As COVID-19 rattles world markets, the effects of the 2008 Great Recession were at the forefront of discussion during last Wednesday’s Employee Assembly meeting.
Faculty and staff brought this discussion to the table, recalling the consequences of the 2008 economic downturn — during which the value of Cornell’s endowment fell by 27 percent and the University budget decreased significantly.
But Paul Streeter, vice president for budget and planning, reassured constituents about the University’s preparedness for future recessions as he gave an overview of Cornell’s finances, as well as its budget and endowment.
“We’re in a much better position to manage [a future recession],” Streeter told the assembly.
Streeter discussed the measures Cornell has taken to mitigate the impacts of a recession, ranging from retreats and contingency plans to optimize Cornell’s investment strategy. Streeter ultimately said the University treasury’s management of finances has changed.
“There’s been an ongoing set of lessons learned,” he said. “We understand [recessions] a lot better. We think we’ll be able to see it happen, see it coming towards us sooner.”
According to Streeter, the University now thinks of contingencies more formally in the budget. Cornell also uses more fiscal responsibility to conduct large capital projects to minimize financial risk.
However, he noted that contingency plans “could take a while to get to the scale that could truly buffer a downturn.”
“Should a recession happen, we’re susceptible to the potential drop in state appropriations, depending on what’s happening on the state budget,” he said of the possible effects of a future recession.
Like the last recession, the endowment value may drop again based on market activity, according to Streeter.
Also affecting students, a dip in the economy impacts financial aid. During the Great Recession, when the average income of families dropped, financial aid expenditures increased.
Streeter described the general rundown of the University’s financial outlook, which largely remained the same as last year. In the 2020 fiscal year, Cornell’s overall revenue stood at $4.77 billion — an increase from last year’s $4.53 billion by about 3.6 percent.
Medical college service revenues, tuition and fees and sponsored programs remained the largest sources of revenue. According to the University’s 2019-2020 Operating and Capital Budget Plan, the investment and endowment distribution is expected to experience a net decrease of half a percent.