Targeted savings to maintain our leading position

© 2023 EPFL

© 2023 EPFL

In this interview, EPFL President Martin Vetterli explains the School’s budget situation. His vision: everything possible will be done to limit any budget reduction, but we need to prepare for a lower operating budget and identify cuts that will safeguard key areas.

Martin Vetterli, you don’t expect EPFL’s budget to continue along its current path, increasing steadily year after year. Why?

You just need to look around to see the many crises that are deeply affecting the world today. The Swiss government spent a huge amount of money to ensure the country got through the pandemic without suffering too much damage. And those difficult years had barely ended when Ukraine was invaded. The invasion has had a terrible impact on those living there, and it’s also disrupted the economy, driving up the prices of energy and other commodities. That instability, together with other economic factors, has spurred widespread inflation. Whether we’re talking about food, transportation or housing, times are tough for all of us.

Yes, but let’s get back to my question: why do you expect EPFL’s budget to shrink in the coming years?

We’ve already felt some of the effects of the crisis this year. We even saw that in October last year, with electricity prices. And we see it now whenever we buy supplies – helium and nitrogen for our labs, microwave ovens for our cafeterias, furniture, and so on. Also, salaries are inflation-indexed, as required by the ETH Board, and increased by 2.5%. That’s excellent news for our employees, but it too has an impact on our budget. Already, our operating costs are growing faster than our budget!

In the years to come, we’re likely to take a double hit: I think the federal government’s contribution to EPFL’s budget will be less than what we were expecting, and I think that will be the case until 2028. To quantify things, we’re talking about around 2% less than what we’d thought.

And you’re letting that happen?

There are two ways to answer that question. We need to continue investing in the future even during times of crisis. EPFL – and education and research more broadly – represent a long-term investment that Switzerland must make in order to be prepared for tomorrow’s challenges. We’re doing everything we can to get that message across to policymakers in Bern, to companies, to politicians, to the cantons, and more – and we’re doing that with the support of the teams within the general secretariat and Mediacom, not to mention our colleagues at ETH Zurich and on the ETH Board. But we need to be realistic: the entire country needs to adapt to a tough situation, and EPFL must obviously bear its share of the burden.

In the past few years, we’ve built up financial reserves by carefully managing the resources provided by the federal government. These reserves have been allocated to dealing with one-off needs and to investing in the future of education and research.

So one thing we’ve decided is to zero out those reserves. We’ve been using them to cover rising electricity costs and to purchase the SwissTech Convention Center, which is an investment for the future. We’ll also use them to renovate the Coupole building so that we’ll have enough classrooms to accommodate the growing number of students. EPFL, together with ETH Zurich and the research institutes in the ETH Domain, had a total of over 1.4 billion francs in reserves at the end of 2022, so we can’t really complain – Bern won’t sympathize, and the public wouldn’t understand either.

So these reserves will get us through this crisis. Afterward, will EPFL’s budget get back on track?

Unfortunately, that’s not what our colleagues in the Vice Presidency for Finances foresee. They conduct near real-time analyses of macroeconomic indicators (inflation, commodity prices, etc.) and how they’ll affect EPFL. Nor is that what seems to be in the works in Bern. We’ll use our reserves to invest judiciously over the next three years, but they’ll be exhausted in 2027. We need to reduce our long-term operating costs so that we don’t end up with a deficit on our hands at that point.

Can you be more specific: what does “reduce our long-term operating costs” mean?

Based on the scenario we consider most likely at this point, if we keep on spending at our current rate, we’ll run a deficit until 2030 or even 2031. You know, we were more optimistic at the end of last year, but the situation is getting worse. What I announced to EPFL staff members on 30 May was a 5% reduction in spending, which we’ll achieve through targeted savings. That way, we’ll be able to maintain our leading position by investing in priority projects. We’ll spend a little less on some things so we can still invest in others, where we need to stand out: education, research and innovation.

What investments are planned in education?

I’m talking in particular about increasing the number of classrooms. Our student body is growing every year, and at times this can test the limits of the teaching and learning environment. The project with the most impact will be the renovation of the Coupole and surrounding buildings, as I mentioned earlier, in order to build new classrooms and workspaces.

And in the area of research?

Here too, we’re talking about building something that’s vitally needed at EPFL. We’re planning to build an advanced science building, which will hold cutting-edge facilities for EPFL’s research community. But here too, we’re trying to do this while keeping construction costs down and finding the right time from a budgetary perspective. This won’t be a luxury building – we’ll carefully consider every detail and the value it would add.

Does investing in innovation mean investing in Innovation Park, for companies?

