At a special meeting of the Board of Trustees on Tuesday, March 19, President Dennis Assanis, Provost Laura Carlson, and Senior Vice President and Chief Financial Officer Mary Remmler updated the University of Delaware community about the financial challenges facing the Board, as well as members of the UD community about the financial challenges facing the University. These challenges are not unlike those that many other institutions of higher education are experiencing nationwide, and University leadership outlined a comprehensive plan to ensure UD continues to deliver excellence in education, research and service.

“We are facing a challenge, but we're poised to overcome and continue on this growth trajectory,” Assanis said. “The moment calls for thoughtful action, for perseverance and for working together — and that's what we're doing.”

Terri L. Kelly, chair of the Board of Trustees, said one of the primary responsibilities of the trustees is to ensure the financial stability of the University well into the future — a responsibility she and the entire board take seriously.

“We're going to be the institution that not only thrives but sets an example of what can be achieved in the higher ed world,” Kelly said. “The only way it's going to work is if we take a proactive approach and do it collectively, with the trustees supporting [President Assanis] and team … and the involvement of the faculty in making sure that this whole organization comes together.”

Many colleges and universities nationwide are dealing with financial headwinds, according to multiple news media reports. Declining student enrollments since the COVID-19 pandemic and declining state appropriations for public universities have reduced revenues at many institutions, some of which have cut staff and budgets.

UD continues to see strong application and enrollment trends, Assanis said. Nearly 40,000 prospective undergraduate students have applied for admission for fall 2024, a record and a 51% increase since fall 2016. Total undergraduate enrollment has remained close to 18,000, despite small fluctuations related to the pandemic. Also, UD continues to be ranked among the nation’s top institutions, and UD’s research and development enterprise ranks in the top 8% nationwide.

Also, annual appropriations from the state of Delaware have been stable, with modest increases, to help support UD’s operating and capital needs, a trend for which Assanis thanked Gov. John Carney and members of the General Assembly.

However, while post-pandemic revenues have been growing at UD, expenses have been growing at a faster pace. This financial challenge has been compounded by inflation and the increase in the cost of goods and services. 

The largest challenge impacting UD’s budget is an increase in personnel compensation to attract and retain excellent faculty and staff. For FY2024, personnel compensation is projected to be about $25 million greater than what was expected when the University’s budget was finalized last year. This is attributed to higher than budgeted costs for contractual agreements negotiated during the academic year; higher than expected yield in faculty and staff searches; salary increases of employees already in the workforce triggered by re-classification and equity adjustments; and retention efforts to preserve top talent at the University.

In addition, UD’s cost for health insurance through the state plan increased by 10% — about $10 million — in the current fiscal year and is projected to increase up to 27% in the next fiscal year. The University is also expecting increases of about 7%-10% annually in the coming years.

Another significant factor affecting the budget has been the growing needs of students who are facing greater financial need because families are also dealing with the rising costs of goods and services, just as the University is, Assanis said. Financial aid in FY2024 is projected to be $9 million higher than anticipated. In total, UD is projected to provide $182 million in financial aid in FY2024, an increase of $88 million since FY2017. At the same time, the tuition rates and fees charged to students have increased more modestly, which has put a strain on UD’s operating margin.

Net undergraduate tuition revenue is slightly higher than budgeted this year, but net revenue from graduate tuition is slightly down, Remmler said. Some of the negative budget trends would have been more significant without mitigation efforts over the past several months by the Provost’s Office and the Strategic Budgeting and Finance Office.

“In advance of any of this, we’ve all been working together to develop system-wide, multi-year enrollment plans and faculty-hiring plans that will maneuver us out of this budget situation structurally,” Remmler said.

Remmler noted that the multiple increases in costs outweighed the “razor-thin operating margin” of about 1.7% in the FY2024 budget, which was approved by trustees in May 2023.

The result of these financial pressures is that UD’s operating expenses are expected to exceed operating revenues by $20 million to $40 million in the FY2024 budget, Remmler said.

Looking ahead to the FY2025 budget, Remmler said current projections are for operating expenses to outpace revenue by $10 million to $45 million, depending on the success of revenue-generation and cost-mitigation strategies.

To help mitigate the impact of these issues and proactively address potential future budget uncertainty, the University implemented a set of cost-saving measures and guidelines, which continue to be updated as the budget situation evolves.

Carlson said the guidelines focus on decisions that faculty and staff make every day regarding hiring, compensation, travel, events and other discretionary spending. They are meant to empower individual units to align their spending with their most important priorities.

Carlson said, “We want you to think about the best way to spend your resources. And that might mean picking the most impactful things, and those are the ones we’ll put resources into. For the other things, maybe we need to pause them or transform them.”

Assanis and Carlson conducted a series of listening sessions in March with faculty and staff of every college and many administrative units; additional meetings are being planned. Carlson said three major themes emerged from those conversations. First, the University remains committed to student success, research excellence and career advancement for faculty and staff. Second, it is important that there is transparency and open communication about the University’s budget. And third, there is significant nuance in the ways the budget affects people and units depending on their size, purpose, workload and other factors.

Carlson spoke about efforts to develop new and expanded revenue streams to help cover the University’s increasing costs. She said growth would be managed through a systems-level approach that incorporates student success, faculty capacity, the University’s mission, a strategic admissions and financial aid plan, and optimization and efficiencies in operations.

