DURHAM, N.C. - Duke University has adopted a budget for the 2010-11 fiscal year that will boost spending on financial aid and advance key institutional priorities while carefully managing costs in response to economic realities.

Duke's Board of Trustees on Friday approved the $1.93 billion budget along with several new graduate-level programs. The new operating budget, which covers the fiscal year beginning July 1, represents a 5.6 percent increase from the FY 2009-10 budget, and calls for drawing $72 million from reserves as part of a three-year strategy that the board adopted in February 2009 to enable the university to continue pursuing its strategic priorities as it recovers from the financial crisis.

Over the past year and a half, Duke has moved to control spending by taking actions ranging from energy-conservation measures to new Internet-based telephone services. It has reduced staff costs by offering early retirement incentives, limiting hiring and holding off on base salary increases for most faculty and staff. Some costs have continued to rise, such as a projected 14 percent increase in employee benefits, due mainly to rising health care costs. Duke also has committed to providing a $1,000 supplement to employees earning less than $80,000 per year.

On the revenue side, the budget projects a 4 percent increase to $1.27 billion, which excludes sponsored research expected to total $660 million. Duke officials project increased revenues from philanthropic supporters, a previously announced tuition increase, expansion in graduate and professional enrollments and new academic programs in the law and engineering schools. The university also has benefited from greater than anticipated investment returns in the endowment over the past year.

Even amid these financial pressures, Duke's new budget increases institutional undergraduate financial aid by 11.1 percent next fiscal year, to $127 million, which is nearly three times the previously announced tuition increase of 3.9 percent. That figure includes $108.5 in university funds and $18.5 million in external support for scholarships and need-based aid. Nearly half of undergraduates receive financial support to attend Duke, the vast majority of which is need-based aid. The annual average need-based grant to a financial aid recipient for the current academic year was more than $33,000.

Duke admits U.S. undergraduates based on their academic accomplishments and potential without regard to their ability to pay and then meets all of their demonstrated financial need. Only about two dozen private institutions in the nation maintain "need-blind" policies for admissions and financial aid. Duke also provides need-based aid to a limited number of international students.

The new budget also calls for a 5.9 percent increase in financial aid for graduate and professional students.

The budget reflects Duke's continuing commitment to financial aid and other strategic priorities, including the hiring of outstanding faculty and support for interdisciplinary research and initiatives such as DukeEngage, which encourages undergraduates to learn from real-world experiences, said Provost Peter Lange, the university's top academic officer.

"We've been working closely with the deans and others to attract and retain outstanding faculty who are leaders in their research fields and committed to teaching," Lange said. "Instead of just retrenching across the board, we've viewed the current financial situation as an opportunity to focus on where we want to move as a university, and on how we can spend our resources most strategically."

"Duke, like many universities, will still feel the impact of the financial crisis for the next several years, so we need to maintain, and in some cases increase, the efficiencies and cost reductions that we began 18 months ago," said Tallman Trask III, the university's executive vice president.

The budget adopted by the trustees includes the School of Medicine and the School of Nursing, but excludes Duke Hospital and other components of the Duke University Health System, which are budgeted separately.

In other business, the trustees approved several new graduate-level programs and a recommendation that the division of orthopedic surgery in the Duke University School of Medicine be elevated to full departmental status.

The Department of Orthopedic Surgery will begin operating as such on July 1, and it features programs in bioengineering and biomechanics, tissue mechanics and surgical outcomes, as well as the Coach K Human Performance Research lab.

New graduate-level degrees include:

-- the Master of Biostatistics, a two-year program beginning in the fall of 2011 that is designed to provide students with the skills to contribute effectively to rapidly expanding fields of biomedical research.

-- the Master of Fine Arts in Experimental and Documentary Arts, a two-year program for students who plan to pursue careers as creative artists in combination with full- or part-time teaching.

The Divinity School will offer three new degrees, most likely beginning in 2011:

-- the Master of Arts in Christian Studies (M.A.C.S.), a one-year graduate theological degree for full-time students. It is designed for students who have an interest in serious theological study, seek to enrich their vocation, leadership or service in the church, and want to bring theological reflection to bear on their vocation in the world.

-- the Master of Arts in Christian practice (M.A.C.P.), a 15-month graduate theological degree for students seeking disciplined theological reflection while remaining in a full-time lay ministry context or other professional position.

-- the Doctor of Ministry (D.Min.), which would require three to four years of study. It is intended to enhance the work of Christian leaders serving in local churches, denominational positions and other faith-based organizations.

Both the M.A.C.P. and D.Min. programs organize learning around short-term intensive residential seminars, in combination with ongoing group interaction facilitated by Web-based learning. Each of the Divinity School degrees requires accreditation in addition to university approval.

"These degrees are meant to fulfill needs of churches and individuals that we are unable to address with our current offerings," notes Dean L. Gregory Jones. "They would not diminish the school's commitment to existing degree programs, especially our core Master of Divinity program for local church ministers, or to residential learning."

In other business, the trustees:

-- held part of its meeting at the American Tobacco Campus, where they received a briefing on Duke-Durham issues and met with City Manager Tom Bonfield. The trustees also toured the downtown Durham area. The morning session began with a welcome from Durham Mayor Bill Bell.

-- re-elected Dan Blue as chair of the board of trustees and Rick Wagoner as board vice chair.

-- paid tribute to retiring trustee Charles Smith for his 12 years of service on the board.