely to have a positive variance than a negative variance.”

The initial budget had called for a much more modest $2 million surplus. Yet on the revenue side, graduate and law school enrollment fueled an unexpected jump in tuition revenue and fees from a budgeted $641.8 million to an actual of $650.8 million.

According to DePaul controller Sherri Sidler, these programs are very volatile, which makes them hard to predict.

“There’s less market data out there to project those,” Sidler said. “So we’re pretty good on the undergraduate side and we come in really close to that little bit of conservatism that we put in, but the graduate programs were the ones that were volatile and those are the ones that have less data available to plan with.”

On the cost side, much of the nearly $22 million in savings on operating and overhead expenses was due to the early retirement program the university offered to faculty and staff in 2014. After taking a one-time hit in the 2013-2014 budget, the university saw better than anticipated savings. Plus, there was a “delay in filling vacancies arising from the program and more extensive use of adjunct and part-time faculty,” the document stated. 

Bethke, however, disputed the point about savings coming from increased use of contingent faculty, pointing more to the “lag” in hiring as the main proponent.

“I don’t know if I would accept that point about savings as a result of the increased use of adjunct faculty,” Bethke said. “That’s not the case. The savings were results from the fact that we had a big batch of folks retire and we haven’t refilled those.”

Still, concerns over the increased use of adjunct faculty and a decrease in tenure track faculty were one of many reasons the two faculty members on the Strategic Resources Allocation Committee (SRAC) initially voted no on the budget proposed for the 2016-2017 fiscal year, which will be presented to the board of trustees in March.

While saying they did not object specifically to anything proposed, the members wanted to “take a stand” on the adjunct issue along with growth in administrative areas and the university’s taking on of capital projects in a time of enrollment decline.

This led to Rev. Dennis Holtschneider, C.M., calling for a meeting with the faculty members, Michaela Winchatz and Tom Mondschean, last month to discuss their vote. The two ended up switching their votes, providing a budget to the board with unanimous support.

“That all sounds accurate in terms of the concerns, but my impression from being a participant in the meeting were Fr. Dennis talked to the faculty representatives about this budget and talked about their vote and their decision to ultimately change their vote to support this budget was his explanation that there actually is pretty significant investment planned in this budget for faculty increases,” Bethke said.

Bethke added that a “fairly large number” of faculty lines will be filled this fall, with a majority of them being tenure-track positions.

In a statement, Winchatz and Mondschean said “we, the faculty representatives on SRAC, had originally voted against the budget due to various concerns. Most importantly, we are troubled by the decline in the number of tenure track faculty over multiple years. However, after meeting with Fr. Holtschneider, Provost denBoer, Bob Kozoman, and Jeff Bethke, we were able to agree on a path to begin addressing our concerns and believed it appropriate to change our vote to support the 2016-2017 budget.”

DePaul School of Music exterior
A rendering of the new DePaul School of Music building, which began construction last November. (Photo courtesy of DEPAUL UNIVERSITY)

According to Bethke, “a chunk” of the surplus from FY14-15 was “used to support capital projects” with the primary beneficiary being the new School of Music Building, which will replace McGaw Hall on the eastern edge of the Lincoln Park campus.

Sidler added that it also went towards the university’s working capital in order to “handle the ebbs and flows of our cash flow.”

This is important as DePaul has a relatively small endowment for an institution it’s size, which makes it more dependent upon tuition dollars to meet the bottom line. This in particular is a challenge for university bookkeepers in the current academic climate.

Between now and 2018, the end of DePaul’s current strategic plan, enrollment is projected to decline by 5.5 percent. With that and other factors, Bethke said that “relatively moderate levels of increase” in tuition can be expected, though most of the increase will be focused on incoming students.

“The budget that we’ve proposed to the board has a returning undergraduate student increase in the range of 2.5 percent, which is consistent with the last couple of years, probably consistent with what it will be like in the next couple. And graduate student increase in the range of 1 to 2 percent,” Bethke said.

Sidler added, however, that institutional aid will also see an increase of around 7 percent in that period.

A more immediate concern for many DePaul students, however, is the continued lack of funding for the MAP program due to the state budget crisis. Bethke put their concerns to rest, for now at least, saying that the university will honor students’ MAP awards for at least the rest of the academic year.

“I think that Father Dennis had been quite clear that the current academic year, whatever happens with the state, DePaul will make sure that those MAP students are not left holding the bag,” Bethke said.

In the long term, however, the picture is much less clear.

“The tricky thing from a budgeting standpoint is, ‘well, what does the future look like?’ That’s not necessarily a commitment that the university could absorb indefinitely,” Bethke said. “So for the current year, we can backstop it. For future years, one of the mechanisms we’ve used is setting aside a reserve if you will if there’s a shortfall. It’s not the whole amount by any stretch of the imagination, but it’s a portion of it.”

While the university is worried about the MAP situation, Bethke said that DePaul is largely able to control its own fate.

“There are no easy answers and sometimes you won’t know if you’ve made the right decisions for years,” Bethke said. “But it’s critical that we get it right because it’s too important what we’re trying to do here.”