On Saturday, the Board of Trustees approved cuts to the University’s operating budget, increased the cost of tuition for the next academic year and further extended an external hiring pause and construction pause that were first implemented last October. The move comes as the University reels from a 27-percent decline in its endowment, drastic cuts in state funding and a decrease in philanthropic contributions.
The Board of Trustees adopted the set of proposals, which had been in the works for the past several months, in an attempt to “protect the strength and character of Cornell, while dealing with financial challenges that impact all aspects of the University’s balance sheet,” President David Skorton stated in a press release yesterday.[img_assist|nid=34406|title=By The Numbers|desc=|link=node|align=right|width=|height=0]
“Prompt correction is necessary to confront a persistent negative financial outlook sweeping the entire higher education sector,” he added.
The plan calls for a reduction in overall University expenditures. Starting next fiscal year, which begins on July 1, Cornell’s Ithaca campus will cut its operating budget by 5 percent and the New York City campus will cut its general-purpose funds by 8 percent.
The Ithaca campus will again decrease its budget by 5 percent in the following fiscal year, starting July 1, 2010.
These cuts will affect all units of the University and will include a 10-percent reduction in the Offices of the Provost and President. Skorton has additionally agreed to take a voluntary 10-percent decrease in his salary.
Skorton told The Sun yesterday that he decided to cut his own pay rate because staff and faculty will not receive pay raises and students will be paying higher tuition.
“I’m compensated very generously,” he said. “The University gives me a house to live in and a car to drive around campus. I thought it’s only fair and reasonable that I also make a sacrifice.”
However, the specifics of how the Ithaca campus will reach an overall 5-percent reduction in its operating costs next year — and which programs will be affected — have yet to be worked out, according to Skorton.
“Everything that has been figured out or decided so far is in the statement I released,” he said. “When we know what the ramifications of the cuts will be, that information will be sent out to campus.”
Skorton said that he and Cornell’s senior administrators will work with the deans of each of the colleges to help them find 5 percent to cut from their budgets.
The colleges and senior administrators will work transparently and collaboratively with each other to find savings and reduce expenditures, he added.
The Trustees’ approved plan also addressed tuition increases, salary raises and construction and hiring pauses.
The University will increase tuition by 4 percent (from $36,300 to $37,750) for endowed colleges next year, which is the lowest endowed tuition percentage increase since 1966, according to Skorton. In-state tuition for the contract colleges will increase by 7.2 percent (from $20,160 to $21,610) next year. Out-of-state tuition in the contract colleges will also increase by 7.2 percent next year (from $35,200 to 37,750).
Skorton said that while some of the budget cuts “will result in additional job losses, the priority is to avoid layoffs whenever possible.”
As for staff and faculty salaries, Cornell will be suspending raises that are distributed through the Salary Improvement Program for one year. This will affect faculty and non-bargaining staff starting next year.
In an effort to minimize layoffs, the University will also extend its external hiring pause to June 30, which was initially set to end March 31.
The hiring pause “may help forestall the need for layoffs,” said Simeon Moss ’73, director of Cornell Press Relations.
Cornell will also set up a hardship fund to assist people on campus who have special needs throughout these changes.
The campus construction pause will also be extended through June 30.
The plan calls for approximately $150 million of reserve funds to be added to the University’s cash flow over the next two fiscal years. These reserves are “existing unrestricted and uncommitted funds” that were planned for other specific projects in the future, according to Moss.
The University will not be dipping into its endowment to cover operating expenses, Moss said. However, the Board of Trustees approved a $35 million endowment draw in order to fund the Cornell’s new financial aid initiatives.
In the wake of the endowment’s 27-percent decline in the second half of 2008, Skorton said that the Cornell Investment Office and the trustees’ investment committee is working “night and day in a direct and intensive way” to adjust the University’s investment strategy to recover its losses. They are “considering all options,” he said.
However, Skorton added that the endowment is only one of several sources of declining revenue that the University, like other schools across the country, is facing.
He said that approximately 13 percent of Cornell’s Ithaca campus budget comes from returns on the endowment. This places the University in between schools with larger endowments — like Princeton — that rely on about 40 percent of their endowments for operating expenses and state schools that only rely on a small percent of their endowments.
Skorton said that he anticipates the recent decreases in state funding, federal research money and donations to the University to eventually turn around.
In the meantime, he said the University must make judicious choices now to avoid irreparable harm and allow the University to emerge from the economic crisis strongly and with its “quality” and “character” in tact.