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January 2010

Remarks From the Provost

As part of the first-ever (and remarkably successful) Cornell Alumni Leadership Conference held in Washington D.C. this weekend, Provost Kent Fuchs made some remarks on the state of Reimagining Cornell to a packed luncheon on Saturday. Highlights from his talk include:

-- A draft version of the strategic plan is now available and the Provost is welcoming public comment on the draft. Later this spring, there will be a second "comment window" for a revised draft.

-- The $200 MM+ long-term structural deficit appears to be largely under control due to a) cuts already taken, b) the $90 MM in administrative savings that the consultants have found.

-- A new budget model for the Ithaca campus, greatly simplified and streamlined, is very close to being approved. Fuchs put up slides of both the old budget model and the new model to get a laugh out of the audience, but the slides were actually very telling -- under the old model undergraduate tuition revenue went straight to the college that "owned it", but the new model has Day Hall distributing the funds back to the colleges based on both "quantitative and qualitative factors" . Additionally, Day Hall will be "taxing" all revenue streams to the various units, presumably at various rates depending on the source of income, and re-allocating the "taxed" dollars to institutional priorities.

In a nutshell, what this means is that the Hotel School will have to start subsidizing the folks that culture (Arts) and feed (Ag) it.

-- Fuchs talked at length about this article and chart. And I'll have more about it later.

-- Interestingly, Fuchs mentioned that the University was "somewhat seriously" considering the idea that students wouldn't have to associate by college until their sophomore year. I'm certain the Hotel School and Engineering School really love that idea.

-- As far as state appropriations, Fuchs could only really say that a) New York State is seriously constrained and b) beyond that is anybody's guess. How Cornell's relationship with New York State changes throughout this process is crucial to the shape and scope of our 'reimagined Cornell', and I think it remains to be seen.

-- Finally, I was able to ask Fuchs where he saw undergraduate business education in ten years. (Loyal readers know this is a favorite issue of mine.) He wasn't able to give a firm answer, because the final decision obviously hasn't been yet, but he did indicate that he expects the undergraduate business part of AEM (as opposed to the agricultural and resource economics part of AEM) to develop a "stronger" relationship with the Johnson school.

We live in interesting times.

Matthew Nagowski | January 31, 2010 (#)

Unraveling the Endowment Numbers

NACUBO released their annual endowment study today. Cornell ranks 17th in the country, with $3.966 B in endowment assets as of June 30th, 2009, just behind Washington University and just ahead of Rice. (Curiously, though, MIT is missing from the ranking, so I suspect that Cornell is really 18th.) You can see data from 2008 and 2007 here and here.

NACUBO reports that the University lost 26.4 percent of its endowment in fiscal year 2009 -- the endowment stood at $5.385 B in June 2008. Unfortunately, this puts the University in some good company, as the New York Times reports:

Unusually, the universities with endowments over $1 billion had the greatest decline, an average of 20.5 percent. Harvard, Yale and Stanford, the wealthiest universities, all lost more than 26 percent of their endowment values.

I've asked before whether or not the University takes too many risks with its endowment.

The 26.4 percent number, however, is a bit of an understatement because it includes any funds that the University added to its endowment in FY2009. What we really need to know is how the endowment that existed as of June 30th, 2008 performed. which, in the interest of openness and transparency, the University kindly provides for us.

First, though, a little bit on how the University's endowment works. Any unit associated with the school can purchase 'shares' in the endowment, provided that the initial purchase is greater than $100,000. (This amount used to be $10,000 but the University recently increased it due to administrative costs.) The shares than function exactly like a mutual fund -- the underlying values of the shares change while the shares also produce dividends that can be used for the unit's operating expenses (e.g. financial aid or professor salaries) or re-invested back into the endowment by purchasing more shares.

Here's a chart:

So what we can see is that between FY2008 and FY2009, a share in the University's endowment fund actually fell from $65.37 to $45.12, a decline of 31 percent. (To be fair, it also produced a $3 dollar dividend.) This is a little bit bigger drop than the 26 percent from what was previously reported.

What is even more striking is how flat the overall value of endowment shares has been in the last 11 years. In June 1998, a share was worth $47.65, while in September 2009, a share was worth $46.65.

At the same time, though, the fund produced over $30 in dividends per share, for a 'true' return of over 60 percent -- better than the 40 percent that the S&P 500 returned over the same. This shows the endowment has definitely been very beneficial for the university.

