Updated October 12, 2015
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1. Q. Is the university in financial trouble?
A. No. Tulane’s overall financial position is healthy. In fact, Moody’s Investors Service recently revised the university’s outlook from negative to stable, citing Tulane’s sound market position, ongoing net tuition revenue growth, $1.2 billion in total cash and investments, solid donor support, and commitment to sound financial operations. Nonetheless, the university has had an operating cash flow deficit that is unsustainable in the long run, so we must balance our revenues and expenses.
2. Q. Why don’t we just take more money from the endowment to cover any shortfall?
A. Tulane’s endowment, compared to our peers, is relatively modest. Our strategy is to grow the endowment rather than deplete it as the university depends on income derived from it to fund operations. Finally, there are legal restrictions that govern how endowment funds can be used. In fact, much of the endowment is donor restricted funds.
3. Q. Who is Huron and why were they chosen?
A. Huron is a leading education consulting group that works with clients around the globe to improve performance and reduce costs. President Fitts spoke with a number of university presidents who have experience with Huron and received strong recommendations about the company.
4. Q. Who are the Huron representatives talking to?
A. They are interacting with the university’s leadership team, including the deans, plus representatives of all academic and administrative units, including athletics. They also held focus groups with students. In the initial phase of the project they interviewed more than 150 university leaders, staff, faculty, and students actively involved in university operations.
5. Q. Will academic programs be included in the operational review as well as administrative areas?
A. The operational review will not assess academic programs or priorities; however, operating activities within all schools and administrative departments are within the scope of the review.
6. Q. Will the priorities of the recent strategic planning process be taken into account in the operational review?
A. Huron and members of the Operational Review Steering Committee have been provided with Tulane’s 2013 Report of the Higher Education Environmental Scan Committee. That report provided recommendations for positioning Tulane as a national leader in education and research for the next two decades. Currently, under the leadership of President Fitts, Tulane has two task forces leading key academic initiatives: the Task Force on the Undergraduate Experience and the Task Force on Academic Collaborations. All of these efforts will inform recommendations of the Operational Review Steering Committee. President Fitts is currently reviewing the recommendations made by the two task forces.
7. Q. In the last year, millions of dollars have been invested in Athletics. Will that department be held as accountable as the rest of the university?
A. Athletics will participate in the process just like every other department. It is important to remember that the majority of funds used to improve facilities and construct Yulman Stadium were donated by individuals for the sole purpose of strengthening the Athletics Department.
8. Q. How will this review make Tulane a better and stronger university?
A. In recent years, Tulane has dealt with its operating cash flow deficit by restricting pay increases and freezing expense budgets, but that is not a long-term solution. The intent of the operational review is to find ways to operate more effectively and more efficiently. The desired outcome is for Tulane to have positive operating cash flows, which will allow the university to be more insulated from external factors, enable us to make strategic investments in the academic mission, and become an employer of choice.
9. Q. How did the Operational Review Committee gather information to identify opportunities?
A. During the Opportunity Identification phase of the project in January through March 2015, Huron conducted more than 150 confidential interviews with academic and administrative leadership and staff, faculty, and students from all areas of the campus. They also received nearly 500 responses to a university-wide survey and conducted five focus groups with 35 undergraduate and graduate students. In addition to the interviews, Huron was provided with hundreds of internal Tulane documents and datasets which were utilized to support and inform additional findings as well as conduct peer benchmarking. The interviews, focus groups, and data, combined with Huron’s extensive higher education knowledge, helped the Operational Review Steering Committee to create a prioritized menu of opportunities for Tulane’s leadership to review and assess.
10. Q. What factors were considered in determining the relative advantages or disadvantages of each opportunity?
A. The Tulane administrators, staff, faculty, and student representative on the Operational Review Steering Committee identified several factors for evaluating each of the opportunities identified. The factors were weighted as follows: (1) financial impact, 35%; (2) reputational impact, 22%; (3) service impact, 20%; (4) cultural impact, 13%; and (5) implementation complexity, 10%. Huron assigned initial scores to each of the opportunities which were reviewed and adjusted, if necessary, by members of the Operational Review Steering Committee.
11. Q. How were opportunities selected for advancement in the process?
A. The factors described above were utilized to narrow the list to about 20 opportunities. The Operational Review Steering Committee then identified the top opportunities, which were then presented to the President and the Cabinet for review in late March 2015.
12. Q. Are all revenue-enhancement and cost-reduction initiatives led by the Operational Review Steering Committee?
A. No. In addition to the top opportunities currently being coordinated by the Operational Review Steering Committee, the President’s cabinet continues to identify strategic opportunities that may originate from and be led by central administration. Further, depending on the scope, revenue-enhancement and cost-reduction initiatives are frequently identified and implemented by faculty, managers, and staff within departments across the university.
13. Q. What happened to opportunities that were not selected?
A. While several opportunities are currently being addressed as part of an initial wave, the Operational Review Steering Committee plans to revisit the list of opportunities in fall 2015 to potentially identify additional initiatives.
