<p>Princeton</a> Slashes Its Budget Again and Freezes Salaries - Chronicle.com</p>
<p>It has hit most schools in a similar fashion (25-30% of endowment). I am more worried about the public universities in this situation. They bear the brunt of the responsibility of educating young people will nowhere near the endowments that these schools have.</p>
<p>Actually, few of the large public universities spend ANY money from their endowments on undergraduates. They will, of course, be cut by their state legislatures (in addition, in my state, they are looking at a two-year, 30% increase in tuition). Lots of the smaller, less-well-endowed private colleges spend much lower portions of their endowments each year. It’s the big ones, HYP, Williams, etc., who are really taking it on the chin (though they have much more that can more easily be cut.)</p>
<p>It hurts private schools more, in general, because they depend on their endowment to supply a larger percentage of their yearly budget.</p>
<p>As in, next year, a huge portion of their budget is gone even if it’s just a small percentage of their endowment.</p>
<p>Wellesley has also made significant cuts.</p>
<p>[Wellesley</a> College details layoffs, retirements - Wellesley - Your Town - Boston.com](<a href=“http://www.boston.com/yourtown/news/wellesley/2009/04/wellesley_college_details_layo.html?p1=Well_MostPop_Emailed5]Wellesley”>http://www.boston.com/yourtown/news/wellesley/2009/04/wellesley_college_details_layo.html?p1=Well_MostPop_Emailed5)</p>
<p>California’s college cuts
Published Friday, Nov. 28, 2008</p>
<p>COMMUNITY COLLEGES</p>
<p>• Gov. Arnold Schwarzenegger has proposed cutting $332.2 million from the budget of California’s community colleges.</p>
<p>• The Legislative Analyst’s Office has recommended that community college tuition be increased from $20 per unit to $26 per unit in January and $30 next school year.</p>
<p>• Community College League of California estimates the cuts and fee increases would mean a loss of 262,000 students.</p>
<p>• Los Rios Community College District Chancellor Brice Harris said he’ll have to turn away 11,000 students if proposed budget cuts and fee increases take place.</p>
<p>CALIFORNIA STATE UNIVERSITY</p>
<p>• CSU faces a $66.3 million midyear budget cut.</p>
<p>• For the first time in its history, CSU plans to eliminate 10,000 admission spots for the 2009-10 school year by moving up application deadlines and raising academic standards for incoming freshmen.</p>
<p>• Impacted campuses – those that are over-enrolled – can use supplemental admissions criteria to admit students or put students on wait lists. The eligibility index – a combination of grade point average and ACT or SAT scores – can be raised to limit enrollment.</p>
<p>• Admission priority will be given to continuing undergraduate students, then community college transfer students and California residents applying as freshmen or sophomores at impacted campuses. Nonresidents will have the lowest priority.</p>
<p>• Impacted campuses including Fullerton, Long Beach, Pomona, San Diego, San Luis Obispo, Sonoma, Channel Islands, Northridge and San Jose State will stop accepting application for freshmen on Sunday. San Francisco State will stop on Dec. 10. Chico and San Marcos will review freshmen applications after Nov. 30 on a “space-available” basis.</p>
<p>• All campuses, including Sacramento State, will close admissions for first-time freshmen by March 1 – or before, depending on available space.</p>
<p>UNIVERSITY OF CALIFORNIA</p>
<p>• Proposed midyear budget includes $65 million in cuts for the UC system.</p>
<p>• UC regents adopted a resolution that freshman enrollments next fall will be curtailed by as many as 10,000 students if funding is short.</p>
<p>• At the same meeting, regents removed student fee and tuition increases from their budget for next school year.</p>
<p>• UC President Mark Yudof suggested the system might even cut enrollment by denying admission to students’ first-choice campuses and referring them to under-enrolled campuses such as UC Merced.</p>
<p>Publication: Sacramento Bee</p>
<p>Let me reiterate</p>
<p>“• Community College League of California estimates the cuts and fee increases would mean a loss of 262,000 students.”</p>
<p>I think Princeton and others like it will be okay in the long run relatively speaking.</p>
<p>I weep for the poor souls at Princeton University…</p>
<p>Glad my own school never had much of an endowment to depend on in the first place.</p>
