Tulane decentralized budget, aims to reduce deficit


Robert Marchini, Staff Reporter

Tulane is putting its finances back in order after it was strained by Hurricane Katrina. The university plans to close the current $15-20 million annual cash operating deficit by fiscal year 2018.

Tulane is not in any short-term financial trouble. In the long-term, however, the cash flow deficit is unsustainable. The university, under President Michael Fitts, began working with the Huron Consulting Group to help “re-engineer” the finances. Tulane Chief Financial Officer Tony Lorino emphasized there are two parts to this ongoing process: a budget redesign, which will decentralize the budget, and an operational review, which will cut costs and increase revenues to make the new model more effective as it is implemented. This process will take time to realize the savings needed to plug the deficit.

“It’s not an overnight change,” Lorino said. “It’s an extensive process with a lot of detail and faculty and administrative involvement.”

The budget model that Tulane is working towards is called Responsibility Center Management. In an RCM model, each school within the university develops a separate budget, responsible for its own revenues and expenditures. They pay what Bernstein described as a tax to support what Tulane calls “shared services” which includes areas like facilities, student affairs, admissions, athletics and the library, among others.

“Budgeting is the sinews of the university,” Bernstein said. “An RCM platform makes it more transparent and clear.”

Hugh Long, chair of the University Senate Budget Review Committee and a member of the Tulane Budget Redesign Steering Committee, had a similar assessment. The University Senate was briefed on the proposals, and the general faculty attended a series of town halls. He said that the faculty, while generally satisfied with the budget proposals, had some short-term concerns about the effect that these programs would have on learning new procedures or training new hires.

“It wasn’t that we shouldn’t do this — it was that there would be tough spots and we would have to navigate them,” Long said. 

Long emphasized that faculty supported addressing the deficit, which he characterized as small relative to total revenues, making it realistic to address the deficit.

Lorino said they have not seen any savings in this fiscal year because it is too early in the process. He said he expects two current programs to begin realizing savings in fiscal year 2017, which begins July 1.

The Voluntary Separation Program is the largest program currently active, expected to save the university about $3 million annually. The second initiative underway is a renegotiation of a contract related to Tulane’s energy-saving equipment that will save Tulane an expected $1 million.

The budget changes are not expected to affect Tulane’s academic mission. Provost Michael Bernstein strongly emphasized that Tulane wants to keep undergraduate academic programming at the same level, or to increase it if the new budget makes funds available.

Class sizes are remaining the same and in some areas, such as general chemistry, Tulane is attempting to bring them down, as they’re considered outside the target.

Bernstein said an area Tulane is not only keeping the same, but trying to particularly expand is summer programming, including classes and events. He said that buildings and professors are used less in the summer, creating an excess of educational capacity. By teaching more classes, either on campus or online, Tulane would use its resources more efficiently.

Lorino noted other areas where Tulane has already implemented policies to reduce excess capacity, such as increasing the number of people who live in student housing and increasing student retention.

Long said that post-Katrina, Tulane became much more careful about how it spent money, because Tulane cannot keep raising tuition indefinitely and other sources of revenue, like public grants, have gotten more competitive. He added that while these changes had made some things more challenging, it had not affected faculty morale or teaching ability.

“Nothing [in the proposals] significantly affects the academic mission of the university,” Long said.