Becoming a More Academically and Financially Resilient University

Dear Drexel Colleagues,

As we embark on this transitional year and work together to shape our University’s future, we value our dedicated and hardworking faculty and professional staff who play an indispensable role in Drexel’s success. We especially recognize our community’s vital contributions in creating the roadmap for academic transformation built on the recommendations of the University Advisory Committee on Academic Structure. 

This is a challenging time for Drexel and higher education. To help move forward together, we must embrace a culture of candor and organizational transparency. Through this message and future communications, we are aiming to foster a collective understanding of Drexel’s financial challenges and our plans for addressing them.

Our financial challenges are considerable. New and recurring revenues have not kept pace with recurring expenses. The University is working to solve an approximately 10% structural imbalance in its operating budget. The key drivers of this imbalance largely reflect the challenges impacting higher education right now: namely, declining enrollments, increased investments both in financial aid to promote access and affordability and in student supports to ensure their success and wellbeing, and rising costs associated with doing business.

Furthermore, as a University that routinely enrolls many Pell Grant-eligible students, Drexel was seriously impacted by the flawed rollout of the new Free Application for Federal Student Aid (FAFSA). As a result, we are on track to meet our revised enrollment goal of 2,350 new, first-year undergraduate students, about 500 students less than our original budgeted target. Our proactive efforts to help our admitted students — accompanied by a successful campaign to recruit 110 more transfer students than last year, including 75 students from the University of the Arts — helped to mitigate the impact on our overall enrollment. Nonetheless, the decline in first-year enrollment has added $22 million to our current operating budget deficit, which we must close as soon as possible.

The roadmap to academic transformation and financial resilience

We have solid plans in place to meet these budgetary challenges and to keep the University on the critical path toward becoming a more academically and financially resilient University.

At this moment, we have two key objectives we must pursue simultaneously: We must transform our academic enterprise to better position Drexel and our students for future success. And we must build financial resilience by bringing our expenses into alignment with revenue on a permanent basis.

Academic transformation will contribute to our financial resilience. It will facilitate savings by reducing administrative costs and other overhead expenditures. More importantly, boosting our capacity to deliver an innovative, high-quality and impactful experiential education will enable the University to attract, retain and graduate a broader base of learners who will recognize the value of a Drexel experience and degree. That is a blueprint for long-term revenue growth.

Transforming our academic enterprise will take time and will not solve the large structural imbalance in our operating budget. We have a crucial, immediate need to reduce expenses, grow revenue, and improve administrative efficiency over the next few years.

Our University is prepared to take on this task while continuing to support our students and academic mission. The senior leadership team has solid, executable plans for achieving positive and sustainable operating margins over the next few years that align with academic transformation.

For example, our Drexel 2030 Strategic Plan, created with broad community involvement, furnishes us with a blueprint for solving problems and seizing opportunities, such as the merger with Salus, which already has strengthened the University’s leadership in preparing future practitioners in high-demand health professions.

More to the point, building financial resilience will ensure that we have the resources to support academic transformation and position Drexel for long-term growth.  

A plan for reducing costs and increasing revenue

We have been working on our multi-year financial resiliency plan to identify $150 million in cost savings, cost avoidance, and revenue enhancement. After careful analysis and consideration, we already have identified approximately $80 million in cost reductions that will be implemented through a combination of measures, including budget reductions made for fiscal year 2025 by administrative and academic units.

We will continue to pause on nonessential hiring, spending, and travel. We will move forward to consolidate and optimize administrative services, systems and space. And we are activating the voluntary retirement incentive plan announced in June.

Unfortunately, these measures alone will not solve the challenge. As is the case for any organization, personnel costs for salaries and benefits make up the largest share of Drexel’s operating expenses. Therefore, we must make the more difficult decision to reduce our workforce and adjust our employee benefit program.  

We are not making these decisions lightly. We understand the impact that each decision may have on you and your family, and on morale throughout our community. We intend to have many of these decisions finalized shortly and will communicate more at an in-person update noted below.

Please also understand that we cannot rely on reduced expenditures alone to balance our budgets. Generating more revenue is equally paramount. By executing new enrollment strategies for boosting net tuition revenue, we can conservatively project that we have identified $25 million in additional revenue in the short-term. We also are exploring new opportunities for further monetizing our real estate portfolio. And of course, we will always be open to forging or expanding partnerships, such as our merger of choice with Salus that has brought 1,100 more students and more than 350 faculty and professional staff to the Drexel community.

Partnerships like this are good for our faculty, our students, and our financial position and bring opportunities to both parties. And over the long term, once we have completed the work of academic restructuring and transformation, the University will have many more opportunities for generating increased revenue.

Drexel’s track record in overcoming adversity

There is a lot to process here. We will continue our discussion at an in-person presidential update on the budget next week on October 10 at 10 a.m. at Mitchell Auditorium inside the Edmund D. Bossone Research Center. We will break down our financial challenges and impacts at that time. A message with more details on how to RSVP for the event will follow. I hope you will be able to attend in person or via livestream.

No doubt our work is cut out for us, and our resilience will be tested. But this community excels at managing adversity. We remember how you rallied to help pull the University through the sudden closure of Hahnemann Hospital and a devastating pandemic. Drexel emerged from these setbacks stronger because of you.

What’s more, innovation is in our DNA. Together we will tackle our current financial challenges head-on while keeping our eyes on our shared goal: Building Drexel into a global, partnership-driven powerhouse in research and experiential education.

Sincerely,

Denis P. O’Brien
Interim President

Helen Y. Bowman
Executive Vice President, Treasurer and Chief Operating Officer

Paul E. Jensen
Executive Vice President and Nina Henderson Provost