MEMORANDUM
February 22, 2013
TO:
Campus Community
FROM:
Jeffrey A. Sine, Chair, Board of Trustees
SUBJECT:
Winter 2013 Board Meeting
_____________________________________________
The American University Board of Trustees today approved a budget for the next two years
that carefully balances the most important needs of its constituents and maintains
momentum for the strategic priorities of the institution, even in a challenging economic
climate.
Developing the university budget is always a balancing act. We weighed many competing
factors and considered challenging external conditions, including a slowly recovering
national economy, associated concerns about affordability, the impact of the looming
sequester and heightened competition among higher education institutions in the
Washington market. Given all of these conditions, a tuition dependent institution like AU is
especially sensitive to enrollment pressures.
Determined to successfully answer these challenges while limiting price increases and
maintaining quality, the board approved a 2.9 percent increase in tuition and fees for each
year, which is the lowest increase on record--dating back to the mid-1970s--and is at the low
end of the range of the budget guidelines approved by the board in November 2012.
AU continued its longstanding practice to increase financial aid, commensurate with any
tuition increase, protecting our most financially needy students. The approved budget also
raised the proportion of tuition revenue dedicated to financial aid, or discount rate, from 29
to 30 percent as a result of a $1.46 million increase in expenditures for financial aid.
In addition to this substantial financial aid increase, the university is committed to a more
comprehensive accounting of all sources of institutional aid awarded to students when it
calculates its discount rate. Close to one million dollars in additional aid for full merit
scholarships and grants generated by philanthropic gifts were not counted or recognized in
the past, when calculating the discount rate. In the future, they will be, and we expect funds
for aid from philanthropy to be an important area of growth.
The university must also respond to projected increases in existing operations and
activities. Some of those projected to rise faster than the rate of inflation (2.1% for 2012)
include the cost of required health care and exponential increases in demand for technology
and bandwidth.
The additional revenue created from the tuition increase will be fully absorbed by the
expected rate of inflation and budgeted increases in healthcare costs and benefits arising
from recent legislation. Therefore, most additional investments we make must come from
reallocation and greater efficiency. The board endorsed an action by the administration to
identify savings by reducing base expenditures by 0.5 percent in all university divisions. The
$1.3 million generated by this reduction will be reallocated to fund the university’s highest
priorities.
Throughout the recession, AU attracted and retained talent through reasonable market based
compensation and merit increases for employees, when many other universities instituted
salary freezes, furloughs and position reductions. The board agreed that we should sustain a
commitment to retaining talent, and with this budget approved a recommended 2.5 percent
performance based salary pool for faculty and staff in both fiscal years.
Finally, in a separate action, the board approved a plan for capital funding that will allow for
the completion of a new home for the Washington College of Law at the Tenley campus.
This budget makes a strong statement about protecting important commitments and
maintaining AU’s momentum. As a tuition dependent institution, AU’s rise and steady gains
in quality are a result of careful and strategic investments of tuition revenue over many years.
The quality enjoyed by today’s students is a direct result of the financial commitments of the
students that came before them. In the same way, the investments we make today in AU will
pay off in the growing value of AU degrees for years to come. Those must continue while
we address the pressures faced by students and families whose dream it is to come to AU.
We are grateful to the University Budget Committee for conducting a thorough and inclusive
process. We appreciate the spirited debate that yielded recommendations reflecting balance
of a wide variety of interests and concerns, yet keep us moving forward.