Stanford, Duke move to avert fiscal problems

News that two prominent universities may cut faculty to close budget gaps suggests that Yale’s financial situation remains equal to or better than that of its peer institutions.

Citing budget difficulties, Stanford Provost John Etchemendy announced Oct. 24 that Stanford would institute a precautionary hiring freeze, effective last Friday. Etchemendy’s announcement came two weeks after a Duke budget committee called for a reduction of up to 50 faculty positions to address projected budget deficits in the 2003-2004 fiscal year.

Yale officials said Monday the University is not considering any such action.

The announcement at Stanford was accompanied by the warning that Stanford could cut its general fund budget by up to 8 percent this year. Duke’s Arts and Sciences Council Budget Task Force, which issued Duke’s report, projects a 2003-2004 fiscal year budget deficit of $1.7 million in the arts and sciences.

Yale Deputy Provost Charles Long said Yale is not considering any faculty cuts or freezes, and although Yale’s budget will not experience the growth rates of previous years, it will not decrease in the 2003-2004 fiscal year.

“We certainly have not yet talked about budget cuts,” Long said.

The most recent faculty cuts in Yale history occurred in 1991 and 1982. In 1991, Yale cut its faculty of arts and sciences by 6 percent after rebounding from a 7.5 percent cut in 1982.

“We haven’t, at this point, contemplated reducing it again,” Long said.

But Larry Goldstein, a senior fellow at the National Association of College and University Business Officers, said universities with larger endowments, like Yale, will ultimately be more affected by unfavorable economic situations.

“It’s a relative concept,” Goldstein said. “The likelihood is you’re depending more on that endowment.”

Long said national economic trends will cause Yale to be more prudent in the coming years. It is not clear at this point how financially cautious Yale will be in the 2003-2004 fiscal year, Long said.

He said various initiatives may need to be reprioritized and the University may become less willing to authorize one-year or fill-in appointments for faculty.

Yale’s endowment reported a 0.7 percent investment return in the 2001-2002 fiscal year, following a 9 percent return in the 2000-2001 fiscal year and a nearly unprecedented 41 percent return in the 1999-2000 fiscal year. This fall, the total value of Yale’s endowment fell from $10.7 billion to $10.5 billion.

But the last few years have shown Yale outperforming many of its peer institutions. The 2001-2002 fiscal year was the third year in a row that Yale’s endowment outperformed Harvard University’s.

This year’s $1.54 billion operating budget and $361 million capital budget is the largest in Yale history and the sixth consecutive balanced budget. The 2001-2002 fiscal year operating budget was $1.4 billion, with a capital budget of $324 million.

Stanford Executive Director of Human Resources John Cammidge said the recent freeze at Stanford was an attempt to “get more discipline, more focus” in hiring by requiring that each appointment be reviewed by a senior officer at the university. But he said that Stanford will not be the only institution required to adjust to the new economic situation.

“While the economic conditions remain uncertain — there will be more institutions that will need to be prudent about managing their resources,” Cammidge said.

But no official decision has been made at either Duke or Stanford concerning the cuts. Currently, it is unclear whether these cuts will take the form of layoffs.

Goldstein said while the potential faculty cuts are regrettable, they are often required in difficult economic situations.

“I think it’s unavoidable,” Goldstein said. “I think it’s a very common and necessary response.”

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