Seeping into all areas of planning and budgeting, the economic crisis and the damage it did to Columbia’s endowment was emblematic of the academic year.
Columbia has had to undergo an across-the-board restructuring of its finances in response to the nation’s financial turmoil, which began at almost the same time as the first classes of fall 2008. The main reason for the change—which has affected such disparate components of the University as student enrollment, budgetary spending, and faculty hiring—has been an overall 22-percent decline in Columbia’s endowment, which has decreased the funds available to maintain usual practices and push forward major plans. In some cases, this has translated into merely delaying projects that were in the works for the future. In other cases, though, the endowment decline has immediate and significant changes in some of the University’s longstanding practices,
Columbia’s ebbing endowment
At the beginning of the academic year, University administrators were hopeful that Columbia’s investment portfolio, which was then valued at $7.15 billion, would experience only negligible, or at least reparable, losses.
“You’re always taking 5 percent [in endowment payout] no matter what you make, because you figure some years you make 20 percent and some years you lose 10,” University President Lee Bollinger said in October. “It all evens out over time.”
But as time went on and the impact of the financial crisis became increasingly apparent, it was impossible to deny that Columbia’s finances had been profoundly affected by the economic crisis, as had many of Columbia’s peer institutions.
In late January, Bollinger sent a Columbia-wide e-mail reporting that the University had suffered a 15-percent decline in its portfolio over the six-month period that ended on Dec. 31.
“Let there be no doubt, we still have to face hard choices in the months ahead,” Bollinger wrote, “Hopefully, by accepting and planning for this new reality, we will be in a position to move forward in strength.”
Recently, it has become clear that the Columbia’s financial woes are far from over. In another campus-wide e-mail, Bollinger announced on May 6 that the value of Columbia’s endowment for the first nine months of the University’s fiscal year ending March 31 has decreased by a total of 22 percent—a percentage loss comparable to those of other Ivy League universities.
While the prognosis for the future of Columbia’s finances seemed grim, Bollinger has repeatedly asserted that the University is well poised to flourish during the recession when compared to its peers because of Columbia’s institutional structure. The University relies on endowment funds for only 13 percent of its operating budget—the remainder primarily come from government grants, patient revenue, tuition, private gifts, and contracts—so a decreased endowment affects Columbia less than it would affect institutions that rely more heavily on their endowment for their operating budgets.
“While hardly good news,” Bollinger wrote in his May e-mail, “my sense is that this constitutes strong relative performance both compared to benchmark averages in the financial markets and university endowments nationally. It also helps in this context that we are less dependent on our endowment than almost all of our peer universities.”
Despite whatever comparative advantage that Columbia’s institutional structure may lend to its finances, the financial crisis has necessitated a comprehensive re-evaluation of Columbia’s spending activity.
Tough times call for tightened purse strings
To compensate for the significant losses that Columbia has endured in its endowment fund, the University has been constraining its spending habits. Every aspect of the University’s finances has experienced at least some cuts or restrictions.
In his January e-mail, Bollinger announced each “budget unit” of the University—including schools, centers, and offices—should plan for an 8 percent decrease in the amount of funds that they would receive in the next fiscal year from the endowment funds.
Each budget unit has been allowed autonomy in the cuts that they make, and has chosen their own ways to reduce their spending.
“It’s really a call on departments and schools to think about how they can do their jobs, protect their core missions, with less resources than they’ve had in the past,” Stephen Rittenberg, senior vice provost, said.
While Bollinger did not announce any further budget cuts in his e-mail this month, he did suggest that the 8-percent reductions would be only a “first step” in the process of “absorbing these endowment declines.”
Trimming wherever possible
While University administrators have largely declined to comment specifically on present and future budget cuts, a few such cuts have been publicly announced.
For instance, faculty hiring searches have been postponed and any faculty position that is now vacant may remain unfilled for the foreseeable future. The University now utilizes a hiring review board to decide which positions must be filled immediately, and which hirings can be delayed until more funds are available.
“I noted that we would institute a process in the central administration to review any new proposals for hiring,” Bollinger wrote in his May e-mail. “Similar mechanisms have now been put into place in schools across the University.”
Additionally, the implementation of Sakai, the proposed successor to Columbia’s CourseWorks system, has also been delayed because, under the current financial conditions, it is not a priority.
