November 24, 2008

Higher Education Responds to Waning Economic Climate

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This is the first part of a series delving deeper into the economic crisis and its effects on higher education, particularly at Cornell.

In the past few weeks, members of the Cornell community have received a plethora of information about how Cornell is dealing with the current economic crisis. Like Cornell, many institutions of higher education have created innovative plans to support their missions while managing their budgets.
There were two resounding facts that echoed through all of the statements and press releases of the Ivy League schools. First, all have stated that upholding a strong academic reputation is a main priority. Second, all have stressed that they are committed to maintaining financial aid programs throughout the economic crisis to ensure that economic hardships do not cause any student to withdraw from school.
“Supporting student access to Cornell is amongst our highest priorities,” said Paul Streeter, vice president of planning and budget, of Cornell’s new financial aid policy. “We will prioritize financial aid in terms of our use of resources, and we are going to make the choice to use funds for this.”
Similarly, Ruth Simmons, president of Brown University, wrote in a letter that Brown will offer the same level of financial aid to students even though the financial aid budget will be tight. Steps that Brown is taking include raising the maxiumum outstanding balance for fall term charges from $5,000 to $7,500. Even if students have unpaid balances up to $7,500 they will still be allowed to matriculate during the spring semester. Likewise, according to a press release, Princeton University is planning on spending an additional 3 to 4 million dollars on financial aid this year.
Schools’ strategies also differ regarding hiring policies. Cornell has instated a hiring pause on external staff positions and Dartmouth College has put into effect a hiring freeze. However, Princeton spokeswoman Cass Cliatt stated in an e-mail “We have no plans at this point to alter our approach to staffing as a result of the current state of the economy.”
David Harris, interim provost, stressed that Cornell’s policy is a pause not a freeze.
“We are encouraging internal hiring over external hiring, which would help strong performers that happened to lose jobs because programs went away,” said Harris. “It won’t affect faculty to student ratios as there is no hiring pause amongst faculty.”
One factor that makes Cornell unique compared to the other ivies is its partial land grant status.
“Because we get a state appropriation, we will have to take whatever reduction the state offers,” said Stephen Golding, executive vice president of finance and administration. “It is just one of the many revenue streams that we get and it is something that we will have to deal with, but is not necessarily more of a disadvantage.”
Harris agreed, adding, “The big part of the budget challenge is not state budget cut, it is decline in endowment. We’re dealing with the endowment issues and the state budget cuts as part of a big bundle; for other schools their bundles don’t have the state piece, but places like Harvard tend to have a much bigger endowment problem than we do.”
According to Golding, Cornell depends on its endowment for 11 percent of the budget, but schools with larger endowments depend on them more. Princeton, for example, depends on its endowment for 47 percent of the budget.
In a press release, Christopher Eisgruber, provost of Princeton, stated that due to prudent planning over the past years, Princeton is currently not facing major difficulties. There will be no budget cuts this academic year, but Princeton will reexamine projects that are part of the university’s four billion dollar, 10-year plan.
Similarly, Amy Gutmann, president of the University of Pennsylvania, stated in a letter, “Our spending rule on endowment reflects the best practice of ‘smoothing’ spending over time, so that when our returns soared in 2007, our spending did not increase at the same rate. Likewise, our decline in 2008 will not result in a reduction in spendable income in 2010.”
Cornell is also unique in that it has the largest undergraduate population amongst the Ivies. Harris, Golding and Streeter all said that the size of the student body was again only one of the factors that affected the revenue stream.
“Our size means we can get a larger return from a dollar increase in tuition,” said Harris. “However it also costs us a lot more to implement a financial aid plan than it does at some of our peers.”
Each research institution has stressed a commitment to maintain a high level research in spite of financial strain. According to Golding, most of Cornell’s research is supported by restricted funds that come primarily from the federal government. There has been no conversation about paring back the commitments that have been made already, and the individual deans are responsible for determining what their respective schools will do in terms of research.
Basically, it is up to the deans of the different schools at Cornell to determine what their respective schools will do in terms of research.
“If you look at the letters that come from Harvard versus Dartmouth versus Brown versus Penn, each institution is really talking about how the are dealing with the issue of research individually because the impact is really affecting institutions in different ways,” said Golding.
Though each educational institution is being affected by the current state of the economy in differing ways, Cornell and other colleges and universities will likely be judicious about spending. Yet, most universities have pledged continuing commitment to maintaining the same high standard of education as they have in the past.
Another change that many of the schools are making, though to differing degrees, is the reprioritizing of construction projects. According to a University-wide e-mail from Skorton dated Oct. 29, Cornell will start a 90-day construction pause to reevaluate construction around campus. Cliatt stated in an e-mail that Princeton will postpone some construction projects, but will finish those that are in progress and nearly complete. It will then evaluate other construction plans as part of a 10-year plan. Similarly, Dartmouth will complete projects that are far along and put others on hold.