2024 Budget Address to the University Senate

Jonathan Holloway
President, Rutgers, The State University of New Jersey

February 16, 2024

Good afternoon and thank you very much. In 2022, I said I would come before the Senate every year in the spring semester to offer an update on our university’s finances. I am with you today to carry out that promise.

As I do, I first want to thank Executive Vice President Prabhas Moghe for his outstanding work in honoring the administration’s commitment to shared governance through regular and ongoing communications with the University Senate, including his reports at each Senate meeting. The time and attention Prabhas and his team devote to this relationship benefit both the Senate and the administration, as well as the broader university. Likewise, I know Adrienne Simonds and Lucy Foster have also continued to do excellent work in leading the Senate and in liaising with the administration, and I want to thank them and their team.

I also want to thank each of you who have accepted the invitation to meet with me in small groups over the course of the year. As those who have attended will attest, these meetings have no agenda other than getting to know each other in person—and speaking for myself, they have been rewarding and uplifting. I know we have a few more scheduled this year, and I hope to continue them in the fall. 

One other note: In anticipation of today’s meeting, I invited Senate members to submit any budget-related questions to my office in advance. I have incorporated responses to some of the broader questions in my address today. To those who sent me more specific questions, you will receive answers by e-mail in the coming few days.

Let me begin with a few points of pride that should be welcome reminders of the incredible work that goes on at Rutgers. This includes:

• Reaching and surpassing the $50 million fundraising goal I set for additional Scarlet Promise funding—and getting there a year ahead of schedule.
• Watching our faculty reach a new record level of sponsored research in the past year, nearly $930 million.
• Having professor and poet Evie Shockley named a finalist for a National Book Award.
• Seeing student Andrew Krapivin earn a prestigious Churchill Scholarship.
• Seeing our campuses rise again this past year in the U.S. News rankings, so that all three—Camden, Newark, and New Brunswick—are in the Top 50 among national public universities. And it’s gratifying to know that we benefited from the rankings recognizing the value in what we’ve been doing: making a world-class education available to students across the economic spectrum.

With those markers of Rutgers' excellence in mind, let me begin this year's financial update with some of the fundamentals of the university's budget.

The University’s primary revenue sources are tuition and fees, state appropriations, patient care services, and sponsored research. Funds from tuition and fees account for the largest percentage of our revenue and the smallest portion (approximately 15%) comes from other sources, including student housing and dining services, facility rentals, ticket sales, donor gifts, and endowment income.

Rutgers primarily spends money on its core missions: teaching, academic support, research, patient care, and public service. Together, these account for more than three-quarters of our total operating expense budget. Of course, funds are spent in other expense areas as well: 15% for building operations and maintenance and university administration, 5% for auxiliary enterprises (such as student housing and dining services), and about 3% for athletics. The University’s primary expenditure is faculty and staff compensation which accounts for over 67% of the annual operating expense budget. This percentage includes the salary increases that the university negotiated with several employee unions last year.

Last year I explained that we faced a structural deficit, and I discussed the major factors contributing to it, including inflation, a shift in overall enrollment, rising costs for health benefits, and the end of COVID relief funds. I explained that the administration would be embarking on a multi-year effort to eliminate this deficit—budgeted at $125 million. I am here to assure you that we remain committed to that multi-year effort. Because Rutgers increased its revenue and took steps to control costs, we actually ended fiscal 2023 with a deficit of $88.5 million, drawing that from reserves—better than budgeted but still far below where we need to be.   

As we continue to reduce our deficit, I want to be quite honest in telling you that, as we develop the FY 2025 financial plan, the state budget, which accounts for one-fifth of our total revenues, is very concerning. You only need to read the headlines to know that state revenues are down and that we face an uncertain state budget environment. Despite these challenges, I and my fellow university presidents will continue to advocate for higher education in the legislature. We do not have control over the state budget process, but we are determined to underscore the important role that higher education plays in enhancing the state’s fiscal well-being. 

Anyone who follows higher education news also knows Rutgers is not the only institution in this kind of financial position. Looking around the country, many other colleges and universities are finding themselves facing similar financial headwinds, and some have made dramatic cuts to the academic enterprise. Rutgers has, thus far, been able to limit the need for these kinds of measures. In fact, in answer to a question the Senate Executive Committee raised to Dr. Moghe, an analysis was done that shows the number of graduate and undergraduate course sections being offered across Rutgers this spring is about 3.4% higher—or an additional 358 sections—than last spring.