14. Q. How is this effort related to other university-wide initiatives?
A. The Operational Review was designed to identify revenue-enhancing and cost-reducing opportunities. Concurrently, a Budget Redesign initiative is underway to create an incentive-based process for budgeting.
15. Q. What is peer benchmarking?
A. Benchmarking is a process that utilizes both publicly available and/or purchased data to compare Tulane and functions within the institution against like functions and institutions across the country. Benchmarking is only used for directional guidance since data sources are not always identical; however, the process is helpful to identify areas warranting additional review.
16. Q. What institutions were utilized during the peer benchmarking process?
A. Tulane identifies with several peer sets that vary based on the area. Two common groups are admissions peers (institutions with which Tulane competes for traditional first-time, full-time, undergraduates) and academic peers (institutions which Tulane views as peers based on academic quality and research activity). The following lists illustrate the placement of peers on the respective lists:
Admissions Peers: Boston University, Emory University, Fordham University, George Washington University, Indiana University-Bloomington, Louisiana State University, New York University, Northeastern University, University of Texas at Austin, University of Maryland-College Park, University of Miami, University of Michigan-Ann Arbor, University of North Carolina at Chapel Hill, University of Southern California, and Washington University in St Louis
Academic Peers: Carnegie Mellon University, Duke University, Emory University, George Washington University, Rice University, University of Miami, Vanderbilt University, Wake Forest University, and Washington University in St Louis
17. Q. What are some university functions that were assessed using peer benchmarks?
A. Benchmarking was utilized to review many areas, including but not limited to: revenues and expenses by university functional areas, degree conferrals, faculty and staff headcounts, endowment size and performance, graduate and undergraduate admissions and enrollment factors (admissions, yield, retention, graduation, etc.), undergraduate transfers and international student totals, payroll, net tuition revenue, and faculty/staff to student ratios.
Operational Review Status Update
18. Q. What is currently happening with the Operational Review?
A. The goal of the Operational Review remains to identify real savings (and/or revenue enhancements) totaling $20 million per year in a steady state (i.e., within two or three years). In August 2015, after review with the Operational Review Steering Committee, the President’s Cabinet approved the following initiatives for implementation:
- Procurement and Travel Management
- Summer Programing
- Student Housing Utilization
- Employee Healthcare Management
- Renegotiation of Energy Contract
- Student Health Center Third Party Billing
Subsequent discussions were held with the President’s Cabinet to proceed with the following initiatives:
- Enrollment Strategy
- Voluntary Separation Program and Workforce Policy Changes
For each opportunity reviewed by the Steering Committee, Tulane leaders along with Huron developed a “business case” to provide additional information to support decisions. The business cases provided financial analyses, implementation plan(s) and a risk assessment. Each opportunity had a working group; comprised of Tulane faculty, staff, administrators, and Huron team members. The Steering Committee reviewed the business cases in summer 2015 and made recommendations to the President and his cabinet.
19. Q. What is covered under each of the opportunities listed above?
A. See Operational Review items at the “Updates” link.
20. Q. Will there be any layoffs as a part of this effort?
A. There is no definitive answer at this time. The university will be offering a voluntary separation program to eligible employees. However, if we do not achieve the necessary dollar savings through the voluntary phase, we likely will have to consider additional measures such as non-voluntary lay-offs.
21. Q. Are employee benefits changing as a result of this review?
A. Tulane will make changes to the policies for overtime pay, sick leave, and vacation days. These changes, which are outlined in the Tulane Workforce Management Office website, will become effective July 1, 2016.
22. Q. Why was Athletics not selected as an opportunity for further review?
A. Investments in, and support of, Athletics are a strategic decision. Tulane remains committed to a first-rate athletics program for the benefit of its student-athletes, the student body in general, alumni, and community members.
23. Q. Does Athletics always receive institutional support?
A. The vast majority of U.S. institutions provide financial support for their athletics programs. The level of support varies by institution but a very small number of colleges and universities in the U.S., regardless of division, location, and conference, actually generate enough revenue to cover their expenses. As a Division 1 athletics institution and member of the American Athletic Conference, Tulane has specific requirements that must be met each year. While the university plans to continue financially supporting the Athletics program, Athletics also generates intangible and indirect benefits relating to undergraduate and graduate enrollment, student life, alumni relations, amongst many more.
24. Q. Was there any analysis conducted on Tulane’s centers and institutes?
A. During the faculty and staff survey, rationalization of Tulane centers and institutes was noted in several submissions. Centers and institutes largely operate on restricted funds and/or their own endowments, so there it is unclear how much any change would contribute to bettering the university’s operating budget. There are no specific initiatives related to centers and institutes at this time; however, this is an area that could still be considered in the near future.
25. Q. What happens if we don’t find $15-20 million to cover the cash flow deficit?
A. The University could continue to operate annually, spending more than it brings in; however, within a few years, the university would exceed its capability to draw further on its lines of credit and would need to access other forms of funding. The lines of credit afford Tulane the opportunity to withdraw cash to support operating and non-operating activities. The Operational Review efforts are being undertaken to realize savings to stabilize the university’s financial position and eliminate the annual cash flow deficit.