October 24, 2007
President Snyder updates campus on the financial health of the university
To the Case Western Reserve University community,
When I delivered the State of the University addresses last month, I promised to share details of our plan for financial health after our trustees reviewed it at the board's fall meeting. That session took place this weekend, and I am pleased to report the trustees approved an approach designed to bring the institution a balanced budget by 2011—and, at the same time, position us to build on our strengths.
I first want to thank the trustees for their support. I also want to express my gratitude to the many administrators and staff who analyzed our current finances and helped develop detailed, realistic projections for our future. Finally, I must recognize our Faculty Senate leaders, Chair David Matthiesen, Chair-Elect Glenn Starkman and Budget Committee Chair Ken Ledford. They and the entire faculty budget committee devoted enormous time and energy to helping us craft the best plan possible.
As I have said repeatedly since I arrived this summer, we could eliminate the deficit much more quickly with across-the-board cuts. The problem with that approach, however, is that it risks harming the very areas that could contribute most to Case Western Reserve University's future advancement. This financial blueprint, applied in conjunction with a comprehensive academic strategic plan being developed this year, should allow the university to make substantial progress even as it resolves existing fiscal challenges.
Case Western Reserve University already is an outstanding institution. By approaching our current financial issues in a deliberate, thoughtful way, we can position it to realize more of its untapped potential in a shorter time period. And that is our goal: To take the steps necessary to make Case Western Reserve University the institution we all know it can be.
First, though, we must understand where we are. The university closed Fiscal Year 2007 with a deficit of $20 million. Our operating expenses totaled $844 million.
Three schools—the Weatherhead School of Management, and the schools of engineering and medicine—were in deficit in 2007, but medicine suffered the largest shortfall by far. Its gap arose in part because of expenses related to the 2006 affiliation agreement with University Hospitals, including about $10 million relating to the consolidation of individual physician practice plans into the University Hospitals Medical Group. The School of Medicine also absorbed significant one-time costs as a result of discoveries made as part of the its budget office's renewed attention to fiscal accountability. The university is working with the accounting and consulting firm of PricewaterhouseCoopers to review the medical school's finances and make recommendations to improve management and efficiency; that analysis is expected to be complete before the end of the calendar year.
The close of the FY '07 budget did bring some promising news. For example, impressive management of the university's endowment led to a $208 million increase in total net assets, representing growth of 10 percent over the previous year. Sponsored project awards climbed to $403.8 million, an increase of $29 million over FY '06. And in a December 2006 review, Moody's Investors Service was satisfied enough with the overall university balance sheet and cost reduction measures that it allowed the university to keep its current investment-grade debt rating.
Under the terms of our recovery plan, the Weatherhead School of Management will close its deficit in 2009, and the School of Engineering in 2010. The School of Medicine is forecast to eliminate its gap by 2011, when the entire university will have a balanced budget. From there the institution will focus on building its reserves.
Over the next three years the university will continue to focus on controlling costs and work to improve alumni and donor relations. At the same time, leaders will evaluate revenues at the school level and adjust resources accordingly. We hope to start investing in areas that will raise the university's stature in Fiscal Year 2009, based upon the work of groups developing the university's strategic plan.
We have provided additional information about our finances online at http://www.case.edu/provost/budget. I encourage you to review the documents there. The deans of each school, as well as members of the Faculty Senate, have been briefed regarding the plan's details. If you have questions, please feel free to speak with leaders at your school. In addition, representatives of the university's budget office will come to individual schools and units if more detailed presentations are desired.
I know that our strained finances have required many of you to do even more for the university in recent years; I deeply appreciate the commitment all of our employees—faculty and staff—have made to this institution, especially in these difficult times. I truly believe that by working together, pooling all of our intellect and energy, we can lift Case Western Reserve University ever closer to its aspirations.
Barbara R. Snyder