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The University of Chicago’s Independent Student Newspaper since 1892

Chicago Maroon

The University of Chicago’s Independent Student Newspaper since 1892

Chicago Maroon

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Expect Growing Pains: University Presentation Reveals Severe Financial Pressures

UChicago’s plans to address its growing deficit include a temporary staff hiring freeze and budget cuts.
Levi+Hall
University of Chicago
Levi Hall

The University finds itself grappling with ballooning costs and a dramatically increased budget deficit. These changes are causing severe financial pressures as UChicago has attempted to catapult itself into contention with universities that have far larger endowments over the past two decades.

Provost Katherine Baicker and newly appointed Chief Financial Officer Ivan Samstein provided details of the University’s finances to employees at an invitation-only Budget Town Hall on December 7. In presentation materials reviewed by The Maroon, financial figures were exhibited alongside details for a long-term financial strategy that the University Budget Office is working to unveil in March.

While UChicago’s investments have allowed it to punch above its weight for decades, rising interest rates and a drop in operating income have necessitated a range of cost-cutting measures, including a temporary staff hiring freeze and voluntary staff retirement packages, as well as budget cuts for programs across the University.

When asked why students were not invited to the presentation or informed of the University’s precarious financial situation, a University spokesperson responded that information regarding budget deficit reductions mainly concerned University employees. However, they added that “University leaders plan to discuss these topics with student leaders in the new year.”

The presentation looked at the 2023 budget deficit of $239 million in the context of the University’s overall financial health. The slides also compared UChicago’s financial health with its Ivy Plus peer institutions. The last slide of the presentation shared short, medium, and long-term plans to improve the University’s deficit.

Since 2013, UChicago has seen a 25 percent student enrollment increase across its undergraduate, Ph.D., masters, and professional divisions. This increase is one of the highest among UChicago’s Ivy Plus peer group, second only to Columbia’s 27 percent student enrollment increase during the same time period.

However, UChicago’s 2022 endowment market value of $10.3 billion stood lower than many of its peer institutions. A majority of these institutions were founded before UChicago, affording them more time to invest and grow their endowments. In a recent letter to the editor in The Maroon, former dean of the College and Senior Advisor to the President John Boyer blamed UChicago’s lower endowment value on decades of low student enrollment rates between the 1950s and 1990s. But the University’s endowment growth has also underperformed its peers for nearly a decade.

The presentation largely mirrored Boyer’s framing of the school’s financial state in his recent letter. While investments in recent decades have proved costly, they have allowed UChicago to climb a number of rankings and compete with its better-funded peers. But now, the University “must address the ongoing need for new pathways to financial resource generation and endowment growth, while preserving the special intellectual culture of the institution,” as Boyer wrote.

Increased enrollment in the face of UChicago’s lower endowment value is resulting in a series of financial growing pains. The deficit growing at a 16.4 percent Compound Annual Growth Rate (CAGR) since 2019 shows that revenue stream increases from sources like grants, contracts, and tuition dollars over the same time period have not been able to keep up with rising costs for services, supplies, and staff salaries.

University operations financial year 2023 presented during the Budget Town Hall presentation.

The University ended fiscal year 2023 with a roughly $239 million deficit, meaning that revenue was unable to cover eight percent of the University’s $3.14 billion operating expenses.

University operating expenses by category presented during the Budget Town Hall presentation.

Between 2019 and 2023, operating expenses rose 24 percent, from $2.53 billion to $3.14 billion. Additionally, the University increased full-time equivalent (FTE) positions by eight percent for academics and 10 percent for staff.

University operating revenue by category presented during the Budget Town Hall presentation.

By contrast, the University’s operating revenue only rose 16 percent in the same period, from $2.49 billion to $2.90 billion. The rise is partially due to tuition and fee increases since 2019. The University’s gross revenue from tuition and fees, which includes financial aid, was $1.18 billion for 2023, while net revenue, which excludes financial aid, was $601 million.

