Carnegie Mellon University faces a $7.8 million deficit in next year's $700 million-plus operating budget but the school's overall financial outlook is strong, leaders told several hundred employees yesterday.

President Jared Cohon, the school's provost Mark Kamlet and Chief Financial Officer Deborah Moon addressed a gathering in the school's University Center, days after it was disclosed that the 105-year-old institution had imposed cost-cutting moves that include smaller raises for its 3,500 employees and a pay freeze for top leaders.

Carnegie Mellon expects $713 million in revenues for the fiscal year starting July 1 but almost $721 million in expenses, Moon said. That is separate from an internal $10.5 million loan made to ramp up advance operations for the upcoming capital campaign.

As they did last week, university officials cited short-term cost pressures like rising utility prices and interest debt. They alluded to a stock market-driven, $100 million drop in the endowment back in 2003 that has reversed itself but, nevertheless, means income available for campus operations will be $6 million less this coming year.

And they said the school's 3.26 percent tuition increase was the smallest in 25 years.

Even so, Carnegie Mellon's assets should grow in value by $62 million, officials said. The operating budget is projected to balance a year from now and improve thereafter, Kamlet said.

"We are not in financial crisis," Moon said.

"What this is all about is positioning the university for even greater things," Cohon said. "I feel very good about our prospects."

Cohon said a bigger problem is a campus endowment that is a fraction of those held by its peers. At about $800 million, it covers 5 percent of operations versus up to 45 percent in the Ivy League.

Carnegie Mellon has $304 million in bond debt, compared with $180 million a decade ago, and has the go-ahead from trustees to seek an undisclosed amount of new debt for construction, officials said. Cohon said the school has adequate debt reserves to cover that.

Faculty and staff leaving the one-hour meeting expressed a range of reactions, some saying their questions were addressed and others expressing worry about future cuts.

Assistant philosophy professor Alex John London, working elsewhere on campus, said colleagues he hears from view the current fiscal situation as "a strategic issue that needs to be resolved" rather than something more ominous. Still, he wonders what is being done to transform graduates leaving campus into future donors.

"Carnegie Mellon needs to do a better job of [instilling] into these students a sense of allegiance and a sense of community," he said.