Economic Downturn hits Brandeis

Brandeis University President Jehuda Reinhartz has sent out a campus-wide email talking about the state of the University budget – it’s not too great.

Donations, Endowment, and so on are all down.

I’ve heard people ask: “Yet, aren’t colleges supposed to thrive during recessions?”

Here’s my take:
We know that Brandeis is very secretive about the endowment, and (I think) they have some contractual obligations that prevent them for disclosing where our money is invested. This probably means that there’s a lot of money in “complex financial instruments”. This credit crunch could really have taken a chunk out of the endowment, I bet.

Colleges can thrive during recessions due to tuition costs. Yet Brandeis is famous for giving lots of financial aid.

Also, I don’t think that colleges do thrive through recessions. Demand for college goes up, yes, as the cost of college stays kinda constant but the returns of working decrease (decreasing the opportunity cost of college). That said, colleges don’t really get all their income from tuition, can’t adjust tuition to supply and demand like a market-oriented actor (and they shouldn’t!) and lastly people’s ability to pay goes down.

I’ll bet there are some Brandeis students, either newly-accepted freshmen or upperclassmen, who will have a very hard time paying for college this year, as tuition has already been fixed for this semester, and college loans just got a lot harder to obtain…

I hope there are no cuts to student aid, work-study, or (god forbid) TYP. We need to double or triple the size of TYP and offer more class-based affirmative action, especially now.

Anyways, you can find the full email in the extended entry.

The economic crisis at home and abroad affects all segments of the economy and society. Chaos in the financial sector continues after months of unpredictable — at times unthinkable — events. Colleges and universities, including Brandeis, are not immune from events occurring in the stock markets and banking. Like many institutions, Brandeis’s endowment returns have declined while the University’s operating costs have risen. Our traditional revenue sources — the endowment, gifts and grants — have all been adversely affected by this situation, and the future is difficult to predict. Families and students are likewise feeling the pressures of the negative economy, and financial needs are increasing.
Today at Brandeis, we are confronted with reduced endowment earnings, reduced gifts, the need for increased financial aid, and an overall increase in our operating costs. Currently, we are projecting a $10 million gap in our $336 million FY2009 operating budget. If the economy continues to worsen, the gap could grow.

I have approved a plan to close the gap this fiscal year. The plan calls for the use of one-time resources of $5 million, and another $5 million to be provided through expenditure reductions. This $5 million expenditure-reduction target represents about 3.5% of the University’s base operating budget, which excludes financial aid, sponsored research, and gift-funded programs. I have asked that the majority of the reduction target be accomplished through expenditure reductions in such areas as equipment, consultants, memberships, travel, events, and supplies. I am hopeful that any need for staff and part-time contract faculty reductions at this time will be minimal. The rest will be accomplished largely by holding positions vacant.

The University is not in a position to assess how and when these economic conditions might change. The current downturn could worsen and continue for some time, and the actions that are being taken now may not be enough to offset further revenue declines for FY2009 and FY2010. The University is trying to weather this period without damaging its academic programs, student life programs, financial assets and physical plant. The University senior administration will continue to monitor the economic situation very closely and, as conditions dictate, will make determinations and recommendations as to whether additional actions are needed for FY2009 and/or FY2010, including further expenditure reductions.

I will keep you apprised, and I have every reason to believe that, together, we will work through this very difficult period with Brandeis creativity, innovation, cooperation and good will.