Due to the recent economic recession, university endowments across the nation shrunk by an average of 3.09 percent this year, according to the Wilshire Trust Universe Comparison Service, which studies endowments worth $1 billion or more.
Wesleyan’s endowment declined by 3.9 percent for Fiscal Year (FY) 2008, which ended on June 30. This is a sharp drop from last year when, according to the 2007 National Association of College and University of Business Officers (NACUBO) Endowment Study, Wesleyan’s endowment grew by 14.7 percent.
President James F. Jones, Jr. of Trinity College recently announced in a letter to the Trinity community that as of Sept. 30, Trinity’s endowment lost 14.9 percent of its value for the current calendar year. This is a very steep loss for an endowment that is supposed to grow on a yearly basis.
In contrast, Amherst College’s endowment ended FY 2008 with a 4.6 percent gain, before drastically tumbling.
“College and university endowments across the country have been significantly affected by market volatility in recent weeks, and Amherst’s is no exception,” Amherst President Anthony W. Marx wrote in a letter to the Amherst community. “Even with our relatively strong investment management, the endowment has lost roughly a quarter of its value since June 30.”
Such severe endowment declines could be an indicator of similar losses at other colleges that have yet to release their endowment earnings for the first quarter of FY 2009, which spanned from July 1 to Sept. 30.
Wesleyan and other New England colleges have taken similar steps to cut spending in the face of this economic turmoil. One measure has been the freezing of construction projects, as Wesleyan recently delayed the construction of its Molecular and Life Sciences Building. Similarly, Williams postponed the Stetson-Sawyer and Weston Field projects and Trinity froze most of its proposed campus projects.
Middlebury went further, banning any new construction or renovation projects that would require college funding.
“Any new construction project will need to be fully funded by donors, and must include additional endowment support so the maintenance and operations of the new structure will not have a negative financial impact on our operating budget,” said Middlebury President Ronald Liebowitz in a Oct. 8 memorandum.
In addition, Middlebury has made cuts to the budgets of a wide array of departments, according to their newspaper, The Middlebury Campus.
“We made selective, but significant, budget cuts across the institution, while trying, first and foremost, to preserve the academic program,” Liebowitz told The Middlebury Campus (“School cuts cost, ends hires,” Oct. 23, 2008). “Salaries and travel budgets were reduced, winter term off-campus courses were suspended for several years, funds set aside for maintaining the campus infrastructure were reduced and we increased the amount set aside for contingencies in the annual budget.”
Several institutions have also implemented a hiring freeze, which means that any positions left open by leaving or retiring faculty will not be filled. Middlebury, Williams, Trinity and Wesleyan have all done so, while Amherst has not yet followed suit. None of the colleges, however, have terminated any faculty members.
According to President Michael Roth, the hiring freeze at Wesleyan will save the university 10 million to 15 million dollars over the next four to five years.
College presidents have also acknowledged that the economic recession will most likely diminish the donations they will receive, as well as adversely affecting fundraising efforts.
Amidst all the budgets cuts, however, institutions have not touched financial aid.
“We are as committed as ever to providing education of the highest quality and to need-blind financial aid, even as we anticipate that our students’ needs will increase as families are caught up in the global economic downturn,” Marx said.
Similarly, Trinity is also prepared to maintain, and even increase, its financial aid in order to help students whose families were hit by the recession. Roth has also emphasized that students’ financial aid will not be affected by the economic crisis.
Although most colleges in the New England area and in the rest of the nation were adversely affected by the economic crisis, some universities with big endowments were able to ride the storm.
Harvard University’s endowment, for example, did relatively well, growing by 8.6 percent through June 30 to $36.9 billion. However, this growth is dwarfed by last year’s nearly 20 percent growth.
Similarly, Yale University’s endowment grew 4.5 percent this fiscal year to $22.9 billion, which was far short of the 25 percent increase the university enjoyed last year.
Dartmouth College lost $100 million to investments in FY 2008, but its endowment still saw a 0.5 percent gain because of fundraising and gifts. In contrast, Dartmouth’s endowment grew 21.6 percent last year. The University of Pennsylvania’s endowment dropped 3.9 percent in FY 2008, after growing 24.9 percent FY 2007.
Despite these losses, many of these college presidents still emphasize perseverance.
“In challenging economic times, it is more important than ever to enhance one’s core competencies and build a platform for innovation,” Roth said. “These next few years will be difficult ones, but with the talent, energy and generosity of the Wesleyan community, we will emerge from this economic turmoil an even stronger, more dynamic institution.”