As Rutgers grapples with budget realities amid turmoil in the world’s financial markets, universities across the country are also assessing the impact of the economic downturn on their own operations and programs.

 
Public and private schools alike are experiencing tough times. Many have already implemented strategies to cut expenditures as state economies take a turn for the worse.

Arizona State University, for example, anticipating a $25 million budget cut on top of $30 million in cuts already made this year, is eliminating 600 positions. In California, Gov. Arnold Schwarzenegger has proposed reducing state agencies’ budgets by 10 percent, including the University of California’s higher education system. The University of Washington, battling a $10 million state cut, has instituted a hiring freeze.

In the past month, private universities including Brown, Boston, and Cornell also have imposed hiring freezes. Even Harvard, with its nearly $37 billion endowment, has announced plans to cut spending.

Many universities are facing a retreat of donors, increased demand for financial aid, and a fall in the value of their endowments, the total worth of an institution’s investments. Moody’s Investors Service, a leading financial research and ratings service, recently projected a 30 percent decline in the value of college and university endowments in the current fiscal year.

Paul F. Hassen, vice president of public affairs for the National Association of State Universities and Land-Grant Colleges, said that public universities and colleges, which depend heavily on state support, tend to have smaller endowments than elite private schools and that the endowments have to be stretched across greater numbers of students. Rutgers’ endowment of $410 million is modest for a university of its size and scope. As of mid November, the university’s endowment has fallen $108 million, from $518 million at the close of the 2008 fiscal year, according to Bruce Fehn, Rutgers’ senior vice president for finance and administration.

Hassen noted that more than 30 states have warned their state agencies to prepare for “midyear recisions” (cuts in the approved state budget) and in a handful of states, public institutions already have announced tuition increases for the spring semester. New York Gov. David Patterson recently called for a $300 statewide tuition hike at public universities for the spring semester, Rhode Island announced a $200 increase, and Michigan State University has raised its spring tuition by 1.2 percent.

“The global economic crisis is having significant impact on federal and state governments,” Hassen said. “The prospects of additional state investment in higher education over the next 18 months is bleak. ”

In New Jersey, the recent economic news has been grim. Tax revenues are well below projected levels, and the state is facing a $1.2 billion budget shortfall. There is talk in Trenton of midyear cuts to the current budget.

Given these uncertainties, Rutgers is taking steps to deal with the real and potential impact of the slumping economy. Executive Vice President for Academic Affairs Philip Furmanski has asked deans and vice presidents across the university to provide a list of actions, in priority order, that they would take in the event of midyear cuts – and a plan to make the cuts permanent in the next fiscal year.  Furmanski also has requested units to defer all nonessential spending beyond the cuts they’ve been asked to model.

In a letter last month, President Richard L. McCormick reassured the university community that Rutgers is in sound fiscal shape. “We have the cash we need to pay our bills,”  including the university’s financial aid commitments to students and scholarship awards, he said. Nevertheless, he stressed that the financial crisis will cause problems for Rutgers on several fronts. Aside from potential state aid cuts, McCormick expressed concern about the incomes of Rutgers’ students and their families, the decreased interest income on the university’s investments, and the challenge of fundraising in the current climate. 

McCormick said the university is taking a hard look at all facilities projects, including the expansion of Rutgers Stadium. Fundraising for the project has gone more slowly than anticipated and borrowing for all capital projects has become harder and more expensive, McCormick said. He has asked Universities Facilities and the Division of Intercollegiate Athletics to develop options for the stadium that would place priority on construction of additional seats, while reducing overall costs.