For example, adding 4+1 degree programs — which enable a student to earn a bachelor’s degree and a related master’s degree in five years instead of six — and adding several professional master’s degree programs is expected to grow tuition revenue beginning next academic year, she said. The University is also working to expand pathways for transfer students.

Assanis said all these short- and long-term measures are part of a broader effort to protect UD’s current workforce and programs, enhance those resources to make them stronger and more resilient, and continue to advance the University’s mission for the future. The work of building a more resilient University requires the sustained effort of everyone, he said.

“It’s all about working together to chart our path forward,” Assanis said.

At the end of the presentation, Kelly asked about the makeup of the transfer student population. Carlson said many students transfer to UD from other universities and international institutions through various academic partnerships. Carlson said a potential source of more transfer students are Delawareans who started at out-of-state institutions and would consider returning to finish their degree closer to home.

Board member Nicolas Marsini Jr. asked how faculty and staff have reacted to the news of the University’s budget issues and mitigation steps. Assanis said some people interpreted the measures as rigid directives, rather than guidelines to help them make thoughtful decisions about expenses and operations. This is why the guidelines have been updated and will continue to evolve with community input and administrative assessment, he said.

“If a measure that generates a 1% savings but aggravates 99% of the people, that’s just not a good measure,” Assanis said.  The listening sessions have provided inspiring moments when faculty and staff expressed their commitment to collaborate in finding new, innovative and long-term solutions to the University’s budget challenges.

“We are unified across this whole institution, and everyone needs to be part of that conversation,” Carlson said.

Board member Nisha Lodhavia asked about the extent of the University’s hiring guidelines. Assanis said faculty hiring is continuing because it is part of a multi-year plan. Most staff hiring has been frozen, with some exceptions made for positions that involve safety, compliance and other critical operations.

Looking at the FY2025 budget, board member Claire DeMatteis asked about anticipated cost-savings measures. Assanis said the University is exploring alternative health insurance plans that retain the quality of the current plan at lower costs. Such a move would be at least a year away, he said.

William Lafferty, vice chair of the board, asked about the financial impact of moving the Athletics program to Conference USA in fall 2025. Assanis said the costs — which will start in the FY2026 budget — are being covered through philanthropic donations. In the long run, the move will financially benefit UD by providing a more prominent platform to promote academic programs, research and admissions opportunities, especially in geographic areas with growing populations.

Board member John Cochran asked about how the University benchmarks its faculty-staff ratios, education costs and financial aid rate. Remmler said UD compares itself against nationwide peers to examine ways to attract top talent, reduce costs and improve efficiencies. Assanis added that UD’s research enterprise is comparable in many ways to more prominent institutions.

“While we’re not a member of the Association of American Universities — the most prestigious universities in the country — we’re currently performing at the median of the AAU in terms of non-medical research expenditures,” he said.

Carlson said comparing UD’s international enrollment against other institutions has shown the need for a more comprehensive admissions strategy.

In terms of capital projects, board member Guy Marcozzi asked about how those expenses are managed so that UD continues to grow and improve over the long term. Assanis said spending on deferred maintenance is continuing, as is construction on Building X and other projects that are already well underway. Planning for construction of the Securing American Biomanufacturing Research and Education — or SABRE — Center is also continuing because it is funded with state and federal money. Also, the University looks at existing space to ensure that it is used efficiently, he said.

“We’re honoring projects that require consideration of health, safety and compliance,” said Donald Puglisi, chair of the board’s Finance Committee. “We’re looking at all projects to see if we can defer their execution, for example the tearing down of the Christiana Towers.”

Taking a broader look at the University’s finances, board member Edmond Sannini asked how the current issues are affecting conversations about the operating model used to meet UD’s mission of delivering education, research and service.

“We were already starting to do this,” Remmler said, “but a budget challenge of this size makes people more willing to rethink how we do things. There’s now much more collaboration across the University.”

Carlson also said making expenses and revenues more transparent to academic department chairs will help them weigh the benefits and financial impact of potential changes to programs and operations.

Assanis added that this is a chance to think of new ways to reach students where they are geographically and meet their needs for lifelong education, especially through online platforms. “This is a moment to rethink, reimagine, recreate,” he said.

Puglisi, a UD professor emeritus in finance, said the business model of higher education needs significant reform to remain economically viable for the long term. “What’s gratifying to me is … that we’re doing something that will make the model work for us,” he said.

Finally, board member Claudia Peña Porretti asked about the impact of possibly increasing the payout from the University’s endowment. Puglisi said that while the annual payout has remained about 4% in recent years, the dollar figure has increased because the endowment has grown due to wise investments, a rising market and philanthropic contributions. He said decisions about the payout must be balanced against forecasts of inflation and market performance.

“There’s a structural imbalance between revenue and expense, and [increasing] the payout ratio on the endowment won’t solve that problem,” Puglisi said. “We need to fix the basic problem, and I’m confident we’ll do it.”

Also at the meeting, three new trustees were elected to join the board. Elected were Udit Batra, a Class of 1991 UD alumnus and president and CEO of Waters Corporation; Shanté A. Hastings, a Class of 2000 alumna and deputy secretary and chief engineer for the Delaware Department of Transportation; and Michael R. McMullen, a 1984 alumnus and outgoing president and CEO of Agilent Technologies.

“They were thoroughly vetted and are really strong candidates with close ties with the University,” said trustee Claire DeMatteis, a member of the nominating committee. “I think they're all going to contribute right away to the Board of Trustees.”