Amid calls from faculty to allocate more funding for research as the University emerges from the COVID-19 pandemic, experts said directing money to a surplus can better support GW’s long-term research offerings.
Faculty said instead of setting aside money for a surplus in the upcoming fiscal year, officials should direct that money to faculty research given delays to new studies during the pandemic and GW’s declining Higher Education Research and Development rankings. But experts in higher education finance said budgeting money for a surplus could also serve as an investment in GW’s research capacity for years to come.
Chief Financial Officer Mark Diaz said allocating money for a surplus serves as an investment in the University’s long-term well-being and infrastructure. He said if officials don’t set aside a surplus, they could end up with a “significant deferred maintenance backlog,” which could delay renovations to campus buildings and affect other parts of student life.
“You need margins to reinvest back into your enterprise – you need margins to make strategic investments,” Diaz said in an interview last month. “Otherwise, what you’re doing is to just kind of figure out how you stay within a box and save a little over a year and then you can make your investment once you save enough.”
Joseph Cordes, the chair of the Faculty Senate’s fiscal planning and budget committee and a professor of economics, said allocating more money to a surplus can also boost GW’s bond rating – the assessment of the quality of an organization’s credit given by credit rating agencies.
Standard and Poor’s Global Ratings and Moody’s Investors Services have rated GW as A+ and A1, respectively, during the pandemic. The ratings came at a time when Moody’s downgraded higher education from “stable” to “negative” as an industry.
“A better bond rating means that when we need to borrow money we don’t have, we’re able to do it on reasonably good terms,” Cordes said.
Faculty have argued that officials could allocate more money for research by tapping the University’s $1.8 billion endowment.
But Demetri Morgan, an assistant professor of higher education at Loyola University Chicago, said doing so is not always straightforward because a large part of university endowments come from donors who specifically request that their donations be used for costs like scholarship funds or financial aid. Morgan said choosing to redirect the money from these funds for other purposes, like research, would mean GW leaders would be breaking the law.
Morgan said higher education leaders are dealing with a “great enrollment crash” as overall declining birth rates in the United States indicate that the pool of prospective college students will eventually become smaller. He said as a result, allocating money for a surplus could be more “prudent” than using it for research to start preparing for a potential decrease in enrollment.
“A lot of institutions are needing to think about how they’re going to reorient themselves to navigate this enrollment decline in terms of investing in different programs, different strategies to buffer themselves,” he said.
Morgan said in general, faculty members will be more closely affiliated to their field of study rather than their university because a professor can always continue doing their research at a different institution if necessary. But administrators like board members are “locals to the institution” and can’t leave as easily as faculty can, which can help explain why faculty members want to prioritize research, he said.
“And so I think that different cultural perspective on what’s most important creates a challenge for faculty to really understand the more long-term investing and prudent approach of trying to safeguard the institution,” he said.
Justin Thompson, a senior associate dean and chief operating officer at the University of Virginia, said directing money for a surplus could allow officials to direct more money for research in the long term because it provides GW with financial flexibility.
“Inevitably, those investments – some portion of future investments from this so-called surplus – will be made in faculty research, so it’s not really a debate about research or not research, as a matter of research now or research and other investments later,” he said.
Thompson said deans’ requests for research funding could likely always exceed what University leaders can provide because faculty can always benefit from obtaining more research funds. But he said especially given the “uncertainty” during the COVID-19 pandemic, GW leaders are likely interested in being more cautious, opting to direct money for a surplus.
“I don’t hear anybody saying that research is not a good investment or that leaders there shouldn’t be making it,” he said. “I think it’s the case that there are competing potential investments, either near term or future.”
Robert Kelchen, an associate professor of higher education at Seton Hall University, said GW is in a unique position as officials and faculty debate over the budget because many universities across the country aren’t even in a position to allocate money toward a surplus because of the pandemic’s financial impact.
“Maybe the 200 wealthiest universities in the country can, but much of higher education took massive hits over the last year, and instead of investments you’re talking about just trying to minimize cuts,” he said.
Kelchen said University leaders at GW should still consider allocating more funds for research to avoid the possibility of losing faculty members who maintain GW’s strong research capacity to other universities.
“If you don’t invest in researchers, you might lose some of your top faculty members,” he said.
