Univ. tuition remains up in the air

Though Princeton announced Sunday that for the first time in four decades it will not increase tuition next year, Yale’s tuition — which may not be decided for months — is influenced by somewhat different financial circumstances.

The endowments of Princeton and Yale have both experienced substantial success recently, but key differences between the two universities paint an unclear picture about whether Yale will follow Princeton’s lead on tuition. At Yale, a decision on any tuition increase is not expected anytime soon. The University typically publishes its tuition rates in late March, usually about a month before its budget is submitted to the Yale Corporation for approval.

Princeton’s tuition will remain at $33,000 next year, though overall fees will rise 4.2 percent to $43,980 as room and board costs increase 19.3 percent. While Yale’s budget is typically prepared in advance of the April meeting of the Yale Corporation, Deputy Provost for Undergraduate and Graduate Programs Lloyd Suttle said, Princeton’s $1.1 billion operating budget for the 2008 fiscal year was approved Sunday. Suttle, who also serves on the University Budget Committee, said he did not know when a decision on Yale’s fees — which currently total to $43,050 — will be reached.

Significant endowment gains, strong alumni giving rates and new endowment spending rules all allowed Princeton to hold tuition steady for next year, Princeton administrators said.

“The tuition decision was motivated by a desire to ensure that our students can benefit from the favorable performance of our endowment and the generosity of our alumni,” Princeton spokeswoman Cass Cliatt said in an e-mail.

The Princeton endowment rose 19.5 percent to $13 billion last year, but over the same time period, Yale’s grew 22.9 percent to $18 billion, the second-highest rate of return among university endowments nationwide. While Princeton’s investments are not worth as much as Yale’s, the Princeton endowment is the highest in the Ivy League on a per-student basis.

But these two figures — total endowment and endowment per student — do not provide a full picture of the endowment’s effect on the ability to fund new initiatives. Princeton attempts to spend between 4 and 5 percent of its endowment each year, while Yale has a spending rate of 5.25 percent, though the actual rate is lower due to additional rules preventing expenditures from rising too quickly.

According to a document prepared for the launch of the Yale Tomorrow fundraising campaign this fall, the University expects to spend approximately $676 million of its endowment on the operating budget for the 2007 fiscal year that ends this June, representing 34 percent of the operating budget, the highest percentage in recent years. Assuming an $18 billion endowment — a figure that represents the fund’s value as of June 30, 2006 — the University will be spending 3.76 percent of its endowment on the operating budget, less than the 4 to 5 percent Princeton is aiming for.

Where endowment funds originated from also impacts how much they could be used for a tuition freeze or financial aid initiative. Only approximately one-quarter of endowment funds are unrestricted and can be used for any purpose; the remainder is tied to specific purposes designated by donors.

“We’re trying to find ways to free up unrestricted funds,” Suttle said. “It’s probably the single-biggest challenge [in the budget process] at the moment.”

Tuition income is vital to university budgets. The $43,050 cost of attendance for this year does not cover the cost of a student’s education and other services provided, Deputy Provost Charles Long has said in previous interviews, and rising utilities and health care costs make the situation even worse. Based on the 2007 fiscal year budget and assuming certain growth rates for income and expenses, the 2008 fiscal year budget would show a $7 million deficit even before adding new programs. Provost Andrew Hamilton said the goal remains to propose a balanced budget this spring, but at the same time fund ongoing initiatives in faculty and staff diversity and child care, as well as new ones, such as strengthening the technology infrastructure.

Reaching a balanced budget while incorporating new initiatives takes months, Suttle said, and proposals for new funds from individual departments and schools will not even be submitted until mid-February. Still, Suttle said major new initiatives that are top priorities for the University — such as the faculty and staff diversity initiatives unveiled in November 2005 — can be announced at any time, even before the budget is finalized.

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