Tulane runs annual $15-20 million deficit, Fitts announces to University Senate

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Tulane runs annual $15-20 million deficit, Fitts announces to University Senate

Armando Marin, Online News Editor

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President Michael Fitts announced to the University Senate Feb. 2 that Tulane has been running a $15-20 million annual cash deficit for the last several years.

Hugh Long, chair of the University Senate budget review committee, said the total accumulated deficit is unknown due to uncertainty following Hurricane Katrina. Tulane did not keep track of finances immediately following Katrina.

“[The finances] swung all over the place until you get to 2010 to 2011,” Long said. “It’s very hard to say what was happening [with the deficit] because [the financial situation] was so unusual.”

Long said the majority of this deficit comes from the university’s capital budget, one of four major fund sources including the capital budget, the operating budget, the endowment, and private funds.

The capital budget includes the cost of all new construction on campus, including repairs on old buildings, renovations and debt repayment. The construction of Yulman Stadium was funded outside of the capital budget through private donations. 

Separate from the capital budget and private donations, the University Senate and the Board of Trustees approve the operating budget. The operating budget funds the various academic departments and other campus divisions and takes in revenues from tuition and other operations.

The endowment, consisting of donations from alumni and other donors, funds scholarships and specific programs within the individual schools.

The operating budget is balanced every year. Because depreciation expense is factored into the operating budget and is a non-cash expense, the operating budget has a positive cash flow. Long said this positive cash flow is not enough to cover the deficit from the capital budget, though.

Board member and board finance committee member Larry Schloss, who has served on the board for seven years, said running this deficit was necessary following Hurricane Katrina.

“We had to play catch-up after Hurricane Katrina,” Schloss said. “The campus was two feet under water. Many buildings required extensive repairs. [Former President Scott Cowen] wanted to make an investment in our university, so we started building new buildings. If you look at our campus today, it’s beautiful.”

Long said Tulane can easily handle running a deficit for a short period of time but that it is not something that can be done for a long time.

“[Running a cash deficit] is not a huge problem because you have the ability to borrow money and to draw from the endowment,” Long said. “There’s never been a bill unpaid. We’ve just had to supplement the bank account by borrowing or endowment draws to balance things out. That doesn’t mean you can [run a large deficit] for the next 100 years. You have to change it.”

Schloss said he and other members of the board have known about the deficit, unlike the University Senate, and given approval to run it yearly.

“We are not worried about it,” Schloss said. “Our institution runs much like a business, and businesses often run a cash deficit to improve them in the long run.”

Long said he is unsure about the solution to reducing the deficit, but he hopes to find an effective way to do so.

“You can’t just raise tuition, which means you have to be more efficient,” Long said. “We have to figure out ways of providing the same quality of education.”

At the senate meeting, Fitts said he hopes Huron Consulting, which he has invited to analyze Tulane’s finances, will be able to propose ways to curb the deficit.

Professors Graham Owen and Michelle White said at the University Senate meeting that they were surprised about the deficit and had never previously been informed about it. Long said the University Senate focuses on the operating budget, and the board decides on the capital budget.

“The University Senate has been given information about the capital budget, but predominately, that involves large amounts of money for significant projects,” Long said. “[The capital budget] has by and large been decided upon by the board, so the senate is mostly concerned with the operational side because that’s the world they live in. [University Senate members] are concerned about students’ education and not building buildings.”

Associated Student Body President Chris Halbohn, the only student directly working with Huron Consulting, declined to comment.