Meanwhile, UChicago’s “strategic investments” have included projects that expand financial aid, student housing options, investment in neighboring communities, and investment in “new academic and research initiatives to recruit top faculty and students,” according to the presentation.

In the period before the COVID-19 pandemic, the University’s operating deficit hovered near breakeven, but since 2021, UChicago’s operating income has crashed into greater and greater deficits.

University operating income presented during the Budget Town Hall presentation.

“The deficit exists because the growth in expenses has been greater than the increase in revenue,” wrote a University spokesperson in response to a question from The Maroon.

The presentation included metrics that compared UChicago’s staffing ratios and endowment per employee with some of its peer institutions. According to one slide, current staffing ratios show that UChicago is not overstaffing in relation to students or academic faculty. Instead, it falls on the lower end of the spectrum in relation to peer institutions. Another slide showed two charts depicting UChicago’s endowment per tenure track faculty member and per FTE student, essentially full-time enrollments measured by hours worked.

Endowment per tenure track faculty member at Ivy+ institutions presented during the Budget Town Hall presentation.
Endowment per student and financial aid support presented during the Budget Town Hall presentation.

On both endowment per FTE students and per tenure track faculty member, UChicago fell on the lower end of the scale.

When asked why the University had lower endowment per staff metrics than its peers, a University spokesperson responded that “The University’s overall staffing is consistent with the levels needed to fulfill our academic mission.” 

Looking forward, the University has outlined a list of short, medium, and long-term “developing categories” to decrease its deficit. Some key short-term items include “potential sunsetting,” meaning the potential closing of certain programs or services, and “stewarding resources.”

A slide from a Budget presentation detailing the University’s plan to address its financial issues.

The University’s choice to operate at a deficit in recent years has seen a series of repercussions. According to a draft paper written by classics and history department professor Clifford Ando that is set to be published in the Chronicle of Higher Education, the University’s debt grew from $2.236 billion in 2006 to $5.809 billion in 2022, which represents an increase of 260 percent.

While the University’s credit rating has remained strong over the past decade, credit rating firm Fitch stated the University’s ability to take on “new debt beyond the current issuance is limited at the current rating.”

Despite this, the University fixed rate debt increased by around $120 million to a total of $4.2 billion between 2022 and 2023, and it has begun to rely increasingly on more expensive forms of variable or floating-rate debt rather than fixed rate debt.

Floating-rate debt increased by over $300 million, from $170 million in 2022 to $481 million in 2023. The increase came in the form of lines of credit from banks which charge the highest interest rate paid by the University.

Interest payments on floating-rate debt increase as interest rates across the broader economy, making them especially risky for institutions like UChicago which have few ways to quickly reduce costs or increase revenue to cope with higher interest payments.

In other words, “big economic disruptions can be very challenging for such big institutions that have lots of obligated forms of spending,” said economics professor Michael Dinerstein. Dinerstein, who researches the economics of education, explained that much of a university’s money pools, especially endowment funds, are tied to specific functions.

“That lack of flexibility just complicates responses to economic shocks,”  Dinerstein said. In times of economic shock, such as rapidly rising inflation and interest rates, Dinerstein told The Maroon that “in times, like inflation, where the economic conditions are changing, universities might need to re optimize.” However, “the more constraints that they face in the optimization make it harder,” he said.

In his draft paper and in an event on campus in early November, Ando argued that UChicago’s solution to rising interest and debt payments has been to prioritize professional schools and STEM fields, often at the expense of the humanities and social sciences.

 And while he cited the presentation from the Budget Office as “a welcome step toward transparency,” he has concerns about the feasibility of the University’s medium term revenue growth strategies which include expanding professional and masters degree programs, research licensing, and greater facility utilization with summer programs and conference hosting.

“Comparative and historical data suggest that the University’s plans to meet its budget deficit in part through increased revenue face very strong headwinds,”  Ando wrote in an email to The Maroon.

