Administrators must determine how to close a $10 million to $12 million “gap” in the University’s fiscal year 2007 operating budget – which could lead to cuts to programs – before they propose it to the Board of Trustees in May.

Executive Vice President and Treasurer Lou Katz said last week that a gap in the budget is created when expenses grow at a faster rate than revenue. He said the reason for next year’s budget gap, which will continue to be a problem for a few years to come, is that GW has stopped increasing enrollment and has approved the lowest percentage tuition increase in two decades. Tuition serves as GW’s primary source of revenue. Each year GW must present a balanced operating budget because of its status as a non-profit. Fiscal year 2007 starts July 1.

Over the past five years GW’s revenue has increased a total of $124 million with an annual average increase of 8.1 percent due to enrollment growth and tuition increases. However, for fiscal year 2007 revenue is expected to grow 1.6 percent, while expenses are expected to grow three times as much because of annual pay increases and building occupancy costs, Katz told faculty in February.

Katz said that the administration will be focusing on three things in order to close the gap: increasing fundraising, cutting back expenses in University programs, and deciding on an appropriate balance for using funds to pay off construction project debt and providing relief to the operating budget.

“It is going to be a combination of these three things,” Katz said in an interview Friday. “This is clearly solvable. We just need to solve it.”

Katz said there would probably have to be 2 to 3 percent cuts in University programs to close the gap. He said he would propose cuts to target specific areas instead of being across-the-board. He said he thinks the low percentage cuts would certainly be felt but are not detrimental. Some professors disagree.

“The faculty should be greatly concerned,” said philosophy professor William B. Griffith, chair of the Fiscal Planning and Budgeting Committee of the Faculty Senate. “We are really not in a good position to withstand further cuts.”

Donald O. Parsons, chair of GW’s Economic Department, has been critical of GW’s budget as well as the potential cuts the University might have to withstand because of the gap. Parsons said in an interview last week that the reason for the gap is that GW is investing too much in paying off debt service due to building projects on campus as well as investing in future construction, instead of putting it toward current programs and the operating budget.

“They’re very careful not to call it a deficit instead of a gap,” Parsons said. “A large part of this ‘artificial gap’ is that they have just decided to put a large part of money away for the future. Call this a gap if you want, but the way to solve this is to get less ambitious building plans and pay attention to educating students.”

Parsons added that since GW raises revenue primarily from tuition, by GW using revenue to invest in future building projects, students are essentially paying tuition and not receiving the benefits of it.

“Current students are being asked to be generous benefactors of the University,” said Parsons, who articulated identical sentiments in a Hatchet editorial last week. “They are putting in a lot of money and it’s not right, particularly when they don’t really know it’s happening. Students are generous benefactors of the University of tomorrow.” Parsons heads the Ad Hoc Committee of Concerned Faculty.

Katz said Parsons’ argument was “at the extreme” and said that GW should not stop renovations and construction on campus because for “us to be on hold does not make sense.”

Katz admitted that the University needs to increase fundraising in order to help pay for more projects on campus, and he said in order to minimize budget gap problems in the next few years more fundraising will be important. Earlier this year the Board of Trustees approved allocating $1 million more from the University’s endowment to GW’s Advancement Office, which focuses on fundraising.

Griffith, of the Faculty Senate, said he agrees somewhat with Parsons and thinks that the University should “find the money in other areas” besides cutting from University programs to fill the gap. He said he wants the Faculty Senate to “put pressure on the administration to release more funds to the operating budget” that are currently being used for capital projects.

“What we are trying to say is that the alternative, which is deep cuts to programs, is not something we can withstand without significantly hurting our programs,” Griffith said.

While Katz said that no decision has been made yet on how to solve the gap, he said the administration has composed a fiscal year 2007 budget development committee, which is made up of about 20 people from GW’s faculty, administration and deans, to help get input on the decision. Parsons is part of the committee because the Faculty Senate appointed him.