On the 17th floor of the Center for Computing and Data Sciences, Boston University’s newest and most expensive building, BU administrators outlined the University’s financial troubles to a room of faculty.
For months, the BU’s finances had been a subject of discussion for students, faculty and staff in the wake of federal funding cuts and an increase in tuition and housing prices.
The faculty assembly on March 31 was led by BU President Melissa Gilliam, Chief Financial Officer Nicole Tirella, University Provost and Chief Academic Officer Gloria Waters and other higher administration to discuss BU’s financial outlook and future.
During the meeting, which was open to faculty and staff, administrators addressed the University’s financial vulnerability, the impact of federal policy changes and influences on operations strategy.
Tirella said though the University was not in a “structural deficit” like other universities, BU’s finances were currently on an “unsustainable path.”
“We are on a concerning trajectory where our margins are declining,” Tirella said.
University expenses are growing annually by an average of 5.6% since 2017, while revenue is growing at an average 4.8% per year over the same period of time, according to BU officials and documents obtained by The Daily Free Press.
To put it simply, the University is spending more money than it’s making.
BU’s largest expense is faculty and staff salaries and benefits, making up 61% of University spending in the 2023-24 academic year, according to data obtained from the University’s audited financial statements.
Post-COVID inflation, investments in technology, the graduating “bubble class” and financial aid — the University’s second biggest expense at half a billion dollars annually — are factors contributing to budget issues, according to Tirella.
The University’s transition to the new Student Information System, MyBU — part of a three-year modernization to BU’s computer system, announced in 2022 and launched in 2024 — has served as another cost for the institution.
The University anticipates spending $13 million this year to stabilize the system and an additional $2.7 million annually for maintenance and upkeep.
Other expenses include the Warren Towers renovation, which cost $550 million, and the new Pardee School of Global Studies building, which will reportedly cost $118 million. Nearly $300 million for the Warren renovation is coming from bonds, while the foundational funding for Pardee was a gift from the School’s namesake, Frederick S. Pardee, according to Riley.
Additionally, the University over-enrolled the graduating class of 2025 by about 800 students, creating a “bubble class” that has generated the most income for the University compared to any other BU class currently enrolled, and “offset” financial pressures, according to Tirella.
The University could re-introduce a larger class of incoming students to replace the additional income generated, but that could create additional issues with housing and resources.
“Given our housing constraints and Warren Towers being renovated over the next three years, we’ll have limitations on how we can scale up that class in order to have additional revenues to cover our expenses,” Tirella said.
Another unanticipated cost for the University was the ratification of the BU Graduate Workers Union contract in October.
In a fall faculty meeting, Dean of Arts and Sciences Stan Sclaroff told faculty the college’s budget was sitting at a $10 million shortfall due to the added costs of ratifying the contract as well as declining master’s candidate enrollment, said a CAS faculty member who wished to remain anonymous.
To correct the shortfall, Sclaroff reportedly said CAS cut admissions for 12 humanities and social sciences doctoral programs.
How does BU make money?
Most of the University’s spending money comes from students paying tuition.
Documents obtained by The Daily Free Press show for the 2024 fiscal year — which started in July 2023 and ended June 2024 — roughly half of University revenue came from net tuition and fees, which is tuition and fees subtracted by financial aid.
BU Spokesperson Colin Riley said the University is “tuition-dependent.”
BU tuition has risen an average rate of 4.08% per year since 2018. Other private colleges across the nation are increasing their tuition at a similar rate over the same period. Tuition costs at the University of Southern California, Boston College, New York University, Tufts University and Northeastern University are all increasing at an average rate of about 4% per year.
“The University works very hard to keep tuition increases as low as possible,” Riley wrote in an email to The Daily Free Press.
He added the percentage increases have been below the national average for higher education.
One option to cover expenses may be to raise tuition. John Longo, a finance and economics professor at Rutgers Business School, suggested this is one of “a handful of levers” universities can pull during times of financial stress.
“Perhaps the one that most negatively impacts students is to raise tuition and room and board fees,” he wrote in an email to The Daily Free Press April 27.
Alternatively, Longo suggested the University could increase their class size, use the endowment, freeze merit pay for faculty and staff, lay off staff or grant less generous financial aid for undergraduate and graduate students to offset financial issues.
Faculty frustrations
Gilliam announced in a March 26 letter that merit pay for faculty and staff would freeze for the 2026 fiscal year.
During the March 31 assembly, a faculty member asked if the University would retrospectively unfreeze merit pay or go on to freeze retirement contributions if their financial troubles end. During the pandemic, the University did this, and Faculty Council Chair Kevin Smith said faculty retirement accounts never recovered.
“All of us who were here during COVID took a massive financial hit by there being no University contributions to our retirement funds,” he said. “That money, that contribution to our retirement fund, we have never made up.”
According to Tirella, retirement contributions are not being paused. She also said the University is “trying to understand all the alternatives that we have on the table” before they announce any layoffs or workforce reductions.
Reserves, or revenue that remains at the end of the fiscal year, is a surplus. That surplus is shared with schools across campus and some goes to the operating budget.
Since fiscal year 2022, Boston University’s reserves have dropped significantly, and they are expected to drop even further this year, according to the March 26 letter from Gilliam.
According to Gilliam, these reserves are “critical to sustaining the University’s competitive position and maintaining the quality of our academic and research programs.”
Smith also expressed concern that faculty were not being included in University decisions about the budget and programs being cut.
Funding for research can come from universities, or it can come from outside sources like the federal government.
The Trump administration has pulled federal funding for research grants from institutions in an effort to shrink the federal government. As a result, at least 19 grants given to BU have been cut since March 28.
Gerry Leonard, a BU professor of law, spoke at the March 31 meeting. He said he endorses University-wide cuts if the college calls for budget adjustments — as long as faculty are brought into the decision-making process.
“We all care about preserving BU as the University we know it to be, one that really is committed to the best education for its students,” he said in an April 28 interview. “We are all willing to sacrifice if sacrifice is necessary at some point in resisting the agenda of the national administration.”
Gilliam was open to speaking to faculty and met with them, but Leonard said he and others “have not gotten the kinds of specific information and assurances” they hoped for.
Nicole Abrams, Madyline Swearing and Aayushi Datta contributed to the reporting in this article.