PRINCETON: University discusses $82 million in budget cuts

By Samantha Pergadia, Special Writer

Princeton University has an $82 million budget-cutting plan set for the new fiscal year, Princeton administrators told members of the community during a town hall meeting on Wednesday afternoon.  
Princeton currently has an operating budget of $1.3 billion, 48 percent of which comes from investment income while 29 percent came from student fees, 16 percent from sponsored research and 9 percent from gifts, Vice President for Finance Caroline Ainslie said.  
“Princeton is especially dependent on investment returns compared to other public institutions,” Ms. Ainslie said.  Princeton averages a 15 percent return on the endowment. Last year, however, returns were only 5.6 percent and they are expected to fall 20 percent for the 2009 fiscal year, Ms. Ainslie added.   
“This gives you a sense of why we’re not in the same good old days and why the times are not normal,” Ms. Ainslie said.  
The new budget will cut the amount that comes from endowment returns by 8 percent or $74 million, Provost Chris Eisgruber said. Princeton also borrowed $1 billion for operations in order to prevent increased endowment spending, Ms. Ainslie said.  
Mr. Eisgruber said that these measures are only the beginning.  
“All of us are confident that we’re going to have to make a second round of budget cuts,” Mr. Eisgruber said. “The second round of cuts is going to be tougher.” 
Princeton officials try to keep the level of endowment spending between 4 and 5.75 percent, which they have been unable to do as its value declines, Mr. Eisgruber said. The first round of budget cuts will bring endowment spending down from 6.75 to 6.25 percent, which is still above the desirable level. 
The effect of these new budget constraints will be felt across departments, Mr. Eisgruber said adding that the salary pool, which comprises 39 percent of the spending budget, will be the smallest it’s been in decades.   
Despite this reduction in resources, Princeton will maintain or increase the salaries of its employees, unlike many peer universities that have instituted hiring and salary freezes, Vice President for Human resources Lianne Sullivan-Crowley said. These increases will be based on need rather than merit in order to protect lower-paid staff from being disproportionately affected by the recession.  
This could save as much as $6 million, Executive Vice President Mark Burstein said.  
These measures come alongside Princeton’s pledge to increase its financial aid budget by 13 percent to more than $100 million, Mr. Eisgruber noted.  
“We’re seeing a rising number of students on aid and a rising size of the aid packages granted to students,” Mr. Eisgruber said adding that many families of students have been impacted by the recession.  
The endowment is unlikely to regain its 2008 value any time soon, Ms. Ainslie said. Even the optimistic view—which assumes the prior average returns of 15 percent—will not bring the endowment back for at least for another four to five years.  
“It takes a lot to recover from something like what’s happening from the year that we’re in,” Ms. Ainslie said.  
Princeton has several cost savings initiatives in place for 2010.  
We’re asking every department to decrease their expenses by five percent,” Mr. Burstein said. These measures include decreasing utility costs, pooling services to get rid of excess, and a reduction in “discretionary activities.” 
When asked if Princeton is thinking about offering early retirement packages, Ms. Sullivan-Crowley said that it is a possibility, but added that it may take awhile to make these decisions.  
“Given what is going on, we can’t guarantee that there aren’t going to be people’s jobs affected, she said. “The truth is, though, that we don’t know what that means yet.” 
“This is an important time for the university where we all have to pull together,” Mr. Eisgruber said.