Briefly: Stanford cuts budgets by 25 percent to avoid future reductions

Facing a 27 percent drop in its endowment, Stanford University will make steep budget cuts for the next two fiscal years instead of spreading out its reductions over several years as other universities, including Yale, have chosen to do. Abandoning the so-called smoothing formula, which would require decreasing endowment spending by 5 to 8 percent every year for five years, Stanford will now make aggressive cuts of 25 percent over the next two years to its endowment spending, which was about $933 million for the 2009 fiscal year. Stanford officials said they believe the sharp reductions will prevent future budget cuts and allow normal hiring and campus development to resume more quickly; by making deep cuts now, they will be able to spend the full endowment payout when the market recovers. Stanford’s endowment, which now stands at $12.6 billion, is tied with Princeton’s as the third largest among American universities.

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