Current Economic Update
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, mysense 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 economic downturn.
Lee C. Bollinger