Two years ago, the university was faced with a nagging, growing deficit, the result of a years-long rolling accumulation of debt that was projected to grow to nearly $215 million by 2015 if the administration took no action. That so-called structural deficit will be nearly erased by the close of fiscal year 2012, a year ahead of time, according to Vice President for Planning and Budget Elmira Mangum. And there are plans to reduce the annual operating budget deficit to $15 million thanks to efficiency initiatives.

After the financial downturn in 2008, "there's a lot of good news going forward," she said, in an interview discussing the budget for fiscal 2012, beginning July 1. "We're trying to make sure that we have predictable, recurring resources to cover our predictable, recurring expenses. If we continue on the current course we will have a sustainable budget for the long term."

Cornell's structural deficit was accumulated over the years by recurring investments in ongoing programs and activities. It is different from an annual deficit in that there has been no sustainable funding for the programs it supported, and, until recent years, no dedicated strategy for paying it off. However, the administration has been chipping away at the problem since 2009, when the structural deficit stood at $148 million (see graph). By fiscal 2010 it had been reduced to $102 million and is expected to shrink to $39.5 million by the close of fiscal 2011 on June 30. By the end of fiscal 2012, it will be nearly balanced with plans to pay it off completely in the future, Mangum said.

The university's ability to eliminate the structural deficit is thanks in large part to the Administrative Streamlining Program (ASP), consisting of 10 cost‐cutting initiatives that make centralized services across campus more efficient. To date, more than $43 million of identified costs have been cut from the operating budget; the administration hopes to gain a further $35 million to $40 million of savings over the next three fiscal years, with about $14 million included in the FY 2012 plan. Achieving that goal will depend on implementation of a revamped procurement system and a new information technology strategy, Mangum said. "Our focus is to make sure that we have the appropriate policies in place to sustain the savings we have achieved. We don't want to slide back into the behaviors and patterns of the past," she said.

Capital debt service, which is the interest on loans that pay for construction and renovations, is also now under control, thanks to President David Skorton's pledge to take on no new debt, she said.

Mangum was also optimistic about the fiscal 2012 operating budget of $1.95 billion, which includes a $30.6 million cut ($18 million from Cornell and $12.6 million from New York state) or 1.57 percent of the budget. That compares to an $82.7 million cut ($69.4 million from Cornell and $13.3 million from New York state) or 4.35 percent on a budget of $1.9 billion in fiscal 2011.

Nearly half of the reduction in the fiscal 2012 budget is due to the state Legislature's decrease in annual funding for operations of Cornell's contract colleges by 9.3 percent, or $12.6 million. "It is painful, and it is significant in the context of the several years of the state's fiscal problem," Mangum said.

To compensate, the contract colleges' budgets will only absorb streamlining reductions from Cornell, and the endowed college budgets will be each cut between .5 percent and 1 percent, as well as the streamlining reductions. "With this action, we are bridging the contract colleges to lessen the impact of the state budget on them, but they still have the long-term responsibility of absorbing the fact that the state has invested less in them," she said.

The minimal decrease in this year's operating budget is thanks to several factors, Mangum said. They include a rebounding endowment, which on April 30 stood at $5.28 billion, a 19.3 percent increase since the beginning of the fiscal year. The administration had anticipated an 8.5 percent return on its investments for all of fiscal 2011. As a result the endowment payout will remain at its FY 2011 levels of $2.20 per share.

Expenses in fiscal 2012 include a 9.5 percent increase in student financial aid and a salary increase for faculty and staff. "Investing in faculty and staff while having discipline around other expenditures is an important part of the overall strategic plan for Cornell's future," Mangum emphasized.