“In other areas of higher education, breaking into a space like professional education that is already populated by established providers has proved exceptionally difficult; and data from the Association of University Technology Managers suggests that only a tiny handful of universities have ever profited from patents owned or co-owned by universities,” Ando added.

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About the Contributor
Elena Eisenstadt, Grey City Editor
Elena Eisenstadt (A.B. '26) is a second-year majoring in history and Spanish. She is from Philadelphia, Pennsylvania, and will talk about the city for hours if you let her (even the public transportation, her greatest love-hate relationship). Elena is interested in local investigative journalism and has written for places like Ms. Magazine, The Philadelphia Citizen, Nosher, and The Trace. Recently, she’s covered topics from the “Disneyfication” of universities, to a kosher Trader Joe’s Facebook group. Outside The Maroon, you can find her performing stand-up, coming up with elaborate travel itineraries, and wearing clothes she stole from her mom’s closet.
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  • D

    David Derbes / Mar 18, 2024 at 4:27 pm

    I’m a retired Lab School teacher (a third of a century there). I wish nothing but the best for the U of C, which provided me with a wonderful career and thousands with a first class education. Bob Zimmer gambled that the interest rates would stay low enough long enough to promote the U of C into the Ivies’ level, and I think broadly he succeeded. But recall a Crane’s Chicago Business article from maybe a decade ago, looking at the U of C’s finances and its borrowing. I have forgotten the precise numbers, but it had to do with what percentage of a university’s endowment was collateralized with respect to borrowing for construction. The usual levels were on the order of 10 percent. Really bold institutions might have hit as high as 15%. Chicago’s was north of 50%. That’s one.

    The other is the alumni. Bear with me. I had this conversation around 2007 with a friend who’d earned his PhD in theoretical chemistry at the U of C. I said, “The new president is trying to change, a little anyway, the sort of student who applies to the college. They would like to attract not just those like you and like me who want to be teachers, but entrepreneurs: A Jeff Bezos, a Meg Whitman.” My friend, chair of chemistry at a well known school at the time, told me, “Every year when the appeal goes out, I dutifully write my check for $100.” More students means, in effect, more lottery tickets. Maybe one or another will hit it big and donate a hundred million to the College, as Whitman has. So the college has become a little more like the Ivies, for better or worse. But so far, apparently, no Bezos-level success. It may come, and the interest rates may go down. Two wagers, neither one of which has worked out. Yet. In my opinion (and I’m a PhD physicist), neglect of the humanities will lead to the slow death of this university and others, because there’s a lot more to college education than acquiring technical skills. I hope Chicago remains a “teacher of teachers”, and maintains its great, deserved reputation as a place where serious thinking occurs across the curriculum.

    Reply
  • C

    Christopher Messina / Jan 25, 2024 at 6:50 am

    “Between 2019 and 2023, operating expenses rose 24 percent, from $2.53 billion to $3.14 billion. Additionally, the University increased full-time equivalent (FTE) positions by eight percent for academics and 10 percent for staff.”

    Why on earth are staff positions increasing more than academic positions?

    Reply
  • A

    Anthony Woolf, '97 Booth MBA / Jan 16, 2024 at 4:34 pm

    The University of Chicago has contributed profoundly and uniquely to the world. Its scholars have forcefully championed the idea that freedom matters, people are rational (mostly) and should be trusted and empowered with clear laws and regulations, and that the contest of free ideas matters. The people of UChicago — from our world-renowned Nobel laureates to entering first year students — aspire to make the world a better place through our passionate engagement in rational, rigorous, free inquiry. There is indeed something in the water that makes us push ourselves harder, chew our ideas down further, and explore the profound ends of what our minds can bring about more fully.