Having said that, I am aware that individual units and departments have been making hard decisions, whether about reducing staffing, equipment, travel, or other aspects of their work. None of this is done lightly, I’m sure. For those who are unaware, our budget model places responsibility for academic budgetary decisions with the chancellors, deans, and chairs. I say this as an important point of clarification, not to shift the blame. Frankly, regardless of where some of these difficult decisions are being made, the current deficit makes these decisions that much more challenging. I want you to know that the central administration is committed to finding ways to be an excellent and supportive partner in this environment.

To that end, you may ask, what are we doing beyond the structured reduction of the operating deficit to mitigate the need for significant interventions that have been necessary at other institutions?  

First, with the support of the Board of Governors, we have begun developing a plan for achieving and maintaining financial sustainability. Once we return to a balanced operating budget, we need to create an environment where we are generating additional net revenue that will fund new initiatives, support a looming and increasing deferred maintenance backlog, and replenish reserves. Financial sustainability will depend more on focusing on new revenues through new and improved programs than on reducing expenditures, though that cannot be ignored.

I regularly meet with the Chancellors and other senior leaders as we develop this plan. At this early stage, our work has focused on four main areas: revenue growth (both bolstering existing sources through efforts like developing a universitywide enrollment strategy and exploring opportunities for new revenue sources); program development; cost optimization; and operational excellence.

As this work progresses, we will have important conversations with the university community, and the Senate will have a role in developing this strategy.  I know from the questions submitted for today’s meeting that there is keen interest in the Senate for such an undertaking and, again, I welcome your involvement.

Despite the clear limitations we face in the current budget, we are making important progress in areas where creative thinking and support from outside sources enables us to move forward. For example, funding may be made available by the New Jersey Economic Development Authority and University Hospital that would allow Rutgers to partner with University Hospital to develop new space on the RBHS Newark campus; this space will benefit our faculty and staff serving there and the residents of Newark who depend on Rutgers Health and University Hospital for clinical care.

Funding from PSE&G is enabling Rutgers to undertake significant infrastructure upgrades in more than 100 Rutgers buildings statewide. This work will lower energy costs, reduce our carbon footprint, and improve building system conditions significantly. 

We are hopeful that grant funding from the National Institutes of Health will provide for critical equipment and infrastructure upgrades at the Rutgers Cancer Institute in New Brunswick and the New Jersey Medical School’s biocontainment labs in Newark.  

With federal subsidies, we are converting the Institutional Planning and Operations fleet to electric vehicles, another step in our Climate Action Plan. Additionally, using state funds we have purchased five electric buses for a circulator bus loop in Newark to better serve our students and the community.

Finally, we are beginning to see progress on the work funded by a $300 million state grant for the HELIX project in New Brunswick, the Cooper Street Gateway project in Camden, and the Life Sciences building project in Newark.

Turning from capital projects to our most important infrastructure—our people—I am excited about the 76 new faculty colleagues we’ve hired thus far through our Faculty Diversity hiring initiative. Fifty of them are beginning their careers at Rutgers as Assistant Professors and 26 at the tenured ranks of Associate, Full, or Distinguished Professor. We’re now at the midpoint of our $45 million, five-year investment—and I’m glad to say even more new colleagues will be on their way to join us in the coming year. These hires are in all four of our chancellor-led units and capture the breadth of our academic enterprise—from the arts and humanities, the social and behavioral sciences, biomedical and life sciences, mathematics and computer science, engineering, and physical science, to business, and to law.

Related to the above, I share Executive Vice President Moghe’s enthusiasm about the $7.2 million our offices are investing in the Roadmaps initiative, a multi-year academic investment in our chancellor-led units that will promote interdisciplinary collaboration, enhance our reputational recognition, serve our communities, and increase enrollment at Rutgers. Roadmaps will support the development of novel degree programs, faculty hiring and research, PhD training, and postdoctoral support, among other things. This funding targets growth and excellence in the emerging fields of Data Science, Artificial Intelligence, Innovation, and Social Justice.

Maintaining our academic strength also depends on recruiting the very best scholars into our graduate programs. Dr. Moghe and I have thus extended the Presidential Graduate Fellowships for an additional five years. Twenty fellows will be appointed across our campuses each year for the next three years, representing a commitment of $1.8 million in funding support.  Equally important, we want to express support for all graduate fellows. We recognize that support for doctoral Fellows is uneven and has not kept pace with the stipends for Graduate Assistants, and I’ve asked EVP Moghe to engage our chancellors and provosts to explore a solution as an institutional priority. That process is just starting now, and it is my hope that we’ll move toward a better arrangement in the near future.

