With a 25 percent drop projected for 2008–09, Princeton’s endowment may need more than a decade of steady gains to return to its June 2008 value of $16.3 billion, according to Provost Christopher Eisgruber ’83. Fewer resources will mean significant changes in the University’s operating budget, which relies on the endowment for nearly half of its revenue, he said.
Eisgruber and President Tilghman delivered a sobering outlook for Princeton’s future at the president’s annual town-hall meeting for the University community Feb. 9. “History is going to judge us by how we do during the next five years,” Tilghman said. “I wouldn’t say that if I didn’t fundamentally believe that we are going to pull together as a university.”
Princeton entered the current downturn on strong financial footing, Eisgruber said, with the nation’s highest endowment per student, conservative cash management, and “significant headroom” in the University’s capacity to borrow money. As a result, faculty searches have continued at a time when many universities are not hiring. And while requests for financial aid are up, Tilghman said Princeton will be able to meet anticipated need. The University’s 2009–10 budget, approved by the trustees Jan. 24, provides a 13 percent increase in undergraduate financial aid, raising the allotment to $104 million.
The $1.3 billion budget, up 0.8 percent compared to projections for 2008–09, includes the lowest increase of tuition and fees in four decades (2.9 percent), which raised the total for undergraduate tuition, room, and board to $47,020. The financial-aid office estimates that an average student spends an additional $3,495 on miscellaneous expenses, such as books, supplies, and recreation.
Graduate students will see a comparable rise in tuition and housing costs in 2009–10, along with a 3 percent jump in stipends. A comprehensive plan to revamp graduate-student housing has been shelved while the University searches for new ways to fund it, Tilghman said.
Princeton’s departments are trimming their budgets, with a target of cutting at least 5 percent of non-personnel expenses in the coming academic year. The University is awarding minimal salary increases, and some construction projects have been delayed or put on hold. But Eisgruber suggested that more belt-tightening will be needed, including job reductions, if the economic climate does not improve.
Several high-priority plans are moving forward, including a 20-student pilot of the University’s international bridge year for incoming freshmen. The newly endowed Andlinger Center for Energy and the Environment is conducting a national search for its first director. Faculty will continue to join the chemistry department, which is scheduled to move into its new building in 2010.
The Priorities Committee, which submits budget recommendations to Tilghman, allocated funds for a few new positions in the coming year, including a director of inpatient services and two fellows in counseling and psychological services at McCosh Health Center. The University’s sustainability director, funded by an alumni gift during a pilot phase, also received permanent funding.When Eisgruber was asked if Princeton could dip deeper into the endowment to fund the operating budget, the provost replied that the trustees have allowed for that in the coming year — even with budget cuts, the University’s endowment spending is projected to be 6.25 percent of the total endowment, above the preferred range of 4 percent to 5.75 percent — but extending that practice would harm the endowment’s long-term buying power. “We think even a spend rate of just in excess of 6 percent is an unsustainable spend rate,” Eisgruber said. “If we do that, the University is living beyond its means.”