Before You Finalize the Budget

Key Takeaways

• Swarthmore adopted a three‑month interim budget in May 2025
• Cross‑subsidies hide true cost structures across departments
• Revenue streams face “synchronized compression” simultaneously
• Traditional budgeting assumes stability, not simultaneous shocks
• Leaders must stress‑test assumptions and increase transparency

Pulse Analysis

University budgeting has long followed a predictable spring ritual: enrollment forecasts, aid assumptions, dean proposals, CFO constraints, and board approval. Swarthmore College’s recent inability to adopt a full‑year operating plan shattered that routine, forcing a three‑month stop‑gap. The board’s decision, driven by a “confluence of uncertainties,” underscores that even well‑endowed institutions are vulnerable when foundational assumptions become unverifiable. This moment forces higher‑education executives to question whether legacy budgeting processes can survive today’s volatile environment.

At the heart of most institutional budgets lies a complex web of cross‑subsidies. Introductory courses fund advanced seminars, business and engineering generate surpluses that support humanities, tuition from international students offsets domestic enrollment, and graduate programs often subsidize undergraduate operations. These internal transfers are rarely disclosed in budget documents, creating an opaque infrastructure that can crumble when multiple revenue streams—state aid, tuition, federal grants—are compressed simultaneously. EAB’s term “synchronized compression” captures this shift from sequential shocks to concurrent pressures, eroding the cushions that previously absorbed demographic dips or funding cuts.

For presidents, provosts, and CFOs, the imperative is clear: move beyond static, assumption‑driven budgets toward dynamic, scenario‑based planning. Stress‑testing financial models against worst‑case enrollment, funding, and cost scenarios can reveal hidden dependencies and guide strategic reallocations. Transparency around cross‑subsidy flows enables more informed decision‑making and protects core academic missions. Institutions that embed real‑time data analytics, diversify revenue, and openly communicate budget assumptions will be better positioned to navigate the compressed financial landscape and sustain long‑term viability.