This year’s annual spring budget forum focused on the potential impacts of rising inflation on the budget for the upcoming fiscal year and introduced a new type of budgeting that will help Fordham to assess its finances in a more holistic manner.
Over the past three fiscal years, Fordham has navigated the pandemic through significant reduction measures and an infusion of federal relief funds. Last year, thanks to higher-than-anticipated revenue—in large part due to the biggest first-year class in University history—and continued federal funding, the University found itself on stable footing. Now, with less than two months left in the fiscal year, the University continues to be in a good position, said Martha K. Hirst, senior vice president, chief financial officer, and treasurer of Fordham, at the Spring 2022 Budget Forum on May 13.
“We’ve come through fiscal year 22 really quite well—aided by a waning pandemic, but really aided by careful budget management and forecasting on the part of the finance team and all the budget managers across the University,” Hirst said. “I’m extremely grateful to them all.”
Reflections on the Past Year
In a Zoom presentation, Hirst and Nicholas Milowski, vice president for finance and assistant treasurer, offered final conclusions on the fiscal year budget that ends this June.
Total net tuition and revenue grew beyond what the finance team had budgeted, thanks to the larger-than-average number of students that arrived at Fordham last fall, said Hirst. The fiscal year budget also benefited from federal COVID-19 relief, higher graduate school tuition and fees—specifically in the Gabelli School of Business and the Graduate School of Social Service, lower undergraduate discount rates, and lower health insurance premiums, she said.
“This budget was built on a series of reductions in expenses that enabled us to stabilize the budget and have in-person classes and students in dorms and on our campuses in ways that we haven’t been able to experience in the prior two years. We end this year with a positive operating result that is $3.2 million,” said Hirst. “It’s not a very big number when you think about us being a half-a-billion dollar enterprise.”
A New Budgeting System
The fiscal year budget that begins this July will be unlike any other budget in Fordham’s history, said Hirst and Milowski. This new system—an all-funds budget, which the finance team has been building for more than three years—will include funds that haven’t been historically included in the operating budget. The all-funds budget will incorporate direct donor contributions and government grants in addition to the traditional operating budget. In other words, it will reflect all sources and uses of the University’s resources, said Hirst.
“Direct contributions and grants are important revenue sources for us. They’re not huge, but they’re critical, and acknowledging them in our operating budget going forward will show our complete financial picture and allow for appropriate budgeting controls to be in place in those areas,” Hirst said.
The Impact of Inflation on Student Tuition
One of the most critical drivers in the upcoming budget is inflation, which has been driving significant increases in tuition rates across the country, said Milowski.
Next year, Fordham will have an undergraduate tuition rate increase of 4%. Milowski said this is significantly lower than the most recent consumer price index, a widely used measure of inflation, which rose to 8.3% in April. Milowski pointed out that in the prior academic year, there was no increase in undergraduate tuition rate. He also noted that the difference between “sticker price” and net revenue per undergraduate full-time equivalent student shows that students save a significant amount of money through financial aid.
“We’re giving most first-year incoming undergraduate students a 50% reduction off of their sticker price,” Milowski said. “We believe it to be very important for our mission, and we always wish that we can do more. But as Martha pointed out, there are so many pressures that are pushing us in different directions, that this is the place where we believe we can arrive at in a financially responsible way.”
Combating Inflation by Increasing ‘Special Endowment Payout’
Next year, Fordham will also withdraw nearly $6 million from the portion of the endowment that supports the operating budget in order to close a substantial gap between anticipated revenues and expenses.
While crafting the annual budget, the University worked to close a $30 million gap between anticipated revenues and expenses through multiple actions, including refining enrollment and financial aid projections as well as increasing unrestricted fundraising. These efforts brought the budget 80% of the way toward closing the gap. The “special endowment payout,” will close that final gap, said Hirst.
Hirst added that this is a temporary measure and an unusual step, but one that reflects the reality of today’s world.
“In a year when we lose the federal funds we’ve been relying on and when inflation is climbing as it is, those funds from the endowment became necessary,” Hirst said.
Maintaining an Affordable Education for Students
In conclusion, the fiscal year 23 all-funds budget proposes total revenues of $698.2 and total expenses of $698.2, said Fordham’s finance team. The principal drivers of revenue are forecasted to be the net undergraduate tuition revenue increase of $7.4 million, as well as an expectation of full housing occupancy, resulting in $11.3 million. The principal drivers of expense increases are salaries and benefits, the additional costs associated with operating the new campus center totaling $9.3 million, and a larger-than-normal increase in general expenses in anticipation of high inflation. In addition, the budget has a built-in inflation factor and a contingency budget of $5 million, which can aid in unanticipated expenses, said Hirst.
The budget is developed to manage the University’s financial resources so as to maximize their use and ensure we are investing them in the best ways to deliver on the promise of a Fordham education, said Hirst, while at the same time seeking to keep that first-rate educational experience as affordable as possible to students and their families.
“We’re Fordham University,” said Hirst. “We’re not going to do more in that regard than we absolutely have to, to be able to maintain the institution and grow in positive ways.”
A full recording of the Spring 2022 Budget Forum is below: