2011/12Stanford University Budget Plan

Faculty SenateMay 26, 2011

Stanford’s Disclaimer on Forward-Looking Statements

Statements in this presentation that are not historical facts are forward-looking statements based oncurrent expectations of future events and are subject to risks and uncertainties that could cause actualresults to differ materially from those expressed or implied by such statements. In addition, we, throughour management, from time to time make forward-looking public statements concerning our expectedfuture operations and performance and other developments. All of these forward-looking statements aresubject to risks and uncertainties that may change at any time, and, therefore, our actual results may differmaterially from those we expected. We therefore caution against placing substantial reliance on theforward-looking statements contained in this presentation. All forward-looking statements included inthis presentation are made only as of the date of this presentation and we assume no obligation toupdate any written or oral forward-looking statements made by us or on our behalf as a result of newinformation, future events or other factors.

Stanford’s Disclaimer on Forward-Looking Statements

1

Thanks

University Budget Group

Adam Daniel, H&S

Harry Elam, H&S

Patti Gumport, Education

Andrea Goldsmith, Engineering

Neil Hamilton, Budget Office

Rosemary Knight, Earth Sciences

Randy Livingston, Business Affairs

Maureen McNichols, GSB

Dana Shelley, Budget Office

Bob Simoni, H&S

Buzz Thompson, Law

Tim Warner, Budget Office

Capital Planning Team

Jack Cleary, Land & Buildings

Megan Davis, Land & Buildings

Stephanie Kalfayan, Academic Affairs

Bob Reidy, Land & Buildings

Suzanne Sangervasi, Land & Buildings

Craig Tanaka, Land & Buildings

Bob Tatum, Engineering

Tim Warner, Budget Office

2

Outline

• Consolidated Budget

• General Funds Budget

• Lessons Learned

• Research Outlook

3

Consolidated Budget for Operations

4

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

5

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

6

$0M

$25M

$50M

$75M

$100M

$125M

$150M

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Stanford Fund/President’s FundsGeneral Funds

Undergraduate Need-Based Aid

Does not include athletic scholarships or outside sources

$132$128

$122$122$122$117$115

$103

$75$66

$61

38M

10M

13M

10M

40M

67M

5M

70M 72M

38M

12M19M

16M

98M

29M 21M19M

92M85M80M

14M 16M17M

19MEconomic stress

Endowment Drop

(New Endowment)Endowment

7

Undergraduate Tuition: Who pays?

Government &Other Awards

7%

AthleticScholarships

5%

StanfordFund3%

Endowment,Gifts, Other

12%

Tier IIBuffer

1%

GeneralFunds

4%

Family Resources69%

2000

Government &Other Awards

5%

AthleticScholarships

5%

StanfordFund4%

Endowment,Gifts, Other

18%

Tier IIBuffer

7%

GeneralFunds

3%

Family Resources58%

2011

8

Undergraduate Tuition: Who pays?

Government &Other Awards

7%

AthleticScholarships

5%

StanfordFund3%

Endowment,Gifts, Other

12%

Tier IIBuffer

1%

GeneralFunds

4%

Family Resources69%

2000

Government &Other Awards

5%

AthleticScholarships

5%

StanfordFund4%

Endowment,Gifts, Other

18%

Tier IIBuffer

7%

GeneralFunds

3%

Family Resources58%

2011

Need-Based Aid20%

Need-Based Aid32%

9

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

10

$0M

$150M

$300M

$450M

$600M

$750M

$900M

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sponsored Research

Projected Projected

Does not include SLAC

Federal ARRA Directs Non-FederalIndirects ARRA Indirects

PercentFederal82% 83% 82% 82% 81% 80% 77% 71% 75% 74%

882

801

699693697698733

693641

574

862

72%

11

$0M

$150M

$300M

$450M

$600M

$750M

$900M

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Projected Projected

Does not include SLAC

Federal ARRA Directs Non-FederalIndirects ARRA Indirects

PercentFederal82% 83% 82% 82% 81% 80% 77% 71% 73% 72%

817

752

699693697698733

693641

574

841

71%

Sponsored Research without ARRA

12

$0M

$150M

$300M

$450M

$600M

$750M

$900M

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Projected Projected

Does not include SLAC

Federal ARRA Directs Non-FederalIndirects ARRA Indirects

817771

734747769790

850825

781

717

820

Sponsored Research without ARRA, inflation adjusted

PercentFederal82% 83% 82% 82% 81% 80% 77% 71% 73% 72% 71%

13

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

14

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

15

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

16

Endowment Market Value

$0B

$6B

$12B

$18B

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

13.912.6

17.217.2

14.1

12.2

9.9

8.67.6

8.38.9

Endowment value as of June 30

-7.3% -2.6% 8.8% 18.0%39.8% 19.5% 23.4% 6.2% -25.9%19.5% 14.4%

Nominal investment return

17

Endowment Market Value (and Merged Pool)

