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Achieving Financial Sustainability

 

Understanding the Challenge      Understanding Funding       Understanding Costs

Phase 1: Understanding the Challenge

Introduction

After a difficult year and a half of extraordinary circumstances and efforts, we are preparing for an in-person Fall 2021, largely due to an effective vaccine rollout and the support and cooperation of our entire community. Not only is this promising news, it is also encouraging for our financial health and sustainability.

As we shared in May, the expected reductions in the level of state support that had been planned for last year were restored. We did not, however, receive additional state support or an increase in tuition. We are providing updates to the  information that we shared last year, which reflect this restoration of state funding and highlight some of the continuing financial challenges that remain.

In response to external funding challenges and during a most difficult operating environment for all of higher education,  we launched the Strategic Budget Initiative in an effort to operate as efficiently as possible and to find alternative revenue sources  . We were heartened by the response. Hundreds of faculty and staff contributed and collaborated across five task forces and dozens of opportunity-specific working groups. We are now in the implementation phase on the first tier of initiatives.

While it’s too early to assign a dollar figure to the SBI’s cumulative contributions to SBU’s financial health, we expect approximately $5 million of projected cost reductions for FY21/22. We expect this amount to increase over time as revenue generation proposals are implemented.

The Challenge

Although the current outlook is certainly more positive than a year ago, Stony Brook’s financial challenges remain. We are reliant on state support and tuition rates that are not set at the campus level, and the foundational challenges that make our budget unsustainable still remain to be addressed.

The following chart shows Stony Brook’s funding—including state tax support, tuition, and fees—against the growing cost of education. It also shows where, with reasonable assumptions around costs based on inflation and student population growth, our funding should have been, based on 2014/15 funding levels. The trend lines are unmistakable and of great concern.

Layered line and bar charts showing the increasing costs of educating students since 2014 and the relatively level amount of funding provided by the state, tuition, and fees. This results in an increasingly large gap between the costs & funding of academic support since 2014 & predicted into the future. 2019/2020 actual costs were $606 million, state tax support was $128.7 million, $297.5 million in gross tuition, and $58.7 million in broad based fees.

Declining State Funding & Unfunded Mandates

Over the past two years our financial situation has been less than clear as New York State worked to manage the impact of the pandemic and the economy on its budget. We demonstrate the shifts of recent years in the chart below.

Budgeting volatility for state funding, chart shows state tax support compared to state support reinstatement and state support cuts for the years 2018 through 2022

Based on guidance we received, we anticipated state tax support to decrease by $19 million in FY20 and an additional $7 million for every year after that, reducing the annual support SBU receives from $147.7 million to $122 million. Fortunately, all but $6.3 million in FY21 was reinstated. The annual support amount has been restored to its previous level ($147.7M) for FY22 and for the foreseeable future. While the reinstatement of those much needed funds helped close the anticipated funding gap, state funding is still lagging behind ever rising costs.

In fact, we have had a number of unbudgeted but important regulatory and compliance requirements that have required the university to divert staff and financial resources. Likewise, our multi-year labor contracts negotiated by the State include a series of mandated Contractual Salary Increases (CSI). While well-deserved by our staff and faculty, these increases have not been matched by state funding. Based on the current levels, we expect the cost of the CSI increases to exceed the full amount we receive from tax support by 2030.

Bar chart showing Unfunded CSI and State Funding Available for other uses with Unfunded CSI starting at $25.6 million in FY11 and increasing every year to total $75.4 million in FY20 and $85.2 million in FY21. State funding has been consistent at $148 million since FY11 and remained there for FY20 after SUNY reinstated the $19 million in state tax support that was cut during COVID. In FY21, state funding was cut by $6.3 million, but restored to $148 million for future years. The unfunded CSI is expected to outpace the $148 million of state support in 2030. Footnote reads: The State support above excludes the state funded fringe benefits costs paid by NYS on behalf of SBU. This figure is $205M for FY20.

Compliance costs and salary increases are not the only unfunded mandates. The Tuition Assistance Program (TAP), for example, has for several years been set by New York State at 2010 tuition levels, meaning that Stony Brook had to find funds to close the $8.0 million TAP gap in FY20 and $7.8 million gap in FY21.  While the enacted NYS budget includes money to decrease the TAP gap by $500 per student in FY22 with an eventual phase out of the gap by FY25, we will need to continue to address this shortfall in the near term.

Changing Student Mix

Traditionally universities work toward an optimal mix of in-state, out-of-state, and international students to meet academic and budgetary goals. At Stony Brook, we have worked to cultivate a rich mix of international students to complement our exceptional U.S. student body. This mix is important, not just for the diversity of thought and experience it brings but also for the additional revenue it brings the school. 

