Stanford can cover pandemic costs without further cuts, provost says

If there is anything good that can be said about the past pandemic year, it is that the markets performed better than expected and the university’s reserves remained strong.

What that means is that, moving forward, Stanford can cover the estimated $379 million in expenses and revenue shortfalls incurred because of the pandemic during 2019-20 and 2020-21 without further program cuts. Its strong reserves leave the university well positioned for future growth.

Provost Persis Drell delivered that news, albeit with an abundance of caution, to the Faculty Senate on Thursday during her annual budget presentation.

She said, “The total cost of COVID, or better yet, the total cost we need to make up from central funds and central reserves, is a very large number.”

During the meeting, the Faculty Senate also heard a report from the Committee on the University Press. In their report, committee members warned senators that academic publishing is an industry under pressure, and that there is likely no silver bullet that solves the Press’s challenges.

Projections versus actual

Drell’s presentation covered the three components to Stanford’s budget plan: the Consolidated Budget for Operations, which includes all operating revenue and expenses; General Funds, which consists of funds that can be used for any university purpose and support core academic and support functions; and the Capital Budget, which is set in the context of a multi-year Capital Plan.

She began the presentation by saying what many at Stanford have felt: “Oh, what a year we have had. It has been tough in so many ways.”

Drell reported that, in June 2020 when the 2020-21 budget was approved, university administrators expected the endowment to perform poorly and for the COVID-19 pandemic to resolve. In the meantime, the university committed itself to protecting student support services and staff jobs to the greatest extent possible.

“We were just wrong,” she said of the initial budget projections.

The market didn’t perform poorly. Its better-than-expected returns bolstered university reserves that have, in combination with higher endowment payouts, helped with unanticipated expenses and revenue shortfalls, even as the lingering pandemic continued to increase costs and decrease revenues.

In addition, the coronavirus didn’t abate. In fact, the provost’s line-item breakdown of the budget reflected how significant the projected end-of-year shortfalls are in specific areas of the university in comparison with the approved June budget.

Student income, for instance, which includes tuition and room and board, is projected to be 19 percent lower than anticipated by the end of this fiscal year. “Other income,” which covers everything from athletic summer camps to Graduate School of Business executive education to Stanford Alumni Association travel study, is also projected to be 19 percent lower than anticipated. Normally “other income” averages about $550 million annually.

Deferrals and leaves

Those shortfalls are partly the result of 373 first-year student deferrals and leaves of absence taken by 12 percent of undergraduates and 4 percent of graduate students. The deferrals and leaves resulted in fewer students living in residences – so much so that room and board income is down 44 percent from June 2020 projections.

The loss of housing and dining revenues helped drive a projected deficit in Stanford auxiliaries of $165 million.

As revenues fell, pandemic-related costs rose. For instance, the university absorbed the cost of campus testing programs, child care subsidies, increased student support and any number of myriad mitigations. The extensive list outlined by the provost ranged from additional research support for faculty to eliminated work expectations for students on aid, pay continuation and premium pay for staff, expanded doctoral fellowships, rental reductions in campus properties and hardship support for postdocs.

The provost defended those costs, noting, “It’s a statement of the value the university places on its people. They were critical investments, but they were not cheap.”

At this point, the university’s May 2021 consolidated budget deficit is expected to be $106 million, $2 million lower than the projected deficit in the June 2020 approval budget. The difference is the result of the increased endowment payout and the better-than-expected market performance.

“Despite the fact that we got everything wrong, we got essentially the same expected deficit,” Drell said. “So, you might think we were quite clever. But the mix of funding sources changed dramatically.”

Moving forward

Drell said the university is “cautiously and optimistically” moving to recover in the 2021-22 budget as it continues planning to ramp up to what she called a “normal” year. The consolidated budget for operations is $7.4 billion, with the general funds budgeted at $1.7 billion.

Market performance and increased payout is projected to provide a 6 percent growth in non–student aid endowment funds and a 2.5 percent increase in student aid endowment funds. Also anticipated to continue growing is revenue earned from health care services, which includes the clinical services provided by faculty members. It is anticipated to be 22 percent of the revenue for the university in 2021-22.

The provost outlined the spending priorities for 2021-22 as:

• Implementing a market-based salary program
• Increasing student financial aid with no tuition increase
• Addressing essential needs in research support
• Advancing Long-Range Vision initiatives
• Maintaining general funds surplus

She said the guiding principles in setting the budget have been research continuity, student education and access, and supporting our community.

General funds surplus

In particular, maintaining a general funds surplus will be crucial as the university continues to confront uncertainties resulting from the pandemic and as it absorbs a surge of first-year students that includes those who deferred for a year.

In addition to a strong salary program, the coming year’s general funds portion of the budget will cover additional operational and utility costs of new structures. Other allocations are directed to the university’s mission and research support, including Faculty Development Initiatives and the Faculty Incentive Fund billets through IDEAL. Students will also benefit from Learning Technologies and Spaces, including reimagined classrooms and enhanced academic advising.

Also slated for additional support are such administrative units as University IT; External Relations; University Human Resources; Campus Engagement via the offices of the President and the Provost; and Land, Buildings & Real Estate.

Total student support, including everything from undergraduate need-based aid to RA/TA salaries and graduate stipends, is anticipated to grow 7.1 percent to $989.2 million.

Capital Plan projects, many originating before the pandemic, were also outlined in the provost’s budget presentation. Among the $664 million in projects currently being designed and constructed are:

• Bridge Building for the Digital Future
• Middle Plaza Residential Apartments
• Graduate School of Education Renovation and New Building
• Central Energy Facility Chiller Plant Expansion
• Bonair Replacement Building
• George P. Shultz Building
• Searsville Dam and Reservoir Project – Phase 1
• Portola Terrace Faculty Homes

The 2021-22 budget assumes a return to “other income” levels of $561 million, including, for instance, Residential & Dining Enterprises’ retail, concessions, catering, executive dining and conferences. At the Stanford Alumni Association, all major programs are expected to return to full capacity by winter quarter. Athletics is already resuming such popular programs as Camp Cardinal for children, which will be in-person this summer.

