Tulane apparently runs a $20 million annual deficit, which has led President Fitts to hire outside consultants to identify ways to close that deficit, and he has not ruled out layoffs. Fitts is also looking to boost the endowment, which ranks as the 9th smallest out of 10 peer institutions, through a new fundraising campaign. In addition, Louisiana’s public universities look like they’re going take a big hit in terms of budget cuts from the state in the 2015 budget. I do not know if Tulane gets any support from Louisiana that might be directly or indirectly connected to the state’s budget cuts.
Just wondering if anyone has insight into Tulane’s financial health generally.
The financial health is generally strong, their bond rating is good. I don’t believe that Tulane gets much directly from the state, although certainly if the state cuts the number of scholarships that go to Louisiana students that could affect Tulane indirectly. And while you are right that Tulane’s endowment is smaller than schools like Duke, WUSTL, Vandy, etc. that are similar to Tulane in size and mission, it is still a large endowment in the overall scheme of universities. But there is no question at all that Tulane needs to increase that endowment and what it earns significantly if it is going to both erase the annual deficit and remain competitive with the above mentioned schools and others. Fitts is supposed to be a good fundraiser and that is a lot of the reason they hired him for sure. We will see if he fulfills that expectation.
Obviously $20 million is a lot of money in absolute terms, but it isn’t that terrible for Tulane. I’m not saying they can continue to run a deficit forever, because of course they cannot. They aren’t the Federal Government who can print money. So I would take President Fitts’ move as a long range precautionary measure, which might mean some short term actions. Of course they will focus, like any place these days, on better efficiencies from better systems. Which honestly Tulane could use in some areas. That alone could mean fewer jobs, although one would hope they could achieve it through attrition rather than layoffs. We will see.
So bottom line I think there is little for undergraduates to worry about. I have a hard time seeing anything happening that will be very noticeable to undergrads. Even Harvard cut back for a couple years after the financial crisis hit in 2008 because their endowment earnings went way down. But again, the changes they made were hardly perceptible to the general student population. I certainly wouldn’t base your choice of where to attend on this issue. I take it as just a healthy assessment of how to proceed over the next 10-20 years by a new president. And like most good leaders, he is laying the groundwork for various eventualities.
Daughter has committed to Tulane for class of 2019. Now that I’ll be Tulane parent, I just want feel that the school is headed in the right direction financially. With the problems that I see higher education facing in the coming years, mainly deriving from reduced state funding, tuition increases that vastly outpace inflation, and an overall decline in the number of incoming freshmen, no school is immune to the problems and has to stay on top of the balance sheet. Having a new leader can be a catalyst for the type of analysis that leads to balancing the books, hopefully Fitts is going to do what is necessary to get things balanced.
I agree with all of that! I would point out that Tulane has not had any enrollment problems since Katrina was dealt with. In fact, all of the last 5-6 classes have been somewhat over target. But it is absolutely essential that the bottom line is being watched closely and action taken well before things get difficult.
Tulane is in pretty good shape. Moody’s upgraded its bond rating in February.
TU’s operating budget is balanced; cash flow positive actually if you back out the non-cash depreciation expense. Revenue has increased year over year. The deficit comes entirely from the capital spending budget. That’s not nearly as concerning as a school that runs an annual shortfall on its annual operations.
A persistent operating budget shortfall is what can lead to the death spiral – declining tuition revenue, depleting long term endowment assets to pay current bills, declining enrollment, increasing tuition discounting to fill seats, lower rankings, lower admissions selectivity, etc. etc. Tulane has none of that.
Former Prez Cowen was definitely an aggressive “if you build it they will come” leader, made more so by the need to repair and rebound from Katrina. So I’m not surprised that the new Prez has to be focused less on empire building and more on fund raising and cost controls.