Student Tuition Billed by Tuition Residency by number of Full Time Equivalent (FTE): '08/09 In-State: 17,188, Out-of-State: 3,285, Grand Total: 20,473 '09/10 In-State: 17,438, Out-of-State: 3,636, Grand Total: 21,074 '10/11 In-State: 17,100, Out-of-State: 4,000, Grand Total: 21,100 '11/12 In-State: 16,556, Out-of-State: 4,352, Grand Total: 20,908 '12/13 In-State: 16,299, Out-of-State: 4,757, Grand Total: 21,056 '13/14 In-State: 16,498, Out-of-State: 4,901, Grand Total: 21,399 '14/15 In-State: 16,738, Out-of-State: 5,202, Grand Total: 21,940 '15/16 In-State: 17,029, Out-of-State: 5,331, Grand Total: 22,360 '16/17 In-State: 17,397, Out-of-State: 5,328, Grand Total: 22,725 '17/18 In-State: 17,722, Out-of-State: 5,337, Grand Total: 23,059 '18/19 In-State: 18,023, Out-of-State: 5,114, Grand Total: 23,136 '19/20 In-State: 18,325, Out-of-State: 5,300, Grand Total: 23,625 '20/21 In-State: 18,805, Out-of-State: 4,378, Grand Total: 23,183 '21/22 In-State: 19,128, Out-of-State: 4,316, Grand Total: 23,444 '22/23 In-State: 19,467, Out-of-State: 4,482, Grand Total: 23,949 '23/24 In-State: 19,699, Out-of-State: 4,591, Grand Total: 24,290 '24/25 In-State: 19,545, Out-of-State: 4,926, Grand Total: 24,471. Right Chart: Student Tuition Billed by Tuition Residency by tuition revenue total. '08/09 In-State: $97M, Out-of-State: $37M '09/10 In-State: $107M, Out-of-State: $46M '10/11 In-State: $108M, Out-of-State: $53M '11/12 In-State: $112M, Out-of-State: $62M '12/13 In-State: $117M, Out-of-State: $76M '13/14 In-State: $125M, Out-of-State: $86M '14/15 In-State: $134M, Out-of-State: $101M '15/16 In-State: $145M, Out-of-State: $115M '16/17 In-State: $150M, Out-of-State: $122M '17/18 In-State: $157M, Out-of-State: $123M '18/19 In-State: $162M, Out-of-State: $122M '19/20 In-State: $171M, Out-of-State: $127M '20/21 In-State: $174M, Out-of-State: $106M '21/22 In-State: $177M, Out-of-State: $106M '22/23 In-State: $179M, Out-of-State: $109M '23/24 In-State: $181M, Out-of-State: $112M '24/25 In-State: $180M, Out-of-State: $120M Footnote reads: Includes fall and spring terms only. FTE Calculation: Undergraduate Credit Hours / 30 + Graduate Credit Hours / 24

The chart above demonstrates generally the tuition contribution that out-of-state students have at Stony Brook. However, to understand just how significant this impact is, consider FY20.  During that school year, 22% of Stony Brook’s students were out-of-state, but accounted for 43% of tuition revenue.  The following year, despite some success in increasing enrollment of domestic, out-of-state students, we saw a combined 17.4% drop in the non resident population of students driven primarily by the impact of COVID travel restrictions on international students.  As a result, our tuition revenue fell by almost 6% although our total enrollment dropped by less than 2%.

Left Chart: 2019/20 Full-Time Equivalent (FTE) Students & Tuition Students: 5,300 out-of-state, 18,325 in-state; 23,625 total FTE Students. Tuition: $126.5 million out-of-state, $170.6 million in state; $297.1 million total tuition. 22% of Out-of-State Students Contributed 43% of SBU's Tuition. 78% of In-State Students Contributed 57% of SBU’s Tuition. Right Chart: 2020/21 Full-Time Equivalent (FTE) Students & Tuition Students: 4,275 out-of-state, 19,325 in-state; 23,183 total FTE Students. Tuition: $108.1 million out-of-state, $176.7 million in state; $284.8 million total tuition. 18% of Out-of-State Students Contributed 38% of the Tuition 82% of In-State Students Contributed 62% of SBU’s Tuition Footnote reads: Includes fall and spring terms only. FTE Calculation: Undergraduate Credit Hours / 30 + Graduate Credit Hours / 24

For the upcoming year, this change in student mix will lead to an expected tuition shortfall of $15 million, or 5%, below what we saw in FY20. This is a trend that we see continuing in the near future.  While aggressive recruiting first-year out-of-state domestic students and transfer students has contributed to significant reduction in lost tuition from international students (impact of $5M from FY21); we do not anticipate a return to the pre-pandemic level of international students who pay non-resident tuition rates.

