In light of recent stories in The Maroon about the university’s budget, I thought it would be helpful if I publically explained some things about how Loyola’s budget operates.
Let me start by saying what the budget is not. Loyola’s budget is not simply one pot of money which we can move around to cover different expenses or projects. There are different parts of our budget which need to be used in certain ways.
The basics of our budget are pretty straightforward. Like the vast majority of colleges and universities in the United States, we are heavily tuition dependent. Our tuition revenue – undergraduate, graduate and Law – covers approximately 86 percent of our revenue. Each year when we create the budget for the following year, we build it around the number of students we expect to enroll. This year, our entering first-year class was smaller than we expected, we retained fewer of our upper-class students than projected and we had smaller graduate enrollments than expected in several programs. The shortfall experienced at Loyola reflects similar occurrences at the other universities in the New Orleans area and the other Jesuit colleges and universities nationally. The graduate shortfall also reflects a national trend in these challenging economic times.
Other sources of revenue come from gifts and from our endowment. Our fundraising has been strong in recent years. However, in these difficult economic times nationally, our unrestricted endowment has declined in value by almost $100 million. What does that mean to us day-to-day? We use a policy that is standard for most universities in that we draw five percent of our endowment into our annual operating budget. A decline of $100 million means that there is $5 million less for the operating budget.
So, when our tuition revenue is down and when the value of our endowment is down, we have less revenue for our expenses which are largely for salaries and operations.
Our expenses are also pretty straightforward. There are really two categories of expenses: salaries and operations. The operating expense budget includes items such as: Honoraria, instructional supplies, computer software, office supplies, repairs, telephone, advertising, brochures, postage, books, periodicals, mobile phones, service contracts, auto expenses, reproduction, membership/dues, professional fees, pest control, waste removal, retreats, instructional lab equipment, office equipment/furniture, faculty/staff development, travel-lectures, travel-conferences, teleconferencing, equipment-lease, rent, catering, security detail, awards and miscellaneous. This is just a sample of such expenses.
A very important expense for Loyola is our financial aid budget. About 90 percent of our students are on financial aid, both need-based and merit. That means that $49 million of our budget is dedicated to financial aid funding. This year our financial aid budget also came in higher than projected. This means we have been able to fund students at higher rates and also creates budget shortfalls that have to be addressed in other areas. One of my goals for Loyola is that we will continue to meet the financial needs of our students.
This year, because of the budget shortfall, we will reduce the operating budget, not the salary budget. I have met with the cabinet and emphasized that we will continue to control expenses so that we attain a balanced budget for this year. We will do this by carefully controlling our operating budgets. I know this is not easy for any of us; however, I think it is the best alternative for us. We have done this repeatedly in the years since Katrina and met our goals. We can and will do it again this year.
I should also point out that the money being used for construction is separate from the operating budget. I point this out because people may ask why the niversity doesn’t take money from the construction fund to cover the operating budget. However, the money being used for construction comes from the sale of long term bonds by the university through the Louisiana Public Facilities Authority (LPFA). Before we went to the bond market, Loyola was reviewed by Standard and Poor’s Financial Services and Moody’s Investor Services and we received ratings of A+ stable and A2 stable respectively. These bonds are sold publically, and their repayment is built in to our long-term budgeting. In recent years, Loyola has gone to the bond market twice. First, we were issued $35 million for the first phase of construction (Thomas Hall, the two additional floors to West Road garage, and important infrastructure improvements). Last year we went back to the bond marker for $125 million. The majority of those proceeds are covering the cost of the Monroe Hall renovation and expansion, the work on Buddig Hall and the total renovation of Cabra Hall. The funds from those bond sales can only be used for those projects. So, while we will be tightening our operating budget this year, the construction work will continue.
I hope that my comments will help to clarify our conversation about the budget this year. I remain fully confident that we can control our expenses this year so that we can meet the shortfall and strengthen Loyola for the future.
Sincerely,
The Rev. Kevin Wildes, S.J.