University Press

The Faculty Senate also heard an interim report from the Ad Hoc Committee on the University Press, which was created in February 2020 to advise and report to the senate and facilitate faculty visibility to and engagement with the Stanford University Press.

The committee is one of two faculty groups studying the Press and considering its future, especially in light of a continuing structural deficit.

The Press became a source of faculty concern in April 2019 when Drell announced that, while Stanford would continue to support the Press with base funding, it would not fund a request for five additional years of $1.7 million in one-time support.

The other faculty committee, appointed by Drell, has completed its report. Drell announced in October 2019 that she would make no decisions until the Faculty Senate committee had rendered its recommendations. The provost made additional one-time funds of $1.7 million available to the Press for fiscal year 2020.

At that time, oversight of the Press expanded with the addition of a Governance Board and the participation of the Ad Hoc Committee on the University Press. Its reporting structure also changed from the University Libraries to the Office of the Provost.

Presenting for the committee was Gabriella Safran, chair of the Ad Hoc Committee on the University Press and the Eva Chernov Lokey Professor in Jewish Studies and professor of Slavic languages and literatures.

Safran noted that parts of the committee’s report, at the request of the Faculty Senate Steering Committee, were outside the group’s more focused charge. Drawing from the work of other groups, including an external review team, Safran said the committee was nevertheless able to present preliminary strategic ideas.

General consensus is that the University Press does excellent work and is known for its craftmanship, relationship with authors and nimbleness. It is particularly known for strong lists in history, Jewish studies, Middle East studies, business and media studies.

But the Press is unlikely to achieve financial sustainability, especially given its small size compared with peer publishers, she said. A university subsidy will likely be crucial for its future, as will an endowment and fundraising activities.

Among its challenges are inadequate marketing and the perception that a lack of university support is driving away authors.

“This is an industry under heavy pressure,” Safran said. “There is no silver bullet answer.”

The external review committee, she reported, saw no unoccupied high-status, profitable market niche for the Stanford University Press to fill.

During the past year, Safran said her committee queried faculty about the Press’s relationship with Stanford authors. It also helped the Press better articulate its mission and brand.

Moving forward, possible strategic directions include growing its lists in such areas as Asian scholarship, Latinx scholarship, the U.S. West, media studies, business, digital scholarship, public humanities and sustainability.

But Safran warned that the Press will only succeed in areas where Stanford faculty lend their support and become actively engaged.

“When Stanford faculty are strongly invested in a series or list, it thrives, and it is top notch,” she said. “So, Stanford Press should try to look more like Stanford if and only if there is faculty will and energy to invest in new efforts.”

Other action

The Faculty Senate also heard a memorial resolution for Stanley Schrier, professor emeritus of medicine, who founded Stanford’s Division of Hematology.

It also discussed, but took no action, on a resolution forwarded by the Associated Students of Stanford University (ASSU) to restore the Cantonese Language Program. The resolution was introduced by new ASSU President Christian Giadolor and responded to by Debra Satz, the Vernon R. and Lysbeth Warren Anderson Dean of the School of Humanities and Sciences. Satz explained why Cantonese instruction has been cut from four to two courses per quarter.

Prior to the Faculty Senate meeting, the Steering Committee met in Administrative Session and considered the following items.

• The Committee on Review of Undergraduate Majors recommended a five-year renewal of the Interdisciplinary Program in African and African American Studies, with authority to nominate candidates for the Undergraduate Major (BA), Minor and Honors for the period of Sept. 1, 2021, through Aug. 31, 2026.
• The Committee on Review of Undergraduate Majors recommended a five-year renewal period for the Interdisciplinary Program in Mathematical and Computational Science, with authority to nominate candidates for the BS, Minor and Honors degrees for the period Sept. 1, 2022, through Aug. 31, 2027. An interim report is required and due to C-RUM in two years (if the program has not sunset).
• The Committee on Review of Undergraduate Majors recommended the initiation and five-year degree-granting period for the Interdisciplinary Program in Data Science, with authority to nominate candidates for the BA and BS, Minor and Honors degrees for the period Sept. 1, 2022, through Aug. 31, 2026. An interim report is required and due in two years focused on the core curriculum and advising.
• The Committee on Review of Undergraduate Majors recommended a four-year renewal of the Humanities Interdisciplinary Program, with authority to nominate candidates for the Minor degree for the period from Sept. 1, 2022, through Aug. 31, 2026.
• The Committee on Graduate Studies recommended a five-year renewal for the degree-granting authority for the MS and PhD degrees of the Interdisciplinary Program in Stem Cell Biology and Regenerative Medicine for the period of Sept. 1, 2022, through Aug. 31, 2027.
• The Committee on Graduate Studies recommended the initiation of the Biomedical Physics Program under the departments of Radiology and Radiation Oncology, with an authorization to nominate candidates for the PhD degree effective Sept. 1, 2022. A self-study progress report to C-GS is required in five years (by 2027).
• The Committee on Graduate Studies recommended a five-year renewal for the Program in Latin American Studies, with authority to nominate candidates for the MA degree for the period Sept. 1, 2022, through Aug. 31, 2027.
• The Committee on Graduate Studies and the Committee on Undergraduate Standards and Policy recommended the approval of Coterm Academic Progress. It was tabled. Approved were a Meeting Pattern proposal and a proposal from the Committee on Undergraduate Standards and Policy in regard to the Distinction and the COLLEGE/Transfer Students proposals.