    And yet, we have lost our way, deeply so, and the University’s budget crisis is a symptom, not a cause. We have been chasing our own hubris to compete with the so-called Ivy+, a pathological selection of schools. Is Harvard and its ilk, with their racially motivated admissions, apparent tolerance for anti-Semitism, obsession with socialism in all its latest, trendiest forms, and demonstrable eschewing of free speech, the apotheosis? Is attaining the largest possible endowment, invested to the hilt in private equity limited partnerships, really the altar on which everything is to be sacrificed? Is an A- for the average student, awarded more or less for showing up, truly the foundation of a rigorous, life-altering education?

    I have a different vision for The University of Chicago, inspired by the past but looking towards our people-centric, AI-filled future. It’s a place where aspiring scholars and professionals of the highest intellect go to challenge themselves and like-minded people to think differently, rigorously, freely, and with a purpose to make a difference. It’s singularly focused on attracting the brightest, most talented people across the nation and world, without resorting to gerrymandering around superficial personal attributes. It’s a place immune from the latest fads like forcing prospective faculty hires to write DEI statements, instead seeking to put its energy into understanding the inner workings of the incredible minds the school seeks to attract. It’s a place where plagiarism goes to die, the brightest ideas come to life, and where people have the time of their lives engaging deeply with each other. It pushes hard to leverage technology, including AI, in a way that brings about humanity’s full potential while minimizing its downsides. It emphasizes the importance of a timeless, core education of the highest caliber. It is STEM, and it is humanities; it is quantitative, and qualitative. It is cross-disciplinary in nature, with its disciplines intricately and thoughtfully tied together.

    This University of Chicago should be necessarily as lean as possible administratively. Everything is streamlined around the mission, not on building bureaucracies to compete with the so-called Ivy+. It focuses everything on its students and faculty so as to realize and sustain their excellence. It pays its administrators well to be sure, but focuses its resources on essential and necessary work, such as recruiting the brightest students into the classroom, policing that ensures the complete safety of the community, and maintaining the facilities to a high standard. I don’t pretend to be an expert on the full administrative state of UChicago, but the fact that 27% of the school’s recent budget was spent on administration, in excess of what was spent on faculty, is prima facie evidence that things have gone terribly sideways.

    So where do we go from here? When I attended Booth back in 1995-97 I started a small student group called the Phoenix Consultants. We aspired to improve the GSB as it was known then and ultimately recommended building a world-class facility to attract the best business students and faculty. It was the right idea for the time. I challenge a small group of students in the College, it can be just a few, to spearhead a similar endeavor, and do it stat. Acquire your needed data first and develop a clear, cogent analysis for the President and the Board on how the U of C writ large can fulfill its unique mission in the world. Involve the administration up front, they are your friends in this. Roll up your sleeves and re-imagine a much better, but smaller university in bureaucracy, one with the largest possible aspirations to set its own course by rigorously engaging the world with brilliant, thought-provoking, Chicago-sized ideas. Set aside the Ivy+. They are not worth following.

    Think about the contributions The University of Chicago has yet to make, and how a leaner school administratively, focused on the education and excellence of its people, can further enrich humanity in so many important respects.

    Crescat scientia; vita excolatur.

    Anthony Woolf, ’97 Booth MBA

    Reply
    • J

      Jacob Myrene / Jan 24, 2024 at 2:06 pm

      Lol. You even managed to smuggle DEI in that incoherent rant. Off the high horse mate. You’re screaming into the void. NEXT.

      Reply
    • S

      Sk / Feb 14, 2024 at 2:07 am

      There’s just one issue with your analysis. You attract the brightest minds with money. Top faculties require 7-figure salaries (just look at MIT’s public records). Top schools compete with each other financially to get Nobels and the brightest minds.

