Yes, that Alice Cooper song (schoooooooool’s out…..…for…..summer!) gets replayed in my head every year about this time, as we send off another group of graduates to change the world. I never get tired of attending convocation or commencement ceremonies, and it is even more fun now that I do the MC duties. I encourage more of you to participate in the ceremonies – it means a lot to the students and their parents, and it is a great personal satisfaction to take part in the celebration of shaping young people’s lives. This spring, we graduated over 150 Bachelor’s, Master’s, and PhDs. In an average year, over 90% of them will have started working full or part-time, or will have enrolled in graduate or professional schools by the end of the summer. We’re doing great work.
Another important but less-fun task that comes each year as school lets out is the college budget. We close out the fiscal year in June and then make allocations for the next FY in July, so we’re busy running the numbers in the dean’s suite. As usual, there’s good news and bad news, but overall, we’re making progress and executing on some of the goals we set in the CANR Master Plan. A couple of brief points:
- With enrollment up at UD and (amazingly) some reduction in costs, FY15 was shaping up nicely as far as the overall university budget. However, the dispute involving The Data Center and its proposed power plant on the STAR campus prompted a withholding of $3.3M from the UD budget, half of which was allocated to colleges. Absorbing our share of this cut reduced our gains, but we’re still slightly better off than last year.
- On the federal side, an appropriations bill is working its way through Congress that has all of the appearances of an increase for federal 2015, which starts in October. Compared to last year’s sequestration cuts, we’re really pleased to see this. Since it is an election year, controversial decisions are not likely before November, and our Cornerstone lobbying team seems to think the proposed increase to Hatch and Smith-Lever will be maintained in the final bill. Only about 6% of our budget is in federal capacity funds so this will not be a windfall to the college, but every little bit helps. The really exciting news from federal is another proposed increase in AFRI competitive funds. Both the House and Senate are proposing $325M, up about 17% from pre-sequester FY13 levels. So, get your grant teams together and consider applying to one of the many AFRI programs in the upcoming year – more money to be had!
Taken as a whole, there’s more good news than bad with the upcoming FY15 budget year, but we have a way to go to eliminate our structural deficit and balance our budget properly. Most of this blog is devoted to important changes in policies affecting our budget that will take place on July 1, 2014, just around the corner. While the financial impact of policy changes will not be felt for several months, I wanted to give ample lead time to allow for changes in unit-level budgeting to be considered. Additional budget policy adjustments will occur during FY15 and will be communicated well ahead of time.
The intent of the new policies is to improve the college’s financial position, and get ahead of anticipated changes in RBB that will occur in the coming years. The RBB Task Force has completed its work, and the provost’s office and UD Budget Office are now working toward implementing changes that could possibly disadvantage CANR relative to today’s budget. While a new RBB model is probably two years off, we cannot afford to wait until the model changes to diversify and strengthen our revenue portfolio. Even if the RBB model remained unchanged, we’ve been on an unsustainable path, and we must look to new sources of revenue while cutting our costs to secure our financial future.
For background, let me reiterate two points I presented at the Spring Semester Faculty Meeting on May 20 that help justify the need for budget and policy changes.
- Our effective F&A rate (AKA indirect costs) across all sponsored programs is only 9%, whereas the top federally negotiated rate is 41% – quite a gap. Compare this to other science-based colleges at UD who have effective rates of 19-25%, more than double ours. Even if we exclude federal capacity funds and the associated state match from these calculations, which mandate 0% F&A, we’re still at a 12.2% effective rate. I presented calculations to the Provost this week that showed a net revenue increase of $2.8 million per year if we were able to raise our effective F&A rate to just 27%, within our reach but still well below the top negotiated rate.This begs the question – what does F&A pay for, anyway? While the calculations are complex, the items covered are straightforward. On the “F” side (Facilities), indirect costs cover some building maintenance, depreciation of major pieces of research equipment and purchases of new equipment, operations including utilities, expendable supplies, and library resources that are used for research. Some of the “F” goes to new hires in the form of a startup package, who in turn spend it on renovations, equipment, etc. On the “A” side (Administration), indirect costs cover the salaries, benefits, allocated costs and other items related to personnel that help make research happen. This includes people who handle grants and contracts, our RBB “taxes” paid to the UD Research Office, some technicians and research professionals, farm staff, and some of our administrative assistants. You likely bump into someone daily whose salary was used to calculate our “A” rate. The bottom line: F&A is carefully calculated and negotiated to cover real costs borne by the college related to research. Without F&A, research would grind to a halt.
- As high as a negotiated F&A rate of 41% may seem, even this does not cover everything that we do related to research, which brings me to the second point on cost recovery. Also mentioned in my presentation on May 20, we will be instituting usage fees for cropland, animal, and growth chamber usage (per square foot) during FY15 to help defray costs that are not being charged to sponsors either directly or indirectly. Additional fees may be instituted as the CANR Cost Recovery Committee convenes in the coming months to study the issue. A 2013 survey of agricultural experiment stations in the northeast revealed that 11 of our 13 peers in the region have instituted some form of direct cost recovery for their farms, greenhouses, and other unique facilities that operate outside the realm of F&A. We are starting small: for example, we will be recovering only about 10% of the total cost of dairy cow use by instituting fees of $2/cow/day beginning on all grants submitted after July 1, 2014.