Endowment value as of June 30; MP values as of August 31

$0B

$6B

$12B

$18B

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

13.912.6

17.217.2

14.1

12.2

9.9

8.67.6

8.3

March 312011

18

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

19

Dollars in millions

Consolidated Budget2009-10Actuals

2010-11Projected

2011-12Budget Plan

1-YearChange

2-YearChange

$658 $694 Student Income $722 4.2% 9.8%

1,139 1,235 Sponsored Research 1,213 -1.7% 6.5%

603 663 Direct Costs - University 650 -2.0% 7.9%

333 346 Direct Costs - SLAC 346 0.0% 4.1%

204 225 Indirect Costs 217 -3.6% 6.4%

506 540 Health Care Services 549 1.7% 8.6%

234 280 Expendable Gifts & Net Assets Released 285 1.8% 21.8%

904 916 Investment Income 987 7.7% 9.1%

855 774 Endowment Income 838 8.3% -1.9%

50 142 Other Investment Income 148 4.8% 197.4%

351 364 Other Income 374 2.9% 6.8%

$3,791 $4,028 Total Revenues $4,131 2.6% 9.0%

1,881 1,988 Salaries and Benefits 2,080 4.6% 10.6%

333 346 SLAC 346 0.0% 4.2%

221 232 Financial Aid 240 3.3% 8.5%

1,063 1,140 Other Operating Expenses 1,158 1.6% 9.0%

$3,497 $3,706 Total Expenses $3,824 3.2% 9.3%

$294 $322 Revenues less Expenses $307

(131) (181) Total Transfers (104)

$164 $141 Revenues less Expenses after Transfers $203

20

Consolidated Budget by Unit

AcademicUnits74%

AdminUnits19%

Auxiliaries7%

Medicine44%

H&S12%

SLAC11%

Engineering10%

GSB5%

Law 2%

Earth Sciences 2%

Education 1%DoR6%

Libraries 3%

Other 3%

Other is Hoover, VPUE & VPGE

21

Consolidated Budget by Fund Type

Auxiliaries8%Grants & Contracts

24%

Restricted24%

Designated19%

General Funds25%

$4.1B

22

Consolidated Budget by Fund Type

Auxiliaries8%Grants & Contracts

24%

Restricted24%

Designated19%

General Funds25%

$4.1B

$1,041M

CentralObligations

$191M

Non-Formula

Units

$686M

FormulaUnits

$164M

Central Obligations include debt service, insurance, Capital Facilities Fund,

university reserve, UG financial aid, etc.

23

General Funds Budget

24

General Funds Budget 2011-2012

General Funds Budget 2011-2012

General Funds Budget 2011-2012

General Funds Budget 2011-2012

General Funds Budget 2011-2012

General Funds Budget 2011-2012

% of Revenue/Expense

% of Revenue/Expense

TuitionTuition $579.6 55.7%

Indirect Cost RecoveryIndirect Cost Recovery 216.9 20.8%

Investment IncomeInvestment Income 210.2 20.2%

Endowment Income Endowment Income 146.1

Other Investment Income Other Investment Income 64.1

Other IncomeOther Income 33.9 3.3%

Total General Funds RevenueTotal General Funds RevenueTotal General Funds Revenue $1,040.6

Salaries and BenefitsSalaries and Benefits 556.2 65.4%

Financial AidFinancial Aid 31.9 3.8%

Debt ServiceDebt Service 58.4 6.9%

Other Operating ExpensesOther Operating Expenses 203.6 24.0%

Total ExpensesTotal ExpensesTotal Expenses $850.1

Revenues less ExpensesRevenues less ExpensesRevenues less Expenses $190.5

Total TransfersTotal Transfers (151.0)

General Funds SurplusGeneral Funds SurplusGeneral Funds Surplus $39.5

25

Incremental General Funds Allocations

Salary & Benefits$12.2M

Non-Salary$4.9M

Facilities$6.6M

UG Fin Aid$2.3M

IncrementalPrograms$16.3M

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

Total: $42M

26

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

27

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

• Reinstate Overseas Seminars in VPUE

• Teaching resources in Language Center and Econ 1A/1B

• Convert UG Education minor from pilot to base

• Array of academic programs in Dean of Research, SULAIR, Law

28

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

• Faculty positions in new Geobiology program

• Faculty recruitment support in H&S and Law

• Retention and equity adjustments in H&S

• Continued support for Faculty Incentive Fund and Faculty Development Initiative

