U.S. colleges grapple with budget decisions

About a year and a half after colleges and universities across the country began reacting to the effects of the economic downturn, divergent plans and budget revisions have emerged among peer institutions in attempts to scale back, prioritize and reallocate spending.

Budget cuts for the College began in October 2008, when President Emeritus Schapiro announced the cutback in faculty hiring, the postponement of the Stetson-Sawyer and Weston Field construction projects and the reduction in facilities renewal expenditure. Since that time, departmental budgets have been reduced across the board, projects have remained postponed, faculty hiring has been limited, faculty salaries have been frozen and class sizes have been increased marginally. Most recently, the College has announced changes in financial aid policies as well as the implementation of a retirement incentive program.

According to Jim Kolesar, assistant to the president for Public Affairs, additional financial decisions will be finalized following the trustees’ meeting in April. Fees for the upcoming academic year will be announced at the end of March, retirement incentive packages will be announced within the next few weeks and departments will receive approved budgets in May.

The Chronicle of Higher Education reported in early February that, as a result of the financial crisis, many colleges kept tuition increases to a minimum and allowed substantially larger financial aid budgets for struggling families. Last summer, the National Association of Independent Colleges and Universities reported that average tuition increased by 4.3 percent at its colleges, while tuition has typically gone up by approximately 6 percent a year for the past ten years. The report also noted that colleges raised aid by 9 percent on average.

While colleges and universities have tried to keep costs manageable for families, cuts have consequently had to be made elsewhere. Inside Higher Ed recently reported that data from the College and University Professional Association for Human Resources have shown a decrease in faculty salaries. Specifically, 21.2 percent of faculty members at institutions across the country did not receive a salary increase this year, while 32.6 percent received a salary decrease. The median salary decrease among those faculty members was 3 percent. The report went on to say that the only faculty members that received a notable increase in average salary (1.7 percent) were those at “private doctorate-granting institutions.”

The general trends, though telling, fail to represent the variety of cost-cutting measures that colleges have implemented and do not make note of the circumstances in which institutions have actually increased spending in various areas. Institutions akin to the College have made financial decisions across the spectrum of financial choices – from drastic budget cuts to minimally changing operations to increasing budgets for particular programs.

Cutting back

At Dartmouth, the board of trustees approved the Strategic Budget Reduction and Investment in early February, seeking to “identify $100 million in expense reductions or new revenues for fiscal 2011 and 2012.” The initiative includes plans for adjusting benefits for faculty and staff, reorganizing student services and implementing layoffs. “We have had to make 38 layoffs now, and expect a comparable number in April,” said Dartmouth President Jim Yong Kim in his Feb. 8 letter to the Dartmouth community. “Approximately 60 percent of these layoffs involve professional and managerial employees.” Dartmouth has also implemented retirement incentives (which 105 employees accepted), reduced work hours, froze salaries, eliminated unfilled positions and ended its no-loan financial aid policy.

Yale also announced in February a plan to close its $150 million deficit – a plan that includes eliminating an unspecified number of staff members, reducing benefits, reducing the number of graduate students by 10 to 15 percent and “reducing but not eliminating” a number of research programs.

Above all, colleges and universities have sought to maintain their fundamental beliefs in the face of cuts – particularly the core academic experiences for students. Dartmouth, for example, affirmed its mission to “build on its unique approach to educating leaders who will shape the future,” emphasizing its prioritization of academics and attracting “world class” faculty.

While many of the Ivy League schools have managed to minimize the effects of budget cuts by trimming around the edges – in Harvard’s case, eliminating lavish dinners and other luxuries – prioritizing academics has for some institutions come at the price of laying off staff members. At Cornell, 150 staff members were laid off, while 432 took early retirement incentives. At Princeton, 43 positions were eliminated in addition to the 145 employees who retired early.

Continuing growth

Even in the face of reduced endowments and tightened budgets, some institutions have been able to make positive progress. Yale announced that, due to $30 million it received in donations, it would be able to restart the renovation of its art gallery, founded in 1832. At a time when other institutions are rescinding parts of their financial aid policies, Hamilton College recently announced that it would move to need-blind admissions. This decision is expected to cost Hamilton approximately $2 million over the next four years, a figure which will be covered in part by donations from a number of trustees. Hamilton will also begin a capital campaign to create a permanent endowment for need-blind admission. In addition, numerous schools – including Yale, Harvard, Princeton, Amherst and Bowdoin – have reaffirmed their commitment to no-loans financial aid policies.

According to Kolesar, the repercussions of decisions made by institutions now may not manifest themselves for years. “I sense that some people think that the college that reduces spending the least is in the best position,” Kolesar said, noting that this may not be entirely true.
“What highly endowed colleges are doing is repositioning themselves for the new financial future that we now all face. It will take some years to determine which colleges repositioned themselves most intelligently, not only by the right amount, but in the way that best protects the core of their mission and enables thoughtful, effective growth as conditions warrant.”