I am writing to share an update on George Mason University’s current budget situation, as I understand this is a topic of particular interest for some faculty who have read with alarm about events unfolding at West Virginia University. I want to share more information about our current budget status, and to assure this community that Mason’s budget situation in no way compares to that of our colleagues in West Virginia.
Because the FY24 state budget was still pending in May (as it continues to be), the Mason Board of Visitors approved three potential FY24 budget scenarios, with varying assumptions of state appropriations and financial aid support.
We have strategies in place that will result in a balanced budget in FY24, including slowed hiring and spending, targeted budget reductions to be achieved over two years, and prudent use of reserves. Our plan is to realign and right-size our budget by FY25; we do not have a long-term structural deficit to manage.
We are not West Virginia.
As analysts study what went wrong in West Virginia, various factors have emerged that paint a picture of WVU that bears no resemblance to Mason: West Virginia’s population is in decline, fewer college-eligible residents are enrolling, the state has reduced its appropriations to WVU by 25 percent over the last decade, and a state financial aid program that once covered 100 percent of in-state tuition now covers just 63 percent. As a result, WVU now enrolls 5,000 fewer students than it did a decade ago, and expects another 5,000-student drop over the next decade, eventually reducing their enrollment to around 21,000 from a high of 31,000.
This is not where George Mason University finds itself, even remotely. Our enrollment, now 40,000 strong, just set another commonwealth record. Virginia’s population base is stable, and the forthcoming state budget is expected to include increases in funding for higher education, particularly for financial aid. As WVU plans to lose 5,000 students over the next decade, Mason is preparing to grow by that much.
We are challenged by growth.
It is therefore reasonable to ask why we are experiencing our own $42 million shortfall, and what we are doing about it. In a nutshell, unlike WVU’s challenge of declining enrollment, we are temporarily resource-constrained because we are growing, and due to recent inflation. And our imbalance exists in the part of the budget called Educational and General (E&G). Because it has been offset by additional revenue generated by our Auxiliary Enterprises, our total $1.4 billion budget actually remains in balance, which is unlike the structural deficit WVU faces. For a more detailed explanation, I refer you to a message I sent to all members of President’s Council this past May:
Sent May 18, 2023
President’s Council Members –
As I write this, we continue to await word from Richmond on the status of the FY24 state budget, which keeps us in a bit of a holding pattern for our own budget planning. I am writing to give further explanation on why we are directing university units to temporarily slow hiring and spending on the heels of a period in which we encouraged growth and increased spending. I understand and appreciate that this change of direction feels abrupt – it is. Let me offer a deeper explanation.
We emerged from COVID needing to grow – and we grew.
While COVID caused dramatic enrollment drops for many institutions, George Mason University enrollment continued to grow. Emerging from COVID, Mason had to rapidly play “catch-up,” because even though our staffing levels and program expenditures stalled during the pandemic, student enrollment bucked the state and national trend by continuing to increase.
In response, we added a large number of faculty and staff over the past two years, a pace of growth that exceeds the growth in our student body over that time. We also instituted a series of salary increases just to keep pace with dramatically increased market competition. To remain relevant to the region, we were compelled to pay significantly higher salaries than we did pre-COVID for retentions, replacements and new-position hires alike. We were more successful, especially in this last hiring cycle, than our historical average. That success eliminated the buffer we usually maintained between annual separations and hires.
Our high cost of doing business has gone up even further.
Of all of Virginia’s public universities, Mason operates in by far the most expensive regional economy. With the Washington, DC metro area ranked by Kiplinger as the 5th-most expensive in the U.S., the effects of inflation have been particularly acute for Mason just to purchase the goods and services necessary to operate this $1.4 billion enterprise. We, like most other universities and businesses in the region, underestimated those costs. We have opportunities to leverage our purchasing power and reduce expenses by collaborating and shared resource planning.
New resources are uncertain in the face of new state priorities.
In the past, Mason depended on additional resources from the state to help support our growth and to place the university on somewhat equal footing with our doctoral peers. Newly elected leadership in Virginia is placing a renewed focus on the affordability of higher education and the efficiency of all state government operations, and those are good things. For us, this means available state revenue may be shifted to competing state priorities, receiving approval for new resources at Mason may prove harder, and there will be pressure to minimize costs borne by students and their families.
We must follow a natural budgeting ebb and flow.
The rapid economic crash-and-recovery cycle of the economy brought on by COVID continues to bring economic and market volatility that are exceptionally challenging to predict and reflect in our business operations. Given the uncertainty of what will be available to us on the horizon, we simply need to right-size ourselves relative to our growth, throttle down our spending where we can, and temporarily pause on all but the most critical hires and initiatives in order to avoid putting the university into a fiscal predicament that would be extraordinarily painful to emerge from down the road.
We will not be in this space forever, but we are here now, and the moment requires us to adjust our spending levels to reflect these realities. Our goal is to be as fiscally responsible as we can. We will closely review and re-calibrate our spending priorities quarterly and we will continue to identify opportunities for Mason to generate additional revenue streams, including potential revenue-generating capital investments.
I appreciate how challenging it is to execute this sort of course correction, especially in an environment of enrollment growth and increasing market competition. While the growth that we have achieved over the last two years helps in this regard, I understand that a number of you were expecting more growth. We are meeting the challenge of this moment, and that requires us to do what is right and that is to be even more fiscally responsible. I thank you for your continued leadership on this issue.
Current status
The conditions remain that I outlined in my President’s Council memo in May, with one notable exception: We expect a final state budget within the next two weeks, which will help us to assess whether to continue our temporary budget measures. We will have more to say about that in the weeks to come.
The current situation at WVU is heart-breaking, but it is not predictive of our own future. The best ways to prevent the need for draconian budget measures at Mason are to take the logical budget measures we have adopted, to continue living our core value of being careful stewards of our resources, and to simply keep delivering the excellence to the commonwealth for which we are increasingly known and supported.