29

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

• Increased Business Affairs capacity for campus support and global support and compliance

• Modest increases in UG Admissions to cope with continued increase in applications and interest

• Final increment in Development base buildup; increased major gift and international efforts

30

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

• Additional support for energy conservation efforts in LBRE

• Add one deputy sheriff in Public Safety

• Additional base support for BeWell program

31

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

• Increased support for Student Services Center

• Residential Education enhancements

• Additional Physician Assistant/Nurse Practitioner and CAPS Case Manager in Vaden

• Increased support for Graduate Life Office and Bechtel International Center

32

Incremental General Funds Allocations

AcademicPrograms

$5.3M

Other$1.6M

Administrative$3.5M

Faculty$4M

GradSupport

$1M

StudentLife$1M

• Growth in Education doctoral cohort

• Base funding for Engineering TAs

• Selected student services enhancements

33

Lessons Learned

34

• In good times, we need more discipline adding staff

! 10 year growth in faculty (except SoM) and students has been slow and relatively controlled

! In units funded entirely through General Funds, staff growth has also been relatively slow—limited by available funds

! Staff growth in units with significant non-GF revenue has been large and uncontrolled

! Do we need a billeting system for staff?

• In very bad times, moving quickly is better than “smoothing”

! We had option of one year of sizable cuts vs. 4-5 years of smaller cuts

! Former yields more strategic, thoughtful reductions

Budget Lessons

35

Expendable Funds Buffering Policy

• Buffering policy worked well for normal investment fluctuations (including 2001-2002 downturn)

• With extreme investment losses, policy left General Funds budget exposed to large and immediate drops (>$40M in FY10)

• Policy needed revision

36

Expendable Funds Buffering Policy

• Buffering policy worked well for normal investment fluctuations (including 2001-2002 downturn)

• With extreme investment losses, policy left General Funds budget exposed to large and immediate drops (>$40M in FY10)

• Policy needed revision

New policy puts more buffering risk on sources of one-time funding;

provides more protection for base budget.

37

Endowment Lessons

• In addition to risk profile of portfolio, more attention needs to be given to liquidity of portfolio

! In extreme liquidity crisis, institution can become cash starved

! Even when there is no crisis, less than optimal investment decisions may be forced

! Did not happen to us, thankfully, but could have

• Did we learn that “Yale investment model” is a mistake?

38

Annualized Returns (ending 6/09) vs. Indexes

Stanford Endowment

S&P 500(Domestic Equities)

MSCI EAFE (Foreign Equities)

MSCI REIT(Real Estate)

GSCI (Commodities)

10-year Treasuries

1-year -25.9% -26.2% -31.0% -43.7% -59.7% 7.3%

3-year -1.0% -8.2% -7.5% -18.5% -15.2% 8.2%

5-year 6.8% -2.2% 2.8% -3.0% -3.4% 5.5%

10-year 8.9% -2.2% 1.6% 5.3% 6.3% 5.8%

30-year 16.4% 10.8% 9.6% 3.3% 6.8% 8.2%

39

Endowment Lessons

• In addition to risk profile of portfolio, more attention needs to be given to liquidity of portfolio

! In extreme liquidity crisis, institution can become cash starved

! Even when there is no crisis, less than optimal investment decisions may be forced

! Did not happen to us, thankfully, but could have

• Did we learn that “Yale investment model” is a mistake?

No(though we should continually

assess mix/risk/liquidityof portfolio)

40

Research Outlook

41

What will happen if the Federal research budget remains flat for 5 years

(and our share remains the same)?

42

... to Graduate Students?

... to Postdocs?

... to Indirect Cost Recovery?

... to the rest of us?