      Reply
  • M

    Matthew G. Andersson, '96 Booth MBA / Jan 10, 2024 at 11:02 pm

    The University is facing financial pressure (as all universities always do) because it is facing cost pressure. Its fixed costs have simply become too high, usually because they are not being managed. Most of those costs are labor costs due to excess administration and staffing levels, and excessively high wage rates and related liabilities. Cost-revenue gaps are very common in higher education; closing them however, takes skills, tasks and risks, that academic administrators usually wish to avoid. A traditional business diagnosis would identify numerous areas to make many improvements, without necessarily cutting the scope of academic offerings. In fact, getting more efficient by reducing waste, lowering costs, and increasing quality (what the Japanese first called “lean thinking”) leads to higher levels of efficiency, and with that, an ability to be truly “sustainable.” One such study I’m very familiar with from another large university, showed that they could reduce tuition costs, student debt and degree completion time all by half, while actually increasing quality in teaching, learning, research, and graduate job placement. Unfortunately, universities are not inherently lean and efficient (buildings are empty at least 50% of the time, while labor utilization rates, i.e. how many hours faculty work, are usually far below their commercial counterparts, while wages are often far higher). Getting lean and efficient requires hard work, managerial skill and especially, great leadership. That may be the first problem to solve. Regards.

    Reply
  • M

    Mark Ira Weinstein / Jan 9, 2024 at 6:37 pm

    It is not clear to me that UChicago’s relative youth is at all related to the low endowment. I believe that by the time Rockefeller made his last large gift Chicago was much better endowed than all but a very few universities. Our relative endowment position continued to be strong into the 1960’s when I entered the College. We were, in effect, born with a silver (if not golden) spoon in our mouth. My guess is that former Dean Boyer has hit an important point. Also, the fact that a higher percentage of our college alums, and have degrees in the humanities, than a lot of other places means that they are not as wealthy and cannot contribute as much.

    Reply
  • D

    Daniel Studenmund / Jan 9, 2024 at 12:39 pm

    “[…] the University’s debt grew from $2.236 billion in 2006 to $5.809 billion in 2022, which represents an increase of 260 percent.” Whoops! There are enough numbers in this article that you can’t be too upset over one mistake. But hopefully the more complicated numerical claims were checked more carefully!

    Reply
  • M

    Matthew G. Andersson, '96 Booth MBA / Jan 7, 2024 at 7:56 pm

    Booth has historically been the financial transfer payment lifeline to departments that cannot be stood up independently (e.g Humanities and Social Science). But even that is a less stable arrangement than in prior periods, and should be curtailed in order to clarify department efficiency. Law is also an untenable platform, and its 3-year JD will eventually be reduced to 1 year, or to an undergraduate program, as in the UK. If the University were assessed from a management consulting perspective, it would otherwise be reorganized and restructured to half its current operating cost base through efficiency measures: everything the University does can be done in half the time and half the cost (degrees and tuition). Any commercial managerial diagnostic would result in immediate reductions by 50% of all faculty and administrative wage rates, followed by department and staff rationalization. Expect however, status quo posture until the cost-finance gap widens beyond private donor, government and parent willingness to pay (or another biosecurity pretext provides federal bailout funds, or the University is made explicitly public and merged with the UI system). Why students would otherwise pay tuition under the current cost scenario–especially in faculty and administrative wage rates–is not rational in behavioral economics. Put another way, everything the University currently does is at least 2x higher than a new rationalized program cost baseline. Regards, ’96 Booth MBA

    Reply
  • N

    Nicholas / Jan 7, 2024 at 7:23 pm

    Gotta love [sarcasm] that there are no specifics for “managing expenses”. It’s never about reducing costs. Always revenue revenue revenue.

    Reply
  • E

    Ed Vidal / Jan 6, 2024 at 1:42 pm

    Terminate all the DEI commissariat!

    Reply
    • J

      Jacob Myrene / Jan 11, 2024 at 6:58 pm

      “Commissariat.” That’s a new one. Which WSJ op-ed did you plagiarize it from? How adorable.

      Reply
  • N

    Nancy Dudek / Jan 5, 2024 at 8:28 am

    Really good reporting, keep it up! Looking forward to future articles on this important subject…

    Reply
  • D

    David Gaballa / Jan 4, 2024 at 4:35 pm

    This will be a lost cause unless the university begins to embrace its alumni base. Donations donations donations.

