The View From Out West

November 30, 2009
Stanfor University

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At Stanford University in Palo Alto, California, Provost John Etchemendy's office isn't far from signs pointing to "Earthquake Engineering" and "Turbulence Research"—ironic indicators of a campus reeling from a financial shock.

In the past year, Etchemendy, a philosopher, has had to deal with what he dryly calls "a unique situation"—even compared with the dot-com implosion of a decade ago, which disproportionately affected Silicon Valley.

Underlying this downturn at Stanford is a damaging triple hit: a drop in income from endowment and other investments estimated at 30 percent, a falling off in sponsored-research revenue, and (because of a relatively small tuition hike of 3.5 percent) only modest increases in student revenue. In the current fiscal year, Stanford is aiming to trim $100 million from its $800 million budget. Originally, the plan had been to stretch the $100 million cutback over two years. That was before the national economic situation deteriorated and the value of the endowment continued to plummet.

Among other steps, Stanford imposed a university-wide salary freeze, suspended $1.3 billion in construction projects, instituted hiring freezes, and slowed down (or in some cases halted) faculty searches. Virtually all top administrators took a 5 percent salary reduction. The university also decided to spend less money from its endowment, a step that, it is hoped, will help to restore the endowment to its previous levels—but will at the same time restrict spending all the more severely.

Last January, the Stanford Graduate School of Business laid off forty-nine employees—about 12 percent of its staff. By the start of the current academic year, Stanford schools and units had laid off 412 staff members and eliminated their positions. Cuts in Student Affairs affected fifty-five employees; some were compelled to work half time during the summer, and some took voluntary pay cuts. The division also cut expenses related to travel, conferences, food, classroom furniture, student salaries, and printing.

Through it all, Stanford has stuck by its commitment to an expanded financial-aid program. "For families earning up to $100,000 a year," says Etchemendy, "the cost of sending your child to Stanford is less than sending him or her to any part of the state university system in California."

Cutbacks are alien to a university culture, Etchemendy says. "One thing a university is good at is expanding. It's not so good at stopping things that it does. A departmental program usually starts when there is a group of faculty who are very enthusiastic about a new area. It becomes a very vibrant program. Ten or fifteen years later, it might not be a very vibrant program, but by that point it's very difficult for the university to shut it down.

"Realities like that can get overlooked in times of abundance. But now people understand that we can't be doing everything that we have been doing. So maybe this kind of correction has a good side to it."

Research universities will have to adjust to what he calls "a new baseline," but Etchemendy says—to borrow the title of Stanford's most recent annual report—they can still be "leading in times of challenge." He points out that Stanford's endowment level now is close to where it was three or four years ago. "That doesn't mean this isn't a difficult time. But we are and will be an extremely strong institution."