The process of formulating next year’s FAS budget is ongoing but nearing completion. FAS—which receives roughly half its income from the endowment—has had to tighten its belt because of the endowment’s recent poor returns and dwindling reserves, according to Smith.
“Since the financial crisis we’ve been dealing with issues,” Smith said. “Earlier in the fall, I said one of the things that happened is we’ve gotten past the worst parts of the financial crisis from 2008, but we are absolutely dependent upon the endowment distribution performance. So every couple of years, having that dip down on us makes things difficult for us again.”
In fiscal year 2016, the endowment posted negative 2 percent returns, its worst performance since the nadir of the financial crisis. University President Drew G. Faust called the returns “disappointing,” and said they would put pressure on budgets across the University.
Last month, Smith said in an interview that the number of graduate school admissions slots will decrease this year by 4.4 percent due to budgetary constraints. He said that he has had to make no other cuts of that size in the past month.
Additionally, FAS will increase personnel expenditures by giving raises to some employees this year, according to Smith.
Various segments of FAS annually present their own budgets to Smith, who then works with them to discern what FAS can and cannot afford.
“The units did a great job presenting budgets that were extremely reasonable given the financial situations that we find ourselves in, so I’m not left with 'I’ve got to make a huge budgetary cut in order to make the budget work,'” he said.
Smith said because of the ongoing nature of the budgeting process, he cannot provide an exact number for the final size of the deficit, but that it will be “reasonably small.” He added that the projected deficit for this fiscal year has shrunk over the past five years, and that the current deficit is smaller than the last projection.
“I feel good about that,” he said of beating the projection. “It’s still a deficit, and I don’t feel good about that. I’d rather us run with the money we take in and spend it on the academic program on the way out, but if we have to run it, if it’s not getting worse than what the past [projections] said, that’s a huge step for us.”
—Staff writer Joshua J. Florence can be reached at email@example.com. Follow him on Twitter @JoshuaFlorence1.
–Staff writer Mia C. Karr can be reached at firstname.lastname@example.org. Follow her on Twitter @miackarr.