Matthew Nagowski | January 28, 2010 (#)

Meanwhile, In Hanover

If you thought Day Hall has a rough going of it these days, apparently Parkhurst Hall in Hanover, NH is in full-out battle mode, facing a $100MM structural deficit out of a total budget of $735MM.

That's 13.6% of Dartmouth College's total budget.

By comparison, Cornell's Ithaca campus currently has a structural deficit of $68MM out of a $1.9 B budget. That's around 3.6% of the University's budget.

Seems like there will be a lot more staff lay-offs and cost-cutting in Hanover than Ithaca.

The interesting question is how Dartmouth got into this mess, and it seems to be a confluence of two related factors: 1) gross financial mismanagement, and 2) an over-reliance on endowment funds.

MetaEzra's counterparts at Dartblog are on the case:

It’s not complicated: the previous administration had long had the College on an unsustainable spending jag. The growth of expenses outpaced revenues for many years and the only way to make up the difference was to draw an ever greater amount of money from the endowment. As President Kim pointed out, over the past few years the College’s draw on the endowment went from below 5% to over 7% (the highest in the Ivy League) — and this figure grew even as the endowment itself was growing robustly: a 77% rise between 2003-2007.

To put things another way, between 1998 and 2001, the College more than doubled its draw off of the endowment (from $48.7 million to $106.3 million). Then between 2001 and 2009, the amount of drawn money more than doubled again (from $106.4 million to $229.6 million). That’s an increase over 11 years of 371%, while the College’s spending grew by 122% over the same time period (from $329.8 million to $735.5 million). Conclusion: the College’s other revenues could not keep pace with spending.

So Dartmouth was paying out 7% of its endowment per year to sustain its operating revenues.

By comparison, Cornell was never paying out close to 7% of its endowment value per year. At the peak of the bubble, it was paying out 5.1%; today it is paying out at a 5.5% rate.

Where Dartmouth has done better is in its overall endowment performance -- Dartmouth's endowment has fallen around 25 percent from its 2007 peak levels, whereas Cornell's fell a bit less than 30 percent.

But that's of little help when fully one-third of Dartmouth's operating budget was based off of endowment revenues, compared to Cornell's more modest 11 percent.

Matthew Nagowski | January 25, 2010 (#)

Applications Rise 5%, Acceptance Rate to Drop to 18%

Elie beat me to it, but Business Week is reporting that applications to the University have risen five percent over last year. This will lead to another record-breaking admissions year for Cornell:

“Even during a recession, students and parents still believe that a college education is one of the most important lifelong investments,” Doris Davis, associate provost for admissions and enrollment at Cornell University said in an e- mail.

The university in Ithaca, New York, reported a 5 percent jump in applications from last year, the sixth consecutive year of increases.

Assuming a 37 percent regular decision yield and a targeted class size of 3150, the 5 percent increase in applications will result in an overall acceptance rate of 18 percent. Last year we saw a 19 percent acceptance rate with a 37.6 percent yield when the university over-enrolled by 70 students.


Of course, as we all know, acceptance rates tell us nothing.

Coincidentally, it will be awfully convenient for the University's budget for admissions to over-enroll again. That's why I am surprised that Uncle Ezra didn't accept more students via the early decision process.

Matthew Nagowski | January 23, 2010 (#)

Enhanced Aid Redux

The Sun has followed up on our reporting about Cornell's pullback from "enhanced financial aid for athletes" with an article of its own. Curiously, however, the Sun does not cite either this publication or Inside Higher Ed -- who, combined, broke the story -- in their own article.

Reads the article:

While the initiative was aimed at aggressively recruiting students of academic excellence, diversity and athleticism, the Ivy League saw the inclusion of athletes in the program as a violation of the league's ban on athletic scholarships.

Although Cornell and the Ivy League administrators disagreed on the legality of Cornell's financial aid program, their confrontation seemed to be somewhat amicable.

"Cornell fully cooperated, publicly announced the program and requested all requested information, and when the Ivy League decided that it did not comply, the University modified its rules," Ivy League Executive Director Robin Harris said.

Though the University maintained that its policy continued to represent a "need-based" approach to financial aid, some people argued that the initiative leaned closer toward a "merit-based" distribution of aid.

"We felt as a University that our practices were in accordance with Ivy League practice but they disagree," Deputy University Spokesperson Simeon Moss said. "There was no investigation. The Ivy League just informed us that part of our practice [needed to be changed] and we changed it."

Cornell will still look to its new financial aid as a way for the University to remain competitive against schools like Harvard, Yale and Princeton, whose greater endowment-size and more generous financial aid packages place them into a league of their own.


