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Budget Cuts Roil Across Academia

Six weeks ago, before people started tossing around the word 'depression', we asserted that it would be a blessing if Cornell could survive the next two years with only a 10 to 15 percent cut in its budget.

Well, Cornell hasn't announced any firm plans for its budget (save for a costly new financial aid program) but other schools have started talking about their plans. Courtesy of Bloomberg News:

Dartmouth, the smallest school in the Ivy League, will freeze hiring, postpone new construction and consider cutting or merging departments as it slashes up to 10 percent, or $40 million, from its budget, according to a letter posted on the Hanover, New Hampshire, school's Web site yesterday. Stanford, in California, will cut 10 to 12 percent, or as much as $96 million, over the ``next few years,'' according to a letter to alumni.

Stanford and Dartmouth join a growing number of other private and public schools struggling with shriveling investments in the worst financial crisis since the Great Depression. Among the Ivy League of eight elite private schools, Cornell University, in Ithaca, New York, and Brown University, in Providence, Rhode Island, also have announced hiring freezes. Princeton University in New Jersey said it may postpone new construction projects.

It's important to note some differences in the revenue structure between a school like Dartmouth and Cornell. At Dartmouth, which has an operating budget of about $400MM, a full third of the school's revenues comes from its endowment. So it is more sensitive to its investments. Meanwhile, Cornell's Ithaca campus is about five times as large -- a roughly $2 billion operation -- but its investments constitute less than fifteen percent of its budget.

Of course, Cornell also has state appropriations to worry about, which make up another ten percent of the University's budget, and upwards of twenty percent of the contract college's budgets.

It will be interesting to see what Cornell's endowment returns look like at the end of the year. While Cornell's endowment was up two percent through June 2008, artmouth's endowment was down 6 percent from June to October, while UVa found itself down a whopping 20 percent over the same time frame. Of course, it could be worse, as the S&P 500 was down around 25 percent over the same period.

Needless to say, this is only the beginning.

Matthew Nagowski | Posted on November 16, 2008 (#)

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