Shrinking Endowments Force Universities to Cut Spending

Posted by on November 15, 2002

[Philanthropy News Digest]

Shrinking Endowments Force Universities to Cut Spending

Universities across the nation that have seen the value of their endowments decline in the past two years are now being forced to cut spending, delay construction of new buildings, impose hiring freezes, and lay off faculty members and staff, the New York Times reports.

The economic boom of the late 1990s boosted investment earnings at many universities, with some institutions reporting increases as high as 60 percent in a single year, providing schools with significant additional funds for expanding programs and building new facilities. But according to the National Association of College and University Business Officers, the prolonged decline in the stock market has caused universities’ investment income to fall for the first time since 1984, with an average decline of 3.6 percent in the year ending June 2001. The association will release the 2002 figures next month and expects to report losses as large or even larger than in 2001 — the first consecutive years of declining income since the early 1970s.

Because universities generally look at the average return of their investments over a three-year period when planning their budgets, two consecutive years of losses can have a major impact on their spending. "This is an across-the-board phenomenon," said Larry Goldstein, a senior fellow with the business officers’ association. "I don’t think there are any campuses, and especially those that are heavily endowed, that aren’t experiencing some form of belt tightening."

Zernike, Kate. "Boom’s End Is Felt Even at Wealthy Colleges." New York Times 11/05/02.
<a href="http://www.nytimes.com/2002/11/05/education/05COLL.html">http://www.nytimes.com/2002/11/05/education/05COLL.html</a>

<a href="http://fdncenter.org/pnd/news/story.jhtml?id=16500012">http://fdncenter.org/pnd/news/story.jhtml?id=16500012</a>