Thus, the problem that Cornell faces in their financial aid for athletes does not just pertain to athletes. "Athletics is just the most visible," Ehrenberg said. "If you lose someone interested in economics, it's just not as visible."

Interestingly, however, the University may still try to offer enhanced aid to athletes, only through a different channel:

Despite these recent setbacks, Cornell administrators remain optimistic in the University’s ability to attract high quality scholar athletes regardless of financial aid.

“It helped in our recruiting but we can move forward and still recruit at a high level,” Moss said. “We have a lot to offer as a University to enroll a consistently excellent class, including scholar-athletes.”

Since Cornell already promised these financial benefits to selected scholar athletes in Cornell’s Class of 2013 and Class of 2014, these students will continue to receive the agreed-upon benefits, Moss added.

In addition, although student athletes will no longer receive preferential treatment in financial aid consideration based solely on their status as an athlete, some of those students will still qualify for the more lucrative aid packages with other criteria, according to Moss.

"We are still continuing with our enhanced financial aid with our priority students,” he said.

But I love the quote from the new executive director of the Ivy League office, which is completely non-nonsensical:

Harris, the executive director of the Ivy League, said that she recognizes the inevitability of differences among schools but explained that the Ivy League ensures that such differences are not systemic.

“The Ivy League recognizes the importance of interleague competition, so that league and every team in every league has a chance to be successful,” Harris said. “Every school is going to have unique advantages over other schools. There is never going to be complete equity. What we’re making sure is that every school has the opportunity to be competitive.”

Cornell was trying to get itself on equal footing with the Harvard's of the world by offering somewhat comparable financial aid to its athletes. But apparently per Harvard, Yale, and Princeton's logic that makes Cornell policies anti-competitive.

Matthew Nagowski | January 22, 2010 (#)


What it takes to win if you are the number one team in the country:

-- Biased Big 12 refs.

-- 12,000 crazy fans who only started cheering after realizing that they could help turn the game.

-- 28 points at the charity stripe. Out of 36 trips. (Compared to our 14.)

-- Playing a bunch of non-scholarship Ivy League boys who can put the scare in your eyes.

Matthew Nagowski | January 06, 2010 (#)

The Aim of AEM (and Reimagining Cornell)

Just before the holiday break, Provost Fuchs (and President Skorton) released some guidance on the state of 'reimagining Cornell'.

Most of the guidance was expected: e.g., the University needs to explore a public policy unit, AAP needs to become a broader design college and work with DEA and Textiles/Fashion Apparel, all of the units need to explore revenue-enhancing graduate and continuing education programs.

However, there was one directive that was strongly worded. My own emphasis is added:

AEM will at present not become a school, but the college and the department, with input from the Provost's Office, will conduct a detailed analysis of the future evolution of the department. This analysis will consider, among other questions, whether the creation of a management oriented school is appropriate in light of the differing areas of focus within the current department.

The last clause is important. It's obtusely worded but it hints at the fact that significantly less than half of the AEM faculty can be considered traditional business faculty -- the rest are really experts in agricultural economics, resource economics, trade, and development. Which isn't exactly what most undergraduate students in AEM want to study, with its mover-and-shaker student body and high rankings.

So what will be AEM's future role in the Ag College? It sounds like it won't become a school within CALS anytime soon. My hunch is that it will get merged out into an undergraduate business college, while the resource and development economics components of the program will become part of the new public policy unit. Meanwhile, the animal science and agriculture programs in CALS will contain some joint-appointments for farm management.

Here's what Fuchs said about the management sciences at Cornell:

Building on the management sciences task force report and the additional studies requested from CALS/AEM and SHA, the Dean of the Johnson School will take lead responsibility for developing, in conjunction with CALS/AEM and SHA, a detailed plan for improving the quality and impact of management sciences and business education and scholarship at Cornell. This will include careful review of the appropriate degree of integration of the three units.

Perhaps for proponents of AgEc, this is discouraging, but I take this as a good sign. It shows that the University realizes that there are severe inefficiencies in undergraduate business education, and that it is willing to tell the colleges what to do for the betterment of the University. Because right now, despite the University's continued excellence, the whole is less than the some of its parts, and Cornell could be even stronger.

Where the politics get interesting is this: Neither the Johnson School nor the Hotel School want AEM. The Johnson School feels that its niche as a small, graduate-only program will be compromised -- it wants to be more like Dartmouth's Tuck and Northwestern's Kellog than Penn's Wharton and Michigan's Ross. (The later two have undergraduates in their mix as well.) Meanwhile, the Hotel School is fiercely independent and likes to brag that it is one of a few hospitality schools in the country that is not part of another academic department and infamously manages all of its finances in house.

