Summertime Budget Cuts Threaten Faculty Retirement Funds
Sam Guzik
Contributor
Posted:
05/28/09
Summer. For students it's a break from classes, homework, and the stress of deadlines; for professors it's a time to step back from the semester, continue research, and plan courses; and for administrators -- this year at least -- it's a chance to cut budgets, scale back, and find savings in a tough economy.
Around the country, public and private colleges and universities are facing the need to reduce staff, delay capital improvements and otherwise reckon with the implications of the economic crisis at the gates of the ivory tower.
Last week, Brandeis University announced it would suspend payments to the retirement accounts of faculty and staff members starting in July to cover nearly $7.4 million of its projected $8.9 million deficit. Halting contributions to retirement accounts is just one of the increasingly harsh steps that institutions of higher education are taking to deal with shrinking endowments.
"There is this perception that the nonprofit world is maybe a gentler, kinder world than corporate," Roland King, vice president for public affairs at the National Association of Independent Colleges and Universities, told The New York Times. "So some people seem to perceive this as a breach of faith, especially since many people go into nonprofit work at less salary, because the benefits are so good. But we are absolutely at a point in this economy where these sort of things have to be on the table."
For colleges and universities, making these cuts is a balance between remaining competitive for prospective students and faculty members and remaining afloat as the economy threatens the viability of the university.
On Tuesday, Wesleyan College announced a similar plan to cut expenses by reducing retirement contributions, in addition to cutting travel, meetings, office supplies, publications, postage, and memberships. According to The Times, several other schools have made or considered making cuts to retirement accounts, including the University of Miami that said earlier this year that it was considering suspending retirement contributions as part of its strategy for dealing with the economic crisis, but then decided not to do so, at least in the coming fiscal year.
"Both [University President Jehuda Reinharz] and I realize the negative impact this will have for the families of faculty and staff at Brandeis for this upcoming year," Brandeis Executive Vice President and Chief Operating Officer Peter French wrote in an e-mail to The Justice, Brandeis's student paper. "While I know that we are all hopeful that the national economy has hit bottom and that there are signs of a small recovery underway, we must all realize that the next year will be a difficult fiscal challenge."
So far, smaller institutions have reported more difficulties, largely because they have smaller endowments to fall back on and fewer options.
Because of the economy, private schools -- an increasing number of which charge tuition around or above $50,000 -- are being forced to allocate more money to financial aid and are seeing students electing not to accept offers of admission.
"With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable," wrote Joseph Cronin and Howard Horton in the Chronicle of Higher Education. "With a drift toward higher enrollments in public institutions, all but the most competitive highly endowed private colleges are beginning to wonder if their enrollments may start to evaporate."
Public schools are in a crunch because they are seeing increased enrollment even as state budgets are shrinking; many state universities face tuition caps imposed several years ago, making it impossible for them to pass increased costs on to students.
That many of announcements of these drastic cuts come over the summer correlates directly to the time at which universities finalize their budgets for the upcoming fiscal year. This timing is conveniently at a point when students are home for the summer, not thinking about school and less likely to contemplate the demoralizing impact that cuts like these could have.
Though students and faculty will still have universities to return to in the fall, the summertime announcements are not quite the summer lovin' that they might have hoped to receive from administrators.
Around the country, public and private colleges and universities are facing the need to reduce staff, delay capital improvements and otherwise reckon with the implications of the economic crisis at the gates of the ivory tower.
Last week, Brandeis University announced it would suspend payments to the retirement accounts of faculty and staff members starting in July to cover nearly $7.4 million of its projected $8.9 million deficit. Halting contributions to retirement accounts is just one of the increasingly harsh steps that institutions of higher education are taking to deal with shrinking endowments.
"There is this perception that the nonprofit world is maybe a gentler, kinder world than corporate," Roland King, vice president for public affairs at the National Association of Independent Colleges and Universities, told The New York Times. "So some people seem to perceive this as a breach of faith, especially since many people go into nonprofit work at less salary, because the benefits are so good. But we are absolutely at a point in this economy where these sort of things have to be on the table."
For colleges and universities, making these cuts is a balance between remaining competitive for prospective students and faculty members and remaining afloat as the economy threatens the viability of the university.
On Tuesday, Wesleyan College announced a similar plan to cut expenses by reducing retirement contributions, in addition to cutting travel, meetings, office supplies, publications, postage, and memberships. According to The Times, several other schools have made or considered making cuts to retirement accounts, including the University of Miami that said earlier this year that it was considering suspending retirement contributions as part of its strategy for dealing with the economic crisis, but then decided not to do so, at least in the coming fiscal year.
"Both [University President Jehuda Reinharz] and I realize the negative impact this will have for the families of faculty and staff at Brandeis for this upcoming year," Brandeis Executive Vice President and Chief Operating Officer Peter French wrote in an e-mail to The Justice, Brandeis's student paper. "While I know that we are all hopeful that the national economy has hit bottom and that there are signs of a small recovery underway, we must all realize that the next year will be a difficult fiscal challenge."
So far, smaller institutions have reported more difficulties, largely because they have smaller endowments to fall back on and fewer options.
Because of the economy, private schools -- an increasing number of which charge tuition around or above $50,000 -- are being forced to allocate more money to financial aid and are seeing students electing not to accept offers of admission.
"With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable," wrote Joseph Cronin and Howard Horton in the Chronicle of Higher Education. "With a drift toward higher enrollments in public institutions, all but the most competitive highly endowed private colleges are beginning to wonder if their enrollments may start to evaporate."
Public schools are in a crunch because they are seeing increased enrollment even as state budgets are shrinking; many state universities face tuition caps imposed several years ago, making it impossible for them to pass increased costs on to students.
That many of announcements of these drastic cuts come over the summer correlates directly to the time at which universities finalize their budgets for the upcoming fiscal year. This timing is conveniently at a point when students are home for the summer, not thinking about school and less likely to contemplate the demoralizing impact that cuts like these could have.
Though students and faculty will still have universities to return to in the fall, the summertime announcements are not quite the summer lovin' that they might have hoped to receive from administrators.