Within the confines of the budget we also continue working to put our undergraduate students in the best position to succeed in and outside the classroom. This year’s hard work in that area includes improved course-catalogue software, new options for students to quickly send their diploma to a potential employer, more online tools for navigating student services such as registration and student accounting, and additional financial aid employees to provide debt counseling to our students. Recognizing our need to serve a population of students with disabilities that has grown considerably in recent years, we have increased the budget for disability services by $350,000. (And let me take a moment to thank the state for providing free Narcan kits now available on all three campuses as a potential life-saving tool to reverse an overdose. As our campaign slogan puts it, you can’t help if you’re not prepared.)

This year’s budget also continues our commitment to increase our investment in the Libraries. The current budget includes an increase of slightly more than $1 million for collections. The budget we are preparing for fiscal year 2025 anticipates an additional $764,000 for that purpose.

As you know, the current year is our first cycle using the Common App in our admissions process. This enables potential undergraduates to apply to Rutgers much more easily than in the past. Our eyes are wide open, of course, and we recognize that we are among many universities to which students are applying through the Common App.

That said, the results have been striking. Applications to Rutgers–Camden are up more than 250%; to Newark by nearly 140%; to New Brunswick by 60%. Reflected in these increases are equally significant increases in out-of-state applications, including international applicants—both of which dipped during the COVID years. This has given us a large and very competitive pool and allowed us to offer admission to many more students, which we hope will correspond with strong yields this spring.

Perhaps more important than adoption of the Common App, we have adopted a universitywide enrollment strategy, which I alluded to earlier, that involves close coordination across the campuses so that we all benefit from this larger pool of talented students.

The proof, of course, is in securing a new class. We are still early in the process, and we face the daunting challenge of getting financial aid packages out in a timely manner given the nationwide problems you may be aware of with the new Free Application for Federal Student Aid (FAFSA). As some of you may also know, we have continued to address issues in our own financial aid software system, and we are working hard to stabilize it to make sure that we can overcome obstacles as much as possible in the coming months.

Of course, it wouldn’t be a budget speech without some mention of athletics. The topic of athletics was raised in a couple of the questions I received, and I certainly understand why. The very significant raise we gave our football coach drew a lot of attention. By any measure, he is extremely well-paid. It is also true that his salary falls just shy of the median of head coaches in the Big Ten; this is the unique world of intercollegiate football, which is also the source of more positive publicity for Rutgers across the country, by far, than any other activity.

As I have said before, I do not expect athletics to turn a profit. It is more properly seen as an investment. And in this year’s budget, it represents 3% of our expenditures. And after accounting for its revenues, the subsidy for athletics is only 0.73% of the total budget.

Now, I want to address a couple of other questions before I wrap up my remarks.

One was a question about recruiting additional nursing faculty to accommodate the demand for nursing education. Governor Murphy, in his annual State of the State Address, highlighted the state’s nursing shortage while saluting one of our own students. Clearly, there is a pressing, and recognized, public need for more well-trained nurses.

We are constrained by space limitations and limited funding. Despite those limitations, Rutgers has been using existing funds to increase its nursing class students by 75 students per class. We are working with our partners, RWJ Barnabas Health, to find clinical rotations for nursing students, which will also augment our capacity to train new nurses. Obviously, the key to  addressing the state’s nursing shortage quickly is with increased and consistent state funding to meet this critical public need.

Another question that came in was a recommendation for staff representation on the Boards of Governors and Trustees, like the nonvoting members representing students and faculty. Though this isn’t directly about university finances, there is a clear financial stake for staff in decisions our boards make and a perspective they can lend. This is an excellent question, and I will take it up directly with the leadership of the Board of Governors and the Board of Trustees.

Let me close my remarks with what I hope will be a positive note.

These are difficult days as we continue to rebound from the impact of COVID, build back our enrollment, and make progress on a plan for achieving and maintaining financial sustainability. I know that in many departments, some of the decisions are difficult and painful, but there are also exciting opportunities to create and enhance programs for the future. Like you, I look forward to a time where we are not talking deficits but about a broad array of new investments, exciting initiatives, and state-of-the-art advancements. Unfortunately, this is not that time. What I know and believe in is the resilience and determination of our Rutgers community. By working together, communicating well, and supporting each other, we will get there—and now is the time to start that envisioning work.

Thank you for listening, thank you for your commitment to this great institution, and thank you for all that you continue to do to help Rutgers achieve its goal of providing an excellent, financially accessible education that is in service to the common good.