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An Update from President Brodhead
Editor's Note: The following letter from Duke President Richard H. Brodhead was sent by e-mail to university faculty and staff Wednesday.
Durham, NC - To Members of the Duke Community,
The opening of the academic year has been an exhilarating, energizing time. The arrival of new and returning students reminds us of a main goal of the University -- to educate young minds and encourage their development into individuals who, working with others, will make a difference in the world.
Now that we are back in session, I want to update you on the university's financial health, which I'm pleased to say is improving. Last year we reported on the need to reduce the $2 billion annual budget of the University by approximately $100 million to address the revenue shortfall caused principally by the decline in our endowment. We have pledged to achieve this reduction over a three-year period.
This past year, Duke took a number of steps that significantly reduced the size of the problem. These included a voluntary early retirement program and strict controls on overtime and filling vacant positions that, together, shrank our workforce by more than 400 positions. In addition, the decision to forgo salary increases, a measure that kept our deficit from growing, protected over 100 jobs. Colleagues have also taken a close look at every aspect of the way we do business. We have readjusted teaching loads and reduced administrative costs in academic departments. We have also created efficiencies and undertaken substantial cost reductions in a number of administrative areas, from telephones to computer purchases to printing and publications.
Taken together, these actions reduced our projected deficit by more than $60 million in the first year of our three-year walkdown. These steps also helped Duke so far avoid the large-scale layoffs and cutbacks in benefits that other institutions have endured, while protecting key priorities like student financial aid and the quality of the educational experience.
With the return of a measure of stability to financial markets, the university's endowment recorded a return of 13% in the fiscal year ending June 30. Gifts to the university last fiscal year increased from the previous year's low point by a remarkable 15%, to $345 million, helping Duke record its third-best year ever for philanthropy. And our faculty's swift response to the opportunities presented by the government's economic stimulus programs resulted in more than $200 million in new grants, making Duke one of the largest university recipients of NIH stimulus research funding in the nation.
Today, thanks to the creativity, hard work and shared sacrifice of everyone at Duke, we find ourselves better off than we thought we'd be two years ago. Even while reducing expenses, we have been able to continue investing in the future by hiring outstanding faculty across our schools, undertaking new educational initiatives both on campus and abroad, and moving forward with some construction projects. Also, the good work to date permits us to make plans for a modest salary increase in the next fiscal year.
Welcome though the good news is, however, it is only part of my message. Despite last year's positive return, the endowment is still about $1.2 billion less than it was at the end of FY 2008. To operate with a balanced budget, the university needs to achieve a further $40 million in savings or revenue enhancements over the next two years. We also need to identify the resources for strategic initiatives that will sustain our momentum in coming years.
We must, therefore, maintain our discipline, continue to find opportunities for greater efficiency in how we teach and do research, and stick to our task until the job is done. This will not be easy and shared sacrifice will likely still be needed to bring us to a sustainable budget, especially in those schools and units that are facing more challenging budget conditions. At Duke most decisions about resource allocations are made at the local level, with input from many stakeholders. We will continue to need this community's best ideas as we work our way through the current situation.
Duke has a history of managing its finances carefully, yet strategically, and of coming out stronger after passing through challenging times. Let's continue that tradition this year.
Again, my most sincere thanks, and best wishes for the year ahead.
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