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Uploaded: Monday, May 11, 2009, 9:35 AM
Stanford faces cuts due to endowment plunge
Move comes on top of 15 percent general fund cut for next year
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by Chris Kenrick
Palo Alto Online Staff
Stanford University expects to face steeper budget cuts in the next two years as it moves to recover from an unprecedented 30 percent plunge in its endowment value this year.
University President John Hennessy said Stanford, which is spending $1 billion from its endowment in the current fiscal year, will reduce its draw from the fund in the next two years in an effort to help restore the principal. Valued at $17.2 billion in 2008, the endowment has plummeted to about $12 billion this fiscal year, which ends Aug. 31.
Next year, endowment spending will be held to $900 million, Hennessy said. The following year it will drop to $750 million.
"The loss of income will be felt over multiple years and have a significant impact on the way we do business," Hennessy told the Academic Council on April 30.
The decision to cut endowment spending comes on top of a previously announced 15 percent cut in next year's general fund budget.
That reduction "requires deep cuts, and we know it will affect hundreds of dedicated employees, but we saw no alternative," Hennessy said,
The university initially thought the 15 percent general fund cut next year would be all that was required. But in recent months Student Affairs, the Alumni Association and the Land, Buildings and Real Estate Division have all cut their budgets and laid off staff, Hennessy said..
"These past months it is become clear that this is a critical juncture in history," he said. "Every industry -- from banking to manufacturing to higher education -- has had to adjust to a new reality and reconsider future directions."
Three weeks ago, Stanford raised $1 billion through a bond offering, a strategy also being used at other universities including Duke, Harvard, Notre Dame, Princeton and Vanderbilt.
Hennessy said it is likely the university's budget challenges will continue for some time.
The university still has not met "some of our important original goals" of the Stanford Challenge, a five-year, $4.3 billion fundraising campaign launched in 2006, he said.
Despite the downturn Stanford remains committed to a financial-aid program announced last year that eliminates tuition, and room and board charges for students from families making less than $60,000 a year; and eliminates tuition for students from families making less than $100,000 a year.
The university also will keep a strategic focus on maintaining faculty quality and "positioning Stanford to be a leader in important new areas," he said.
Noting that Stanford has survived two major earthquakes, the Great Depression and severe reductions in federal research support, Hennessy said he remains confident about the university's future.
Last summer 48 Stanford-affiliated athletes -- the largest number from any university -- competed in the Beijing Olympics, winning eight gold, 13 silver and four bronze medals.
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Posted by Stuart Berman, a resident of the Old Palo Alto neighborhood, on May 11, 2009 at 11:43 am As part of the cost cutting Stanford Athletics was on the verge of cutting its Varsity Fencing program until a group of interested athletes and parents stepped up to undertake a fundraising program. Stanford not only has one of the top fencing teams in the country, but it's coaches also run the Cardinal Fencing Club. Cardinal Fencing Club serves the Palo Alto community with recreational and competitive fencing programs for children and adults in the community. You don't have to have a Stanford affiliation to participate.
For more information check out:
www.cardinalfencingclub.com
www.savestanfordfencing.com
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Posted by jc, a resident of the College Terrace neighborhood, on May 11, 2009 at 1:27 pm Walking around the Stanford campus I am continually amazed at the number of new buildings that have gone up or are being built. The campus is lovely, and it is certainly easier to say yes than no to money for visible bricks and mortar and programs that donors (and those Stanford officials who make the decisions) can swell with pride about. But there have always been booms and busts. The painful cost of fiscal imprudence and risk assessment is paid for by all those involved in teaching and research, faculty, students, and support staff.
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Posted by withheld, a resident of the Old Palo Alto neighborhood, on May 11, 2009 at 5:02 pm In light of the news that Stanford is putting their building program on "hold", why not do our community a favor and let the Charter Auxiliary that supports Lucile Packard Children's Hospital stay in the location on Oak Road on campus? It serves hundreds of people in our area. In the current downturn in our economy the need is even greater. Also, the need for Good Will toward Stanford is at an all time high. All it would take is the stroke of a pen to allow this facility to remain ON CAMPUS, where it belongs. Their final sale at the present site is scheduled this month!
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Posted by withheld, a resident of the Crescent Park neighborhood, on May 11, 2009 at 8:07 pm In light of the news that Stanford is putting their build program on "hold", why not do our greater community a huge favor and extend the lease granted to the auxiliary that works to support Lucile Packard Children's Hospital? It serves hundreds of people in our area. In the current downturn in our economy the need is even greater. It also seems prudent for Stanford, who could use some good will from the community at larg, to loosen it's hold on that property that will be vacant because of the "hold". All it would take is an attitude adjustment and a stroke of a pen to allow this facility to remain on campus--where it belongs. As it stands, the final sale is this month.
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Posted by reader, a resident of Menlo Park, on May 12, 2009 at 12:52 pm I second "withheld's" motion to keep the auxiliary where it is now. It is hard to believe that Stanford really needs EVEN THAT area for something or other, in a time when it has to cut like mad. (In fact, since they made the decision to ask the auxiliary to leave, things have changed and are regarded as being much, much worse than they were; maybe the auxiliary could be allowed to stay after all.)
People on campus have not realized that a bigger cut than 15% is now what we face. It's hard to hear, every single day, that the economy is recovering... and put that "truth" alongside cuts at Stanford that exceed 15%. (Exceed by how much? One person at the April 30th talk believes the suggested cut is 37.5%.)
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Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on May 12, 2009 at 8:41 pm
Walter_E_Wallis is a member (registered user) of Palo Alto Online Ivy, welcome to the real world.
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Posted by reader, a resident of Menlo Park, on May 13, 2009 at 12:11 pm Ivy? No, Mr. Wallis. That's the problem. Had they stayed Ivy, they would not have had these problems.
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