My bet is that the Johnson school will end up with AEM.

After all, Skorton issued this final directive:

Decisions should be made as much as possible with the intention of optimizing the quality and value of colleges, individual units, and the entire university but, if a conflict exists, it should be decided in favor of the greater university.

Now what to do about Communication...

Matthew Nagowski | January 05, 2010 (#)

Cornell Has Dropped Enhanced Financial Aid For Athletes

After our scoop over the weekend, Inside Higher Ed put some of their journalistic expertise to work and confirmed that the Ivy League office has looked into Cornell's financial policies towards athletes, but that Cornell has already dropped that aspect of their expanded financial aid initiative:

"While we thought that including student-athletes with demonstrated need among those eligible for enhanced need-based aid awards meets Ivy League standards and practices, the league did not agree," said Simeon Moss, a spokesman for Cornell. The blog MetaEzra reported this week that the Ivy League was investigating the aid policy, apparently for concerns that it violated the Ivy ban on athletic scholarships. But Moss said that there was no investigation because the university has changed its aid rules. He added that Cornell was "committed to achieving competitive equity throughout the Ivy League."

The good news, however, is that Cornell does not appear to have been restricted from offering enhanced financial aid to select non-athletes. Which means there should be no reason why we can't continue to have the best marching band in the Ivy League.

Albeit the only one.

Matthew Nagowski | January 05, 2010 (#)

An Ivy Dialogue

Somewhere in Day Halll a phone rings. Cornell picks up. A conversation ensues:

Harvard: You are giving athletes more money than you should.

Cornell: But we're not giving as much as you, so what's the problem?

Harvard: But you're giving athletes too much financial aid relative to other students.

Cornell: We're giving all students the same level of aid, just differing the level of loans versus grants. And we're also offering more grant aid to under-represented minorities and world-class oboe players. This is a good thing, because it means that more students will be able to afford a Cornellian education in all sorts of great subjects -- like human development, architecture, plant science, hotel management, horticulture -- that you don't offer.

Harvard: Yes. But you can't do that.

Cornell: Why not?

Harvard: Because we said so. Because we're Harvard.

Cornell: But you're still giving all of your students a lot more money to attend Harvard than we are to attend Cornell.

Harvard: Yes. But we can do that. Because we're Harvard.

Cornell: But you pay your coaches twice as much as we do and offer your students all sorts of perks, like trips to Europe, that we can't offer to most teams.

Harvard: Right. As we said: We're Harvard. We have the arrogance of Larry Summers and more resources than most sub-Saharan countries.

Cornell: But apparently you still can't pull together a winning season in hockey, and need to stoop to recruiting violations to win in basketball.

Harvard: Don't you realize who you are talking to?

Matthew Nagowski | January 04, 2010 (#)

Report: Ivy League Investigating Cornell's Financial Aid Policies?

MetaEzra has learned that the Ivy League office is currently investigating the University's new policies that provide "enhanced financial aid" to select students from certain groups, including underrepresented minorities, recruited students, and outstanding oboe players.

When the University announced the new policies last year, it was a head scratcher, because it sounded a lot like merit-based financial aid, which the Ivy League explicitly forbids. But we assumed that Cornell knew what it was doing -- and that giving some students loans and other students grants might be acceptable because both were forms of need-based financial aid.

Besides, there had been allegations that other schools in the Ancient Eight had been egregiously breaking these rules for some time:

From David Harris:

We’re less competitive because there has been a relative change in what we do for athletes – not an absolute change what we do for athletes. Harvard, Yale and Princeton and in particular Harvard, has gone way beyond in what it they can offer kids in terms of parent contributions and in terms of loans in terms of how much summer savings is expected – a whole range of things. There are a number of our peer institutions who are matching Harvard, Yale and Princeton on these terms in ways that are hard to reconcile with Ivy League rules in many cases.

And Andy Noel:

Noel believes that schools have found ways to “creatively finance” athletes by designating some students as “high priority,” such as certain minorities or genders. By applying this standard to all students, it allows schools to better package financial aid.

So does Cornell get penalized because we are the first to admit what we are doing? And will Larry the Lacrosse Player and Ollie the Oboe Player have their grants reneged?

One thing is for certain -- if Cornell ever wants to have a winning football team, the rules for Ivy League parity will have to be revisited.

Matthew Nagowski | January 02, 2010 (#)

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