So here are the policy changes we’re making to begin to address our tenuous financial position, effective July 1, 2014:
- New fiscal to academic contract conversion policy for faculty. Since the 1990s, a policy has been in place that allowed faculty to convert from a fiscal year (11-month) to an academic year (9-month) contract with no loss of salary. Those converting were not eligible for salary increases for the two years following conversion. Beginning July 1, 2014, this policy is voided and we will use the standing University policy where salary would be reduced by 2/11th’s upon conversion. When you consider that you are trading 2/11th’s for the potential to gain 3/9th’s by writing summer months into grants, there is still an attractive incentive to convert. Most of the CANR faculty were either hired as 9-month or have long since converted, so this would affect very few people.
- Graduate Tuition Policy. We forgo over $3.8 million per year by not asking our research sponsors to pay any of the tuition of our students on research assistantships. Thus, the largest and most detailed of the policy changes slated to take place on July 1, 2014 deals with graduate tuition payment. As I announced at the Spring Faculty Meeting on May 20, we will be launching a new policy requiring 15% of graduate tuition to be paid from sources other than the College’s Tuition Waiver Authority for new and renewed contracts signed after January 1, 2015. The policy will be released in the coming days in full detail. Note that this DOES NOT affect students who have been or will be placed on assistantship contracts for Fall ‘14; the College will continue to waive 100% of their tuition for FY15. And, students paid from current grants will be grandfathered in since those budgets were developed prior to this policy. This allows plenty of time to begin writing 15% of tuition onto new grants or finding other sources of tuition funds during the upcoming year.
Let’s put this in perspective. A graduate student on assistantship is almost a ~$50,000/year proposition: roughly $22,000 in stipend & fringe, $24,000 in tuition waiver, and $3,500 in allocated costs. At today’s tuition rate, the new policy equates to shifting $3,600 in tuition expense to the sponsor, in addition to the stipend & fringe, thus sharing the total expense closer to a 50:50 split between the sponsor and the college. Basically, our sponsors are getting half off, even with the new policy!
- Incentive for including more than 15% of graduate tuition on grants. While the above might be considered a “stick”, we’re also implementing a “carrot” for those who can and wish to do more. We will return larger amounts of F&A to departments and PI’s who write more than 15% of graduate tuition into grants (thanks to those who have been doing so!). For example, grants including the full cost of tuition will have 40% of the F&A returned compared to only 28% returned now. This will be split 32% to the department, and 8% to the PI. The PI may retain these funds in a discretionary account that carries forward annually, expiring only when they leave the university. This is a way for PI’s or Centers to build a discretionary fund for research.
- Hatch-funded assistantships are included in the CANR Grad Tuition Policy. Each department has been receiving Hatch funds from the College, and historically a large portion of these funds are then used to pay graduate stipends and fringe benefits. Considering the example given above, the college budget assumes all of the ~$50,000 liability for each student paid with Hatch funds. Now, departments will pay $3,600 of the tuition, or less than 10% of the total value of the assistantship. By law, Hatch funds cannot be used for tuition payment, so the 15% tuition payment must come from other sources of funds, such as departmental supplemental accounts, gift accounts, grants, or RBB funds. Again, this does not affect Fall ’14 enrollment as their contracts for FY15 were processed prior to the policy taking effect.
- Graduate students eligible for Sustaining Status must be registered as such. Once a student completes all required courses and credits, they can retain full-time status (and all the attendant benefits) by registering in Sustaining Status. The cost of Sustaining registration is currently only $911 per semester, as opposed to $1,578 per credit to register for courses or research hours. In addition, students on Sustaining Status do not incur allocated costs under RBB, saving an additional $3,500 per year per student. Clearly, we need to be taking advantage of this, and since there is only a financial upside, we’re implementing this on July 1, 2014.
- To encourage students to register as Sustaining as soon as eligible, a corollary to the last bullet is that the College’s Tuition Waiver Authority can only be used toward the minimum number of credits required for the degree. For contracts signed or renewed after January 1, 2015, this will be enforced, so please make students aware of the upcoming change. The dean’s office will provide the broiler plate language to be used on letters of offer going out in the next calendar year to make this clear to students from the outset.
- Cost Recovery. Beginning in FY15, direct cost recovery fees will be required in grants using dairy cows, cropland and growth chambers in Newark. Fees at the Carvel Center will be introduced later in FY15 as those calculations are still ongoing. Some of you are doing this already – and thank you – but we need everyone to get involved to have an impact. For grants submitted after July 1, 2014 using the Newark Farm, please include:
- $2 per day per animal for dairy cows
- $100 per acre (or any fraction thereof) per year for cropland
- $10 per month (or any fraction thereof) for growth chambers in the Fischer Complex
Here are a couple of other ways you can help. Educate sponsors who pay little or no F&A. Remind them that there are real people and hard physical facilities being compromised when they undercut our negotiated F&A rates. I will be happy to have a conversation with your sponsors to help raise awareness of the true cost of research and how F&A is calculated and budgeted. Faculty and staff can also help by educating graduate students on Sustaining Status and planning their programs of study accordingly.
We’ve made real progress in two years by reducing our RBB structural deficit from $1.2 million to ~$600,000. New policies will help us recover hundreds of thousands of dollars that we’re currently leaving on the table, and get us closer to balancing our budget, making renovations in Worrilow, constructing new spaces, and replacing old, worn out equipment. Truly brighter days are ahead, but we need to ask more from our sponsors to help get us there.
The blog will return in August as we welcome one of the largest classes of incoming students we’ve ever had.
Enjoy your summer!
Mark Rieger, Dean