Update on Trustee Retreat (Part III)
Jan. 11, 2019
Dear Members of the Brandeis Community,
As the new year begins, I send my wishes for a happy and healthy 2019 to you and your families. I hope your time off during the holidays proved both restorative and enjoyable.
Following each Board of Trustees meeting, I send out a summary of the topics the board engaged as well as the results of any resolutions considered and voted upon. On November 27-28, the board held its annual retreat, which, unlike the three regular meetings it holds every year, focuses on one or two major topics for discussion, exploration, and education. Committees do not meet during these retreats, but official business, including the consideration of resolutions, can be conducted.
At the recent retreat, we focused on the second part of the independent investigators’ external review, which dealt with campus climate, and issues related to Title IX and how the university complies with and manages Title IX processes. Immediately following the retreat, on November 29, I shared the board’s response to the campus climate session in an email to the community. In addition, the board took up the issues of fossil fuel divestment and how the university can reduce its carbon footprint in response to concerns about climate change; I shared the board’s response in an email sent on November 28.
The retreat agenda also included consideration of a proposal from the Brandeis administration to accelerate or advance funding for staffing, program, and capital needs deemed essential to planning for the university’s future and pursuing a major capital campaign. This proposed funding, totaling $73M ($47M for operations and $26M for capital projects) over a three-year period would begin this year and would address gaps in operations that I and my senior colleagues believe must be filled if we are to pursue the university’s reinvigoration.
This funding is not intended to address all of the university’s current and future needs, desires, or vision. That level of investment would require a greater financial commitment than we proposed to the board at the retreat.
Here is an abridged description of what the $47M in incremental operations over the next three years would fund:
For Academic and Student Affairs:
Additional Arts and Sciences faculty, beyond replacement positions that come with retirements.
Additional IBS full-time equivalent faculty, addressing issues raised in our recent AACSB reaccreditation.
Increase in the faculty salary pool for retention and recruitment.
Increased funding to support major research innovation awards ($1M beyond current funding).
Additional mental health counselors.
Additional career counselors.
Additional support staff in Student Affairs to meet the demand of the larger-than-expected first-year class.
Increased staffing and operating budget for media relations, branding, external partnerships, internal communications, and public affairs.
For Institutional Advancement:
Additional staffing to attain 2006 levels, including major gift officers, annual gift officers, a planned giving officer, a proposal writer, and a leadership position in major and principal gifts.
For Diversity, Equity, and Inclusion:
Additional staffing for the Office of Spiritual and Religious Life, the Ombuds program, a new Office of Equal Opportunity, and the Intercultural Center, and for increased training, education, and development.
For the President’s Office:
Creation of a president’s discretionary fund to enable seed funding of strategic initiatives, including recommendations from university task forces.
For Finance and Administration, and the General Counsel:
Leasing additional office space.
Additional staffing for Campus Operations
Additional staffing for Public Safety.
Dining program design modification.
Additional staffing for the Office of the General Counsel.
Although these investments will not provide what is needed to implement a new vision for Brandeis, we believe they will provide the extra bandwidth, through staffing and program support, to allow us to plan Brandeis’ future and address immediate needs in our academic and student-support programs while carrying out the university’s day-to-day business. Significant additional expenditures, to be funded by a future capital campaign, will be required to implement the recommendations that will come out of the task forces associated with “A Framework for Our Future” that I recently appointed.
In the interim, these investments will address some of the staff reductions since the 2008 recession that were not accompanied by significant reductions in programmatic commitments. Such staff reductions left the university challenged in the pursuit of new initiatives, or unable to improve or modernize dated processes, systems, and infrastructure.
