Princeton University announced that it expects its endowment to plunge 30 percent by the end of this fiscal year—more than its original projection of a 25 percent decrease—forcing the administration to plan for a new round of budget cuts, including a salary freeze and staff layoffs.
Monday’s announcement came two weeks after Harvard revealed that the payout from its endowment would fall by 8 percent for the next two years—a much greater reduction than the original 2 percent projection that the administration told departments to plan for.
But unlike Harvard, Princeton plans to increase the fraction of the endowment it plans to spend—upping the spending rate from a projected 6.25 percent to 6.7 percent next year, which is higher than its usual target rate of 4 to 5.25 percent, according to Princeton University President Shirley M. Tilghman’s letter to the community on Monday. [SEE CORRECTION BELOW]
Princeton may have needed to increase endowment spending as a result of its decision not to compensate for its losses by raising tuition more than usual. Although Princeton, like Harvard, has increased its tuition, the 2.9 percent hike is Princeton’s smallest in 43 years. The modest increase is intended to provide relief for families who have been hard hit by the economic downturn, according to Princeton’s Provost Christopher L. Eisgruber.
Tilghman told the Daily Princetonian—Princeton’s daily student newspaper—that staff layoffs will be inevitable, though it remains unclear how many employees will need to be let go.
Although Harvard slashed the number of its faculty searches from 50 to 15, Princeton joined Yale in refusing to slow down hiring despite the financial downturn.
“This is a time that calls for us to be as thoughtful as possible about what is most important to the success of Princeton, and to preserve those qualities aggressively,” Tilghman said in Monday’s letter.
Princeton is spreading out its budget cuts over a longer period than Harvard’s Faculty of Arts and Sciences plans to. While the FAS must cut next year’s budget by approximately $152 million, Princeton is planning to reduce next year’s budget by $88 million and the 2010-2011 budget by an additional $82 million, saving a total of $170 million in two years.
Layoffs, a halt on new construction projects and faculty searches, a freeze on salary raises for faculty and staffers with salaries over $75,000, and cuts in departmental budgets will contribute to Princeton’s savings.
—Staff writer Bonnie J. Kavoussi can be reached at firstname.lastname@example.org.
The April 7 news article “Princeton Forecasts Endowment Drop” incorrectly implied that Harvard’s payout as a fraction of its endowment would decrease next fiscal year. In fact, that fraction will likely increase due to the projected 30 percent decline in Harvard’s endowment.