Peer Institution Comparisons

More fundamentally, SBU’s tuition rates remain considerably below those of our regional research university and AAU peers. In fact, according to the data in a report published last year by the State Higher Education Executive Officers Association, public institutions — including both 2- and 4-year — received an average of $7,875 state support and $321 state aid to students (total of $8,196) in education appropriations per FTE in 2019.  Although this reflects an increase in inflation over the previous year, in most states, funding remains at 2008 pre-recession levels.  Although it is one of just seven states that has narrowly increased funding since the recession, New York’s funding nonetheless reflects the overarching national trend of decreasing state support for higher education not just as a percentage of per student funding but as a percentage of costs—from 68.6% in 2008/09 to 44.7% in 2018/19.

 Left bar chart shows increasing state support and tuition across the U.S. resulting in an overall increase of nearly $4,000 per Full Time Equivalent (FTE) student since 2008/09. Footnote reads: Source: State Higher Education Executive Officers Association State Higher Education Finance (SHEF Report)— includes public 4-year and 2-year institutions. Right bar chart shows New York's declining state support with increasing tuition, resulting in less than $2,000 increase to funding per FTE in New York since 2008/09. Footnote reads: Source: SBU Budget Office, SBU Institutional Research, Planning & Effectiveness, and IPEDS Data. Center footnote reads: Stony Brook Chart: Based on full-year tuition & fee revenue, full-year FTE enrollment, removing revenue and FTE for medical students Net tuition and fees excludes state and institutional aid State support excludes the state funded fringe benefits costs paid by NYS on behalf of SBU. This figure is $206M for 18/19 Updated ‘20/21 information is not yet available. Left bar chart shows a decrease of 24.3% in state support, increase of .4% in fees, and increase of 23.9% in tuition across the U.S. per Full Time Equivalent (FTE) student by percentage since 2008/09. Footnote reads: Source: State Higher Education Executive Officers Association State Higher Education Finance (SHEF Report)— includes public 4-year and 2-year institutions. Right bar chart shows a decrease of 7.3% in state support, decrease of 2.8% in fees, and increase of 10.1% in tuition across the U.S. per FTE in New York by percentagesince 2008/09. Footnote reads: Source: SBU Budget Office, SBU Institutional Research, Planning & Effectiveness, and IPEDS Data. Center footnote reads: Stony Brook Chart: Based on full-year tuition & fee revenue, full-year FTE enrollment, removing revenue and FTE for medical students Net tuition and fees excludes state and institutional aid State support excludes the state funded fringe benefits costs paid by NYS on behalf of SBU. This figure is $206M for 18/19 Updated ‘20/21 information is not yet available.

In New York, declining state funding on a per-student basis is further complicated by rules governing tuition and fee increases.  Tuition at public institutions of higher education in New York State is set uniformly across the SUNY System with no differentiation from one type of institution to the next. Additionally, there have been only modest or no increases over the past several years. Other public research institutions are able to increase tuition when state funding does not keep pace with the costs of running such an institution.

As a result, in comparison with our peer set—major public research universities in the Northeast—Stony Brook’s tuition and fee structure is the lowest, a full $15,845 less per year for out-of-state students than the University of Vermont. 

Left chart shows 2019/20 In-State Undergraduate Tuition & Required Fees / Major Public Research Universities Northeast U.S.. Pittsburgh: $19,718 New Hampshire: $18,879 Vermont: $18,802 Penn State: $18,450 Connecticut: $17,226 Massachusetts: $16,389 Rutgers: $15,407 Rhode Island: $14,566 Buffalo: $10,524 Stony Brook: $10,175. Right chart shows 2019/20 Out-of-State Undergraduate Tuition & Required Fees / Major Public Research Universities Northeast U.S.. Vermont: $43,690 Connecticut: $39,894 Massachusetts: $35,710 Penn State: $35,514 New Hampshire: $35,409 Pittsburgh: $33,746 Rutgers: $32,189 Rhode Island: $31,686 Buffalo: $28,194 Stony Brook: $27,845

Likewise, relative to AAU schools nationwide, Stony Brook’s tuition and fees are among the lowest.