The $26M in incremental capital expenditures over three years will allow us to begin to close the gap between the annual costs of maintaining our buildings, equipment, and IT infrastructure on the one hand, and what we have been able to allocate to these needs in the past on the other. As most of us know firsthand, the Brandeis campus has significant deferred maintenance, and it will take many years and a successful capital campaign to modernize our infrastructure. The $26M in incremental funds will allow us to address the most pressing issues sooner than would otherwise be the case and will provide greater startup support for newly hired faculty. These funds will come without any additional burden on our annual operating budget. By refinancing a series of bonds, we can take on this additional debt at the same annual cost of our previous debt service.
The $47M in incremental operating funds is expected to come from four sources:
Increasing the endowment spend rate for three and a half years. We have been reducing the spend rate on our endowment by nine basis points per year and had planned to do this for several more years to bring our reliance on our endowment in line with best practices (allocating 5 percent of the endowment, based on its average value over 12 prior quarters). However, because we believe these proposed investments are critical to the university’s future and we cannot wait until the success of a major campaign for additional funds, we have proposed suspending the reduction of the spend rate and increasing it for three and a half years before resuming our earlier plan of bringing down the spend rate to 5 percent per year.
Efficiency from the university’s new financial framework. We expect annual savings from a new financial framework that, for the first time, will include both direct and indirect cost allocations for school-level and center/institute-level units, helping us understand the true costs of operations. That is, the way in which the university made what were “invisible” or “unknown” subsidies to many parts of the university will become transparent and will lead to incentives for eliminating redundancies in some units, resulting in cost savings. This will inform our decisions on how much to invest in various parts of the university by providing more information on the actual cost of supporting each unit. Over the past year, the principles of the new financial model have been previewed in part by Stew Uretsky, executive vice president of finance and administration, and Sam Solomon, chief financial officer and treasurer, in open meetings; the full financial model will be shared during the coming months.
Increases in the Annual Fund. With increased staffing for the university’s Annual Fund (independent of the other investments in Institutional Advancement), we anticipate greater success in this aspect of university fundraising. Our current alumni participation rate in the Annual Fund is 19 percent, which, while typical for large universities, is considerably lower than at smaller institutions and far below where I know many of us would like it to be. This participation rate means that more than four out of five alumni choose not to contribute to the university, a trend we must reverse as we look to rebuild old relationships and develop new ones. Greater Annual Fund participation will help defray the full cost of the advance funding.
Early philanthropic investments. In order to cover the full $47M in incremental operating funds beyond the third year, we will need donors to invest early, before an announced capital campaign. We are in the process of soliciting such commitments, and those who contribute will receive gift credit toward the future campaign.
There are risks attached to our request for advance funding to cover what we see as critical and foundational investments in the university. We will be increasing our endowment draw and adding ongoing expenses to our operating budget after the initial funding. We are counting on greater efficiencies in our budgeting process as a result of the new financial system, as well as increases in future fundraising to cover the incremental operating expenses beyond the next three years. And there is always uncertainty regarding the markets, including how well our endowment, which provides about 14 percent of our annual operating budget, will perform.
This is why our proposed investments, especially in Institutional Advancement, are crucial and time-sensitive. Immediate investments in IA will allow for broader, more regular, and strategic engagement with alumni, parents, friends, and past donors. We also believe we have a compelling vision for the university to share that will be of significant interest to donor constituents, including foundations.
Though there is risk to pursuing this funding, there is, I believe, a greater risk in trying to forge a vision and a future for Brandeis without first creating the human and programmatic infrastructure to do so.
In sum: In November, the board approved in principle our proposal, known as “springboard funding.” At the same time, we will still need to balance our budget each year with the increased funding and projected expenditures. The board also approved the increase in the spend rate for three and a half years as well as the refinancing of bonds to allow for the extra funding for capital without an increase in our annual debt service. We are now pursuing the final funding piece of the springboard proposal, which will come from donors whom we are asking to make early pledges toward our future capital campaign. I will keep you posted on our fundraising progress and on the status of discussions within the board’s Strategy and Planning Committee as they relate to the allocation of the springboard funds.
As always, if you have any questions, please let me know.