43

Assuming flat research funding

$0M

$150M

$300M

$450M

$600M

$750M

$900M

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Assumes non-federal research grows at 4.5% nominal

Federal Non-Federal Indirects

817

752

699693697

841

Sponsored Research (Projection)without ARRA

849 857 866 876 885

44

Assuming flat research funding

$0M

$150M

$300M

$450M

$600M

$750M

$900M

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Assumes non-federal research grows at 1.5% real

Federal Non-Federal Indirects

817771

734747769

820

Sponsored Research (Projection)without ARRA; inflation adjusted

803771 756 741

-14%

-10%787

45

Graduate Student Enrollment (Historical)

1000

2000

3000

4000

5000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Doctoral Masters Professional Annual growth rate2001-2011

1.75%

1.29%

.39%

3721

44254134

2276 23202586

1703 1720 1768

46

Assuming flat research funding

$0M

$90M

$180M

$270M

$360M

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

7577808285878785858185

146144143141140138138130131107103

8483828180797977758475

Graduate Student Funding (Projection)inflation adjusted

General Funds Designated & Restricted Grants & Contracts

263272

291 293304 305 305 305 304 304 304

Assumes 1% real growth in Designated, Restricted, and General Funds

47

Assuming flat research funding

Graduate Student Enrollment (Projection)

1000

2000

3000

4000

5000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Doctoral Masters Professional

0%

1.29%

.39%

Annual growth rate2012-2017

2301

4180

1720

44254425

26192793

1775 1810

2586

1768

4425

48

Graduate Students

• Effects would largely be limited to doctoral (PhD) students

• Global impact would be dampened by growth in other graduate funding

• Local disruption inevitable due to lack of fungibility of some funds

• At best, total number of doctoral students would remain level

...but would decline if cost per graduate student exceeds inflation

49

Postdoc Numbers (Historical)

0

500

1000

1500

2000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Annual growth rate2001-2009

2.09%

1281

1888*

13911512

14121576

* 2010 & 2011 anomalous due to one-time suspension of 5 year postdoc limit

50

Assuming flat research funding

$0M

$30M

$60M

$90M

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

5152545557596164

545351

2625252525242122231423

22222222291

Postdoc Funding (Projection)inflation adjusted

General Funds Designated & Restricted Grants & Contracts

75 7679

8884 85 84 82 81 80 78

Assumes 1% real growth in Designated, Restricted, and General Funds

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Assuming flat research funding

Postdoc Numbers (Projection)

0

500

1000

1500

2000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

146216051576

1474-1.7%

Annual growth rate2012-2017

52

Postdocs

• Effects would not be dampened by other funding

• Since postdoc funding is not fungible, effects would be entirely in science and engineering fields

• Decreases in postdoc numbers would be inevitable

• Similar effect likely for research staff positions

53

Indirect Cost Recovery

To understand potential effect on Indirect Cost Recovery, first need to understand

how it works.

54

Indirect Cost Recovery

Other3%

Investment Income

20%

Indirect Cost Recovery

21%

Tuition56%

General Funds$1.0B

$100 “Direct” cost of

research*

$58 Indirect cost recovery

Current IndirectCost Rate = 58%

37%

63%

* Certain direct research costs excluded from IDCR calculation

Research Grant

55

Indirect Cost Recovery

Other3%

Investment Income

20%

Indirect Cost Recovery

21%

Tuition56%

General Funds$1.0B

Utilities, O&M on research buildings

Research administration

Research compliance

...

56

Indirect Cost Rate Calculation

Facilities Rate

Admin Rate(Capped at 26%)*

+

Total Indirect CostRate

=

=

Facilities Costs (Utilities + O&M)

Research Base

Administrative Costs

Research Base

* Results in under recovery of full cost of research, even on grants paying “full” overhead charge

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Indirect Cost Recovery

Two final points:

1. Indirect Cost Rate is recalculated (renegotiated) every two years. During these two years, the rate is fixed.

2. When rate is recalculated, new research base is estimated based on latest research volume.

58

Indirect Cost Recovery

• In first two years, as research volume stagnates, IDCR will as well, reducing this source of General Funds

• Equivalent to a 6% reduction in IDCR over two years, roughly $12 million hit to General Funds

• Can be managed with our planned General Funds surplus

• When Indirect Rate is recalculated, higher facilities costs (due to inflation) without increased research volume, would increase the negotiated rate

• Would yield (partial) recovery of General Funds revenue, but place added overhead burden on research grants

• Would worsen under recovery of indirect research costs, due to capped administrative rate

• Net effect after 5 years could be up to 4.5 points added to the rate (e.g., raising current rate of 58% to 62.5%)

59

Other Effects

• Even more unsuccessful grant applications; more effort writing grants

• Pressure on faculty salaries (summer support; salary offsets; base salaries in School of Medicine)

• More reliance on other funding sources (which generally do not pay full indirect cost rate)

• Less research accomplished

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But remember:

Historically, Stanford’s share of federal research has increased when funding

became tight.

61

End

62