According to provost Alan Brinkley, such budgetary adjustments are not “a step backwards” for the University. “It’s just not taking a step forwards,” he said. This also translates into a deferral of projects that are not already fully funded or completely necessary.
“The goal has been to deal with the financial challenges as much as possible through attrition,” Bollinger wrote in the e-mail. “I also said we would only proceed with capital projects that are underway, that are donor-funded, or that are essential to ongoing operations and safety.
Different cutbacks in different schools
For Columbia College specifically, the student-to-faculty ratio for the coming year is expected to increase to 9:1 from the 2009 level of 8.6:1. A University statement released to Spectator in April highlighted the fact that, even with the expected increase in the student-to-faculty ratio, the figure will remain below its 1999 level of 10:1.
The increase in student-to-faculty ratio is related to another financially inspired change in Columbia College: an enrollment increase of 50 students.
In March, Kevin Shollenberger, dean of student affairs and associate vice president for undergraduate life, informed the student body about the addition of 50 students to the incoming Columbia College class of 2013. This enrollment increase is expected to result in an approximately $1 million revenue boost after renovations are paid for.
But the cuts don’t stop at CC. According to Nicholas Dirks, vice president for arts and sciences, the enrollment increase is “just a blip” in the grand scheme of the University’s budget-cutting measures. “A couple million here, a couple million there, pretty soon we’re talking about real money,” Dirks said.
Another of the University’s money-saving initiatives includes a 10-percent decrease in the number of Ph.D. students. The reduction of these graduate students will free up space in Harmony Hall, a University dormitory, and thus will help to accommodate the increased number of incoming CC first-years.
These cuts come with a push to fill programs that bring money into the University, such as housing during the summer and the post-baccalaureate program.
In addition to these measures, Columbia administrators have also implemented a faculty wage freeze. Many officers and administrative staff will have their salaries held constant as well.
Barnard College, too, has taken measures to compensate for its reduced endowment, which fell from the $200 million mark of two years ago to $163 million as of Dec. 31, 2008. Such measures have included a 3-percent tuition increase—approximately $1,560 more per student—as well as budgetary adjustments on a smaller scale.
“To address the budget shortfall, the members of the president’s council, in consultation with their senior staff, reviewed their budgets and came up with mid-year reductions to close the gap,” Gregory Brown, Barnard’s vice president for finance and planning, said in March. “These savings were achieved by freezing or eliminating budgeted positions, deferring equipment purchases, and reducing travel and entertainment costs.” Such reductions, he said, represent approximately 1 percent of the ollege’s annual budget.
Columbia’s School of Engineering and Applied Sciences is also undergoing financial adjustments, although so far these changes have seemingly only included an extension of planned projects over longer periods of time to conserve money.
“While it is not immune to the effects of the economic conditions in the world outside its walls, and while its resilience may be tested, there is every reason to believe that the school will continue its steady progress, both nationally and internationally,” University spokesperson Robert Hornsby wrote in a statement on SEAS. “Albeit at a slower pace than would occur in a better economy.”
Columbia’s financial future
While the University has been making extensive adjustments to address its shrinking endowment, the future of Columbia’s finances, which are largely tied to the currently unpredictable and unstable global economy, is unclear.
A growing student need for financial aid, coupled with a slowing in donations and gifts to the University, nearly ensures that Columbia will need to continue finding new ways to cuts costs and save money.
For instance, Bollinger has not ruled out the possibility of a rise in tuition for colleges within the University. In February, he said, “I’m doubtful we will [implement a tuition freeze] ... Cost is going up and we need to share that with students.”
Although extensive future cuts seem inevitable, Columbia administrators have made it clear that some aspects of the University will remain unchanged.
For example, the University has pledged its ongoing commitment to remaining need-blind to its admission applicants. Likewise, Brinkley has emphasized that budget changes will not interfere with Columbia’s academic quality, which is its first priority.
“We should try to reduce expenses in ways that would not impinge on the quality of teaching more than necessary,” Brinkley said. He added that any financial changes made to the University will avoid any “irrevocable damage.”
Comments
We're looking for comments that are interesting and substantial. If your comments are excessively self-promotional or obnoxious you will be banned from commenting. Consult the comment FAQ and legal terms.