SIPA cuts non-financial aid, non-salary costs by five percent

In light of a decreased University endowment, the School of International and Public Affairs has initiated a five percent cut on all non-salary, non-financial aid spending in 2009 and will maintain the cut for the 2010 fiscal year.

Many schools within the University are grappling with budget cuts in light of the 15 percent decrease in the University’s portfolio performance in the six-month period that ended Dec. 31, 2008. SIPA is economizing administrative costs in a way its leaders hope will have a minimal direct impact on its students or long-term growth.

All budget units in the University have been told to anticipate an eight percent decrease in University endowment funding for the upcoming fiscal year. But relative to other Columbia divisions and its peer institutions, SIPA has a tiny endowment.

“While of course any reduction is painful, other schools with larger reliance on endowment funds are worse off,” said Patrick Bohan, associate dean of SIPA’s General and Financial Administration.

SIPA’s total endowment at the beginning of the 2009 fiscal year was $44 million, and the income the endowment generates accounts for less than five percent of SIPA’s central budget.

“The irony is that other schools within Columbia and our peer institutions, such as the Woodrow Wilson School of Public and International Affairs at Princeton or the John F. Kennedy School of Government at Harvard, are hurt more because they have larger endowments and their endowments constitute a greater percentage of their budgets, so there is a greater shock,” said Robert Jervis, Adlai E. Stevenson professor of political science and international and public affairs, who has previously managed the budget of the Faculty of Arts and Sciences.

To cut costs, SIPA has initiated the five percent cut on all non-salary, non-financial aid spending in 2009. There will be no faculty cuts, nor will there be any staff terminations. Cuts to instructional and administrative salary growth will be kept to a minimum.

SIPA is “also looking at deferring the purchase of equipment and/or services where possible, and, as staff vacancies occur, we are examining each position carefully to determine if it needs to be filled immediately or if replacement hiring can be deferred for a period of time without a significant loss in efficiency and service,” Bohan said.

According to SIPA Dean John Coatsworth, there will be no direct effect on students, but Jervis noted that the potential for fewer Ph.D. students—there is a university-wide Ph.D. cut of 10 percent—means fewer teaching assistants and a shrinking faculty. “Money does translate into things we all like in terms of education, so there is no way for this to be painless,” Jervis said.

But there should be little to no impact on course size, teaching, or student services. Most of SIPA’s endowment that does not come from the University’s general endowment goes directly towards fellowship support for students. An increase to fellowship funds will be maintained by cutting costs elsewhere.
Scholarship spending will increase as previously planned for 2010 and will have increased almost 30 percent since 2008. The 2009 financial aid budget is $6.6 million, and the projected 2010 total is $7 million with growth due to new endowments, an increase in current use gift funds, and strong enrollments in all degree programs.

The effects of the decline in endowment payout is also mitigated by SIPA’s fundraising efforts, which Bohan said are “doing quite well” despite the recession. Annual fund revenue is up again this year, 2008 was a very strong year for fundraising, and in January 2009, there was a large $3 million endowment gift.

“If the trend continues, the reduction in endowment income will be more than offset by new endowment gifts and increased current use donations,” Bohan said. Endowment income constitutes 4.06 percent of SIPA’s projected revenue this year, and the figure for 2010 is projected to be slightly higher thanks to the $3 million Lemann endowment gift in January 2009.

Budget preparations for the fiscal year 2010 are complicated by SIPA’s increased financial and administrative autonomy, which will be in effect as of July 1 of this year. SIPA has traditionally paid about 38 percent of its revenue to the Arts and Sciences but will now retain all of its direct revenue and make its payments out itself to the central University administration as well as to Arts and Sciences.

The structural change, which was announced in March, gives SIPA complete control over what budget cuts it will make, allows it to retain donations and gifts to the school, and makes its future budget more predictable. “The net financial result of these changes is not as dramatic as it sounds although it certainly makes for a more challenging budget submission,” Bohan said.

Questions remain about the financial relationship between the two schools, particularly in this economic climate. “We are still subsidizing A&S even though A&S services aren’t for SIPA students,” Jervis said. “Most students in the College, for instance, don’t realize that lots of SIPA money goes to them.”

Overall, the school is trying to maintain its status while sustaining the blow. “We are way ahead of where we were 20 years ago, but this is a hit,” Jervis said. “Looking around at the wider society, it would be amazing if there weren’t any impact here.”