<p>When endowment income goes negative ( or even to zero) the schools that affected most significantly are the ones that fund a large portion of their budget with endowment earnings. So schools like Princeton, Harvard, Duke, Standford which spend from 30-45% of endowment income on the budget have large cuts to make when that income drops to zero (or goes negative). Often these large endowment schools have most of their money locked up in illiquid assets such as venture capital, hedge funds, timber etc so they can’t easily sell assets to get operating money from the principal of the endowment. As a result many of these schools have had to borrow big just to avoid more cuts than they are projecting. Schools with moderatly large endowments but who have only supported 10% of their budget or less have much less pain ( and borrowing) than the richer universities. For instance Brown is only planning to make 80 million in cuts over a 4 year period . Nothing like 100 or 120 million in one year plus massive borrowing going on at some of the rich schools.</p>
<p>LOL, ilovebagels. My sentiments exactly.</p>
<p>“Often these large endowment schools have most of their money locked up in illiquid assets such as venture capital, hedge funds, timber etc so they can’t easily sell assets to get operating money from the principal of the endowment. As a result many of these schools have had to borrow big just to avoid more cuts than they are projecting.”</p>
<p>Sounds like irresponsible and erratic management. </p>
<p>Look, I completely reject the notion that the Ivy’s are going to hurt more than the publics, that is an absolute joke and indicative of the mentality that has but this nation in the position that it is in. But if we want to be Darwinian Capitalists about this, then I guess these institutions are doomed to fail because of their lack of intelligent management. Oh well. Anyway, they only account for a tiny portion of the country’s students. I am more concerned about the 262,000 students not a few elites.</p>
<p>My post about the difficulites of schools that support their budgets with large endowment did not mean they are the biggest concern and we should be sad for them, it is just an interesting paradox that the reduction in investment assets is having a bigger short term budget effect on large endowment schools ( >6bil) while having a smaller effect on med endowment schools (1.5-6 bil) that have not been able to historically fund a large portion of thier budget with earnings. These large endowment earnings have allowed these “rich” schools to spend freely with high salaries, expensive buildings, low faculty ratios etc. These large fixed costs will make it harder for these schools to balance their budgets than the more poorly endowed frugal schools. The lack of liquidity in these funds in not necessarilly poor management but a system that worked to maximize earnings for the last ten years and is what got these schools such high endowments. </p>
<p>The same paradox can be seen in state schools. The flagship state schools have had a high contribution from the state coffers so they will have to endure painfull budget cuts as states face revenue shortfalls that could top 30% in many states. While lower tier State colleges and universities have often had to make due with per pupil budgets that do not greatly exceed the cost of in-state tuition. So it is a bit like the age of the dinosaurs. The kings of the land struggle while the small mammels thrive.</p>
<p>^ It not uniformly true that the top tier public institutions get a large fraction of their budgets from the state legislature. Some do, some don’t. The UCs including Berkeley and UCLA are heavily dependent on legislative appropriations, and given the magnitude of California’s current budget crisis will be hit hard. California public institutions further down the food chain will be hit even harder because in most cases they have no other substantial sources of revenue. Research funding will keep a large part of UC berkeley and UCLA afloat. </p>
<p>In contrast, the University of Michigan gets only about 7% of its operating budget from state appropriations, so if appropriations to higher ed are cut 3% (as Michigan’s governor is proposing), that amounts to a minuscule 0.21% hit to the University’s overall budget. Michigan gets much more revenue from tuition, which in comparison to other publics is relatively high for in-state students and even higher for OOS students, the latter making up a full 35% of the student body. Do the math—those OOS students bring in hundreds of millions in additional tuition revenue annually. Michigan also has huge research enterprise, along with a relatively large endowment for a public. But it prudently spends from the endowment at a rate of 5% of endowment assets calculated on the basis of a 7-year moving average, which means even a sudden and sharp economic downturn like this one doesn’t result in a radical swing in the University’s endowment payout, limiting the budgetary impact. Most schools base endowment spending on a 3-year moving average, resulting in much sharper impacts on the budget, especially in year 2 after a sharp downturn when lower asset values make up 2/3 of the average—so things can be expected to go from bad next year to worse the following year at most endowment-heavy schools.</p>
<p>I am wondering what will happen to the less known private schools.</p>