After years of surpluses – as recent as 2022, TU/e turned a profit of 21.6 million euros – TU/e fell short by 1.5 million euros in 2023. This can be read in the annual report that was published last week. The loss was smaller than expected, as the budget for 2023 anticipated a deficit of 27.4 million euros.

“Costs are rising," Vice President Patrick Groothuis recently said already in an interview on the TU/e website, “but revenues are not rising with them.” The cost increases are caused by high inflation in the past two years, which makes everything more expensive. The considerable salary increases agreed in the collective labor agreement also contribute.

To illustrate, TU/e’s total salary costs were 320 million euros in 2022, increasing by 12 percent to 359 million euros in 2023. For 2024, the board is anticipating staffing costs of 400 million euros (another increase of almost 12 percent). These higher costs are only partially offset by a rising government contribution and tuition fees.

Money in the bank

This doesn’t mean the university is already in financial problems, because there’s quite some money in the bank. At the end of 2023, this cash – or ‘liquid assets’ in accounting terms – amounted to 150.8 million euros. According to the prognosis in the annual report, a total loss of 59 million euros is anticipated between 2024 and 2026. From 2027 onwards, the budget should be balanced again.

With over 150 million euros in the bank, the reserves should – in principle – be large enough to support that loss of 59 million euros. But a lot of money is also needed for investments, including in the construction and renovation of buildings on campus.

Lack of space

Lack of space is one of the major operational problems at TU/e. For instance, talking about Flux in the interview on the TU/e website, Groothuis says the following: “There is serious pressure on the number of available square meters.” In reference to the Department of Biomedical Engineering, the Vice President says they “have been creatively managing the limited lab space and workspaces for years.” And about the situation at the Department of Chemical Engineering and Chemistry, he says the following: “It is bursting at the seams there because of the growth and successes of recent years, and for the future we simply need more space.”

By way of the Campus strategy 2030, TU/e is catching up on housing for the growing community. In terms of finances, this translates to an increase of tangible fixed assets. This includes things like land, buildings, machines, laboratories, and technical installations. At the end of 2023, the university had 392 million euros worth of tangible fixed assets on the books. In the years ahead, this amount is set to increase quickly, ultimately totaling 800 million euros in 2028, the annual report says. Which means 400 million euros is required for the expansions.

More tuition fees

As TU/e expects to recruit more students in the coming years (see box), revenues will also increase. The government contribution amounted to almost 320 million euros in 2023, increasing to over 345 million euros in 2028. More students also means more tuition fees, from around 40 million euros in 2023 to 50 million euros in 2028.

To afford the multiple hundred million euro investment in the expansion of the campus, more money is needed in addition to the increasing government contribution and tuition fees. The 150 million euros that were in the bank at the end of 2013 won’t cut it either. According to the budget, 50 million euros will be left of that at the end of 2028. To free up capital, TU/e will borrow money on the one hand and make cuts on the other.

Skyrocketing loans

As far as loans go, the annual report says that arrangements have been made with Rabobank and BNG Bank. This is no small potatoes. At the end of 2023, long-term debts amounted to 93 million euros. This will skyrocket to 468 million euros by 2028, a 375 euro increase.

This growing indebtedness puts pressure on the university’s financial health. The solvency ratio – the ratio between borrowed capital and equity – was a comfortable 43 percent at the end of 2023. Due to the increasing loans (borrowed capital), solvency will drop to 30 percent in 2025. That’s below the standard of 32 percent that is considered safe. In 2028, there will be a further decrease of solvency, to 20 percent.

In the annual report, TU/e writes that various financial ratios are scrutinized on a yearly basis: “By temporarily drawing on the reserves to make investments, solvency decreases. The development of the steering ratios (including solvency, ed.) will be presented at least once a year in the long-term budget, keeping a close eye on whether the ratios develop within the prescribed standards.” The university writes it will take “timely measures” in case solvency “is in danger of dropping below the lower limit”.

After 2028, the solvency will meet the standard again, the Finance and Control Department states in an email. The investments in the campus will have peaked by then. "A well-considered risk which the TU/e is taking because the investments in the Campus program are necessary to maintain the quality of education and research," the email reads.

Cuts

In addition, cuts will have to be made. The annual report mentions “cuts in operations, purchasing, and hiring of (expensive) external staff.” All of the departments and services have been told to make cuts. “The savings will be made according to the available capacity,” reads the aforementioned interview with Vice President Groothuis.

Although TU/e spokesperson can’t confirm this, multiple sources report that all departments and services will have to save 2 percent for four consecutive years. In May, the departments and services had to submit saving proposals. These plans weren’t made public, but they did serve as the basis for the long-term budget included in the annual report.

But what about Project Beethoven? Didn’t the previous cabinet decide to invest 450 million euros in technology talent for the Eindhoven region? “Project Beethoven is not a solution to our current financial deficit,” says Groothuis on the TU/e website. In the years ahead, the university has to cut costs “to continue to invest in additional space.”

The big question is whether these cuts will be the end of it. After all, the new cabinet wants to structurally save over a billion euros in higher education. The universities are resisting these plans, but if they go ahead, the cuts will run deeper than it says in the current annual report.

Students and researchers

The university is happy to report that TU/e researchers are doing a great job. The annual reports notes: “In research, TU/e is performing well. This is illustrated by the participation of researchers in 31 out of the 56 proposals that have so far been granted as part of the National Growth Fund.”

In 2023, the intake of students rose by 10 percent. TU/e had around 8,000 bachelor’s students and 5,000 master’s students, so 13,000 in total. In 2024, the number of students is to increase further to just below 14,000, and in 2025 to 15,000. That growth is required to make Brainport Eindhoven’s strategy possible. In fact, TU/e would prefer to grow much faster, but the required funding from the government is lacking. “As long as the means for such a scale jump at TU/e are not available, TU/e is aiming for controlled growth,” the annual report reads.

Not long after the publication of the annual report the situation changed substantially. "Particularly due to the new coalition agreement (with the commitment to cut over a billion euros in higher education, red.), the TU/e recently had to put aside its organic growth plans," a TU/e spokesperson says. "Due to the government's major budget cuts, which must become effective fairly soon, this intended organic growth is no longer feasible. For that matter, the TU/e cost-cutting operation remains necessary, because even with the current student numbers there are already large, growing deficits that must be addressed."

Project Beethoven, meanwhile, does offer some relief. The outgoing cabinet decided in March to allocate 450 million euros to invest in technical talent until 2030. For the period after 2030, the cabinet pledged an additional 80 million euros annually for education. This is an impulse for universities, colleges and MBOs.

This investment from The Hague was partly intended to retain companies such as ASML and NXP for the Netherlands. The educational institutions were asked to come up with their own plan. According to the TU/e spokesperson, that plan is taking shape and there is good hope that the funding will come around. "These plans envisage TU/e growing only in terms of numbers of master's students, to a total student population of over 15,000 in 2030."