Technical universities like EPFL need to maintain close links with the business world. For example, our Vice Presidency for Innovation is running Ecotope, an ambitious project we’ve already spoken of. The funding will come from outside investors and sponsors, including the Canton of Vaud. Yet EPFL made an initial layout of around 1 million francs. And there are other projects under way, fully funded by EPFL, that will help us maintain our leadership position in forward-looking areas. For instance, Solutions4Sustainability is a 20-million-franc funding program for sustainability-related projects that will begin with research and lead to demonstrators (on our campuses, I hope) before being transferred to the business world. This initiative is not only in EPFL’s interest, but also in that of Switzerland as a whole. The same is true for the Center for Green Energies, which is related to Solutions4Sustainabilty but focuses on ways of storing clean energy. We’re seeking outside contributions, but EPFL obviously needs to get the ball rolling by covering part of the initial outlay. And then there’s artificial intelligence: I don’t think we should let companies lead the innovation effort alone. One of EPFL’s responsibilities is to get involved and develop our own approach. In that respect too, we need to invest (especially in equipment), even though we’ve already had some very encouraging discussions with several companies.

So it’s going to fall to central services to reduce their spending? What about the School’s administrative services?

If we want to get through this, we need to think broadly – and that’s the approach we’ve settled on. So within central services there are probably some savings to be had. But we need to avoid doing what we did in the past: if we cut here and spend more there, that doesn’t necessarily create savings. Our deans and vice presidents – particularly at the Vice Presidencies for Operations (VPO) and for Finances (VPF) – are working together to identify ways of saving money. One example: communications. There are communications employees in central services but also in other parts of the School. The same goes for event organizers. That’s fine, and I’m very proud of this pragmatic approach: over the years, our School has evolved, almost organically, in response to specific needs. We now have an opportunity to see whether it’s worth simplifying this structure, which, over time, has grown complex. There is overlap and a lack of clarity around each person’s role, along with potentially unnecessary spending.

More concretely, how are you going about the task of identifying savings opportunities?

There are seven working groups, each devoted to one topic: teaching (led by Jan S. Hesthaven); operations at our research centers (also Jan); human resources (Matthias Gäumann); purchasing (also Matthias); overlap and “legacies” (Françoise Bommensatt and Gaël Hürlimann); and efficiency and processes (which is still being put together). Other groups will be created as needed if we see additional sources of savings.

So these groups don’t include anyone from operations?

First of all, each group obviously works with specialists when conducting their assessments. And I don’t think anyone can imagine EPFL functioning without administrative assistants, electricians, buyers, etc., but it wouldn’t be fair for them to bear the burden of deciding where to cut the budget. That responsibility lies with me and the rest of the Direction.

So employees have no say?

Sure they do. We’ve created a suggestion box, and we’ve already received over 150 ideas. Most of them are very good and will be considered by the working groups. The good news is that nearly 60% of the ideas concern areas already identified by the Direction. As to the other ones, my colleagues and I will look at them and determine how much could be saved and how difficult that would be. Whenever we see what we consider significant potential savings, we’ll figure out who can turn that into a real project.

Can you provide a specific example?

This wasn’t my idea, I can assure you, but I find it particularly relevant: “Stop paying publishers for subscriptions, in agreement with the consortium of Swiss libraries and universities, and adapt our contracts so that they’ll cost less and lay the groundwork for other forms of publications.” I’m an advocate of open science, yet this solution never seemed realistic. I’m seeing, however, that a growing number of researchers are warming to this idea. Maybe we can kill two birds with one stone: save hundreds of thousands of francs while helping change how scientific publishing works. In this case, we’ll work with EPFL’s Open Science department to carefully assess how much money is at stake and whether it’s feasible to get out of the contracts.

You haven’t mentioned jobs. Will you commit to preserving jobs at EPFL?

We’ll do everything we can to preserve jobs. First, we’re looking at how to streamline processes, such as by saving on external spending and identifying small things we can do without. And we’ll take advantage of employee attrition, although we need to be sure that doesn’t add to the workload of colleagues who are already under pressure. Lastly, there may be some ways of saving money by forgoing certain services, and we’ll have to look at cases where employees can move to other positions within the School. We’ll need to keep these priorities in mind until the end of the year: the 2024 budget has not yet been approved, and economic indicators are constantly changing. No one – not me, and not the most qualified economist – can say whether the budgetary and economic situation will be the same at the end of the year. We’re going to have to learn how to challenge ourselves constantly and adapt our plans regularly, because we’ll have to operate without the comfortable margin that we’re used to and that led to such significant reserves.

Food was served at the Town Hall meeting – doesn’t that go against what you just said?

We don’t have to give everything up. In some areas, saving 5% just means spending a little less. A brown bag meal, like the one provided at the Town Hall meeting, costs less than half of a buffet. So we saved 50% there. But don’t worry, we’re not trying to set an example – we’re sticking with the 5% target.

The information in this interview clarifies and supplements the information discussed at the Town Hall meeting on 30 May.

Author: Mediacom

Source: Direction EPFL

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