    Reply
    • J

      John Smith / Jan 7, 2024 at 8:25 pm

      Tough to embrace the successful graduate demographic that is in a position to meaningfully donate today. White, cough, men. I’m sure many of the affirmative action graduates will be donating to Rockefeller’s institution in the future. The University will just need to buckle down for 30 years.

      Reply
      • J

        Jacob Myrene / Jan 11, 2024 at 7:08 pm

        White men are oppressed! That’s a hot take. Are you part of the same camp decrying librulz for their martyr complex?

        Surely the irony isn’t lost on you, right? Like you must realize you contribute to the Victim Olympics with such rhetoric as much as DEI goons do?

        Reply
  • J

    Jacob Myrene / Jan 4, 2024 at 2:28 pm

    When I said we were going bankrupt I meant that somewhat ironically. This is hilarious.

    Time to cut all non-STEM programs and go full MIT. We will reduce our deficits tenfold in no time. Let’s face it: there’s no money in the humanities. The Liberal Arts experiment was fun, but if this institution is to survive it must adapt, NOW. Fire all non-STEM faculty immediately, barring a select few who will teach two quarters of HUM for first-years. Abolish all majors that do not produce profitable alumni. Gut every humanities building and turn them into technology and science labs. Problem solved.

    Also, does anyone else find it ironic that an institution famed for its economics program is in such a dire financial position? Heh.

    Reply
    • A

      Allen / Jan 6, 2024 at 12:33 pm

      I was thinking the same thing, can’t the Booth donate some of its time to sort this out?

      Reply
    • B

      Bob Michaelson / Jan 8, 2024 at 7:28 am

      I hope that your comment was meant to be sarcastic; if not, you seem to be ignorant of MIT, which has a School of Humanities, Arts, and Social Sciences, which is particularly strong in linguistics, in philosophy, and in history.
      BTW the UofC economics dept and B-School are on the whole not as good at real-world economics as they are at parroting neo-liberal dogma.

      Reply
      • J

        Jacob Myrene / Jan 11, 2024 at 6:55 pm

        What is it with dinosaurs like yourself and punctuating your sentences with hackneyed partisan drivel you plagiarized from the Wall Street Journal? You couldn’t manage one comment without blaming duh liberulz. Are they in the room with us right now?

        I mean, seriously, Bob. Surely you weren’t expecting a serious response to that unfounded, provocative remark you snuck in. Like everything you said up until that second sentence I was prepared to respond to. BAHAHAHA.

        Reply
    • G

      Garry / Jan 9, 2024 at 7:10 am

      That’s a truly idiotic idea. All of the military service academies are major STEM institutions, but they all have a large humanities department, because they know that the officers they turn out need to have a truly well rounded education to be able to function.
      Most grads of the military academies would probably best any grad of even a very well regarded liberal arts college, such as Carleton in any type of questioning.
      And do you also want to gut the libraries of all non-STEM books?
      Chicago already has IIT here, we don’t need a second one.

      Reply
      • J

        Jacob Myrene / Jan 11, 2024 at 6:50 pm

        Respectfully, Garry, you live in fantasyland. UChicagoans are no better prepared for industry or academia than anyone in peer schools (read: T30). There is nothing unique about a UChicago education that justifies your weird shillery for this place; if anything, that alumni are too poor to contribute to its future is a testament to how useless a degree from this place has become. Get off the high horse, NOW. Northwestern ranks above us, and no amount of copium will erase that fact.

        Dinosaurs like yourself need a reality check. This place is in decline because uppity intellectualists like yourself refuse to accept that it is FAILING to adapt to the modern era. The sooner you lot and your Life-of-DUH-Mind-addled brains cease your shillery for this place and its antiquated customs, the better. YOU are why we are going bankrupt. YOU.

        Reply