Current Economic Update
May 6, 2009
Dear fellow member of the Columbia Community:
As this academic year closes, I want to provide a final update
on where the University stands in the current economic recession. I want to say first how grateful I am to
everyone who has worked so hard, sometimes under stressful conditions, to help
the institution weather this economic downturn.
While the University has not been as negatively affected as many of our
peers, it is never an easy matter to address a world that has taken a sharp
turn for the worse for a great many people.
Just to review, earlier in the year I wrote to identify
several steps we were taking in the face of the downturn. I noted that we would institute a process in
the central administration to review any new proposals for hiring. Similar mechanisms have now been put into
place in schools across the University. The
goal has been to deal with the financial challenges as much as possible through
attrition. I also said we would only proceed
with capital projects that are underway, that are donor-funded, or that are essential
to ongoing operations and safety. We have
introduced significant budgetary cuts in each part of the central administration. All of these approaches have contributed to sustaining
a stable financial position for the University.
For fiscal year 2010, we set out to work with each school by
planning for a reduction of 8% in the endowment support for operations. Since dependence on endowment varies across
our schools, the impact also varies. In
the annual budget meetings led by the Provost with the deans, various additional
measures were developed to achieve balanced budgets for next year. Meaningful expense reductions have been set
in place. Additionally, many salaries
across the University will be held constant. I know these steps have called for difficult,
but necessary, choices.
As is widely known, public markets declined further between
the time I wrote in January and the end of March which is our most recent
quarter for financial reporting purposes.
For the first nine months of the University's fiscal year ending on
March 31, 2009, the value of the endowment declined nearly 22%, with private
investments and real assets valued on the normal one quarter lag as of December
31. While hardly good news, my sense
is that this constitutes strong relative performance both compared to benchmark
averages in the financial markets and university endowments nationally. It also helps in this context that we are less
dependent on our endowment than almost all of our peer universities. Nevertheless, planning for an 8% reduction in
endowment support for the 2010 fiscal year appears prudent as a first step in
absorbing these endowment declines. Our
view of fiscal year 2011 will have to await the close of this fiscal year and a
view of the market conditions and investment returns at that point.
Because of the measures we have applied, we have been able
to maintain the overall financial health of the University. It is heartening news in the current
environment that last week both Moody's and Standard and Poor's reaffirmed
their highest credit rating, Aaa and AAA respectively, for Columbia's
debt. For the entire Columbia community,
this provides reassurance that we are taking the steps necessary to protect the
long term financial health and forward momentum of the University.
It is also noteworthy that we continue to see growth in the
majority of our most important revenue streams. Tuition, sponsored research, and patient care
all remain strong across the University.
As we expected, endowment gifts have slowed in recent months, but we are
still ahead of projected gifts for the Columbia Campaign and the annual funds
of our schools continue to hold up well.
Again, I want to express my deep appreciation to all of you
for the help, ideas, and patience in adjusting to the current extraordinary
Lee C. Bollinger