An Update on Strategic and Budget Planning
I am writing to provide an update on strategic and budget planning. At last week’s meetings of the President’s Advisory Council (PAC), the President’s Coordinating Council (PCC), the Staff Advisory Committee (SAC) and a student town hall meeting hosted by the Student Government Association (SGA), I shared that this is a difficult time for higher education and for SLU. You probably have seen news stories about dramatic budget cuts at some of our sister institutions. As I indicated to the groups with which I met, while SLU remains financially strong, it is not immune to these market forces.
In FY16, the University’s expenses exceeded revenues, and they will again in FY17. Once again, we expect to bring in very talented new students next fall; however, our overall revenues are not expected to grow. In recent years our student counts have waned, principally due to downward market shifts impacting particular graduate and professional programs, community college transfers and adult student programs. Despite these forces, we remain committed to keeping a SLU education within reach for qualified students. We will continue to increase financial aid and maintain need-blind admission policies that assist in enrolling low-income students, academically talented students, veterans, and first-generation students. These efforts have helped more SLU students graduate on time, and appreciably lowered the average student loan debt loads of our recent baccalaureate graduates who borrow.
Information about our current financial situation has been shared regularly with the 100-member PAC. The frank and open conversations that have taken place during those meetings have shaped major decisions during the past year, including how we are moving forward with the Magis Strategic Plan.
Well beyond the PAC, I know that many of you served on committees that helped craft the strategic plan and devoted many hours to that effort. You are now eager to make progress. Moving the plan’s initiatives forward, including those dealing with compensation, is my top priority. Improving how we operate will allow us to do that.
Earlier this year we announced the Magis Operational Excellence Program. The purpose of this program is multifold. In announcing that plan we noted that “... we cannot continue to deal with our budget challenges one year at a time. That is why we are beginning with an in-depth, comprehensive operational opportunity assessment ...” This program will allow us to fund the priorities, goals and objectives in our new strategic plan, including compensation targets.
The Magis Operational Excellence Program will address our challenges in a strategic, long-term way. This will put us in the best possible position to achieve our ambitious strategic priorities. Nearly 1,000 of you have attended town hall meetings and community fora to learn more about this effort, to ask questions and to share concerns. As I said during the Magis Operational Excellence town halls, it is critical that we continue to collectively and effectively address our challenges — in the near-term and beyond. Your continued involvement will be critical to the project’s success.
As the implementation of the Magis Operational Excellence Program achieves expense savings and revenue growth in excess of that needed to address projected deficits and create a small contingency, positive net results will allow us to achieve our strategic priorities. These priorities include addressing faculty and staff compensation. To reaffirm our commitment to this imperative, we plan to devote at least 20 percent of the positive net results realized by the multi-year Magis program to bringing our compensation practices in line with our strategic plan.
It is important to note that we are in the diagnostic phase of the Magis Program. This stage involves interviews with numerous stakeholders and extensive data collection and data scrubbing. This initial phase of the work will continue through June. The 18-member steering committee, which includes representatives of the faculty, staff and student body, is responsible for reviewing diagnostic findings and providing input and expertise in evaluating potential opportunities and implications, so that recommendations can be made. Final decisions related to this project will be made by University leaders.
In the meantime, this coming May we have to present a FY17 budget plan to the Board of Trustees for its review and approval. We are having preliminary conversations with members of the Trustee Finance Committee about the shortfall. We expect to propose a plan that includes:
- A request to extend by a second year the University’s endowment spend rate at 5 percent. It was at 4.5 percent until FY16.
- Because of the shortfall, there will not be a merit pool for FY17. Nonetheless, we will not penalize those who are being promoted this year; so we intend to set aside funds necessary for faculty rank and tenure adjustments, and we will continue to adjust salaries of staff and administrators who are promoted.
- We will not reduce SLU’s 10-percent retirement match for the coming year. This has been expressed as a priority of the PAC.
- As a sign of our commitment to addressing those most at variance to market, and who are most contributing to advancing priorities in our strategic plan, we hope to take a small step forward. We will propose that $1.5 million be allocated to base salary increases for up to 500 faculty who are below market and contributing at a high level. We will also request $500,000 for up to 250 staff and administrators (excluding vice presidents and the president) who are below market and most contributing to advancing our strategic plan.
- Executive staff (president, vice presidents, special assistants to the president) will not receive a salary increase in FY17.
I realize that you make sacrifices to ensure that the experiences of our students and patients are minimally impacted by our resource constraints. I hear stories every day of faculty and staff who go out of their way to help others. That speaks volumes about you.
The administration, the Board and I appreciate all that you do for our University. The work we are doing now will pave the way for an even brighter future for SLU and its faculty, staff and students.
Fred P. Pestello, Ph.D.