Left chart: 2019/20 In-state Undergraduate Tuition & Required Fees / Public AAU Institutions Pittsburgh: $19,718 Penn State: $18,450 Virginia: $17,935 Illinois: $17,274 Michigan: $16,540 Michigan State: $15,555 Rutgers: $15,407 Minnesota: $15,027 UC Berkeley: $14,495 UC San Diego: $14,415 UC Santa Barbara: $14,391 UC Davis: $14,253 UC Santa Cruz: $13,991 UC Irvine: $13,727 UCLA: $13,240 Oregon: $12,720 GA Tech: $12,682 Colorado: $12,500 Arizona: $12,379 Washington: $11,465 Texas A&M: $11,361 Kansas: $11,166 Ohio State: $11,084 Indiana: $10,947 Texas: $10,824 Maryland: $10,779 Wisconsin: $10,725 Buffalo: $10,524 Missouri: $10,477 Stony Brook: $10,175 Purdue: $9,992 Iowa: $9,606 Iowa State: $9,320 North Carolina: $8,980 Utah: $8,615 Florida: $6,381. Right chart: 2019/20 Out-of-State Undergraduate Tuition & Required Fees / Public AAU Institutions. Michigan: $52,997 Virginia: $51,482 UC Berkeley: $44,249 UC San Diego: $44,169 UC Santa Barbara: $44,145 UC Davis: $44,007 UC Santa Cruz: $43,745 UC Irvine: $43,481 UCLA: $42,994 Michigan State: $40,384 Texas: $38,326 Washington: $38,166 Wisconsin: $37,785 Texas A&M: $37,470 Maryland: $36,891 Colorado: $36,702 Oregon: $36,615 Indiana: $36,512 Illinois: $36,213 North Carolina: $36,159 Penn State: $35,514 Arizona: $34,662 GA Tech: $33,794 Pittsburgh: $33,746 Minnesota: $33,325 Rutgers: $32,189 Ohio State: $32,061 Iowa: $31,569 Purdue: $28,794 Florida: $28,659 Missouri: $28,348 Buffalo: $28,194 Kansas: $28,034 Stony Brook: $27,845 Utah: $27,220 Iowa State: $24,508.

This past legislative session, SUNY and the Governor recognized the unique contributions and needs of research universities by proposing increased flexibility for the University Centers to set tuition in a way that better supports their mission and goals, while protecting Pell- and TAP-eligible students. That proposal was not enacted in the session that ended in June 2021, and tuition across the SUNY System was held flat. While we will continue to work towards this mission driven tuition flexibility, for planning purposes, we need to assume that tuition will be flat next year as well.

COVID added additional stress to underlying issues

And finally, as discussed earlier, these systemic challenges have been compounded by COVID, impacting not just the last two years but for many years to come. In FY20, we incurred a $34.8 million Academic & Research shortfall from COVID impacts.  We addressed this in part by instituting a hiring and purchasing freeze and other expense savings. Another $9.9 million has been reduced through CARES Act funding.


Waterfall chart showing -$6.3 million COVID costs, -$34.1 million Refunds/Credits, -$7.7 million in Lost Revenue, and -$8 million TAP gap for a total impact of -$56.1 million in losses. These negatives are offset by $9.9 million Federal offsets and $11.4 million in other offests for a total Estimated Funding Gap of -$34.8 million.

In FY20, COVID healthcare impacts topped $63.7 million after including all offsets and federal support.

Waterfall chart showing -$65.7 million COVID costs and -$146.2 million Hospital Lost revenue, for a total loss of -$211.9 million. These negatives were offset by $120.2 million Hospital CARES Act funding, $17.5 Clinic PPP, and $10.5 million Clinic CARES Act funding, for a total estimated funding gap of of -$63.7 million.

In FY21, we saw a total of $119.2 million in losses at the University and $234.5 million in losses in healthcare. We took extraordinary financial measures, held back on hiring and spending, and did a significant draw down on our limited central reserves. This, in combination with federal COVID funding through HEERF II, ARP and the CARES Act brought last year’s gap to $13.6 million on the Academic and Research side and $187.3 million on the Hospital and Clinic side. Our central fund balance is well below recommended levels. It is important in the coming year that we review all reserves to make sure that we are investing where possible and necessary and saving for future commitments as needed. It remains an imperative that we find ways to fully resolve our systemic budget gaps.  

Waterfall chart showing -$6.6 million in COVID costs, -$2.7 million in Refends/Credits, -$68.2 million in Lost Revenue, -$26.4 million in debt refinancing to be repaid, $15.3 million in SUNY driven changes for a total loss of -$119.2 million. This was offset by $47.5 million in federal offsets and $49.1 million in Other offsets for a total Estimated Funding Gap of -$22.6 million.

In FY21, we had a $187.3 million COVID healthcare funding gap after including Clinic PPP and Hospital and Clinic CARES Act funding to offset impacts.

Waterfall chart showing -$127.7 million in COVID costs and -$106.8 million in Lost Revenue for a total loss of -$234.5 million. These losses are offset by $2.4 million of Clinic PPP, $9.8 million of Clinic CARES Act funding, and $35.0 million of Hospital CARES Act funding for a total Estimated Funding gap of -$187.3 million.

We have come far in managing our funding issues, but challenges remain. With SBI and other critical initiatives, SBU is on the right track. We are tackling our challenges head on, we are being innovative and creative across the entire enterprise, and we have a renewed momentum.  Given the current work to prepare all-funds, multi-year budget plans, to manage the careful and intentional use of reserves, and to build on the collaborative innovation we initiated during the pandemic, we should be hopeful about what we can achieve together.

 

 

 

Understanding the Challenge      Understanding Funding       Understanding Costs