Too big to fail? Harvard University is certainly big — more than 20,000 students, 18,000 faculty and staff, a budget of about $3.3 billion, a score of schools and institutes and allied programs, and an endowment that topped $36 billion in 2008.
$36 BILLION. Now, that figure is history. Harvard’s endowment decreased by about 30% this year in the recession, so now it’s more like $25 BILLION. Sad. Heads are rolling. Losing more than $10 billion dollars in sketchy investment strategies — strategies that once were hailed as brilliant, like just this time last year — those kind of decisions have consequences! The top guys who earned, oh, several million dollars managing all that money last year have escaped to the Hamptons.
Meanwhile, yesterday Harvard announced that 275 employees of the university are also losing their jobs. Seems that a reduction in endowment value from $36 BILLION to $25 BILLION or whatever it is means that Harvard does not have enough money to pay the salaries of 275 employees.
Throughout higher education, the recession has forced numerous budget reduction strategies. Some of these strategies are actually a good thing — here at Trinity, we are on a campaign to reduce the amount of paper consumed in photocopying, a step that will reduce costs and take a small step toward becoming a “greener” campus. It’s also a terrific moment to think about how all of that spending on technology can create efficiencies and reduce expenses for students and the institution — using more digital materials in place of expensive textbooks, delivering more hybrid courses to reduce the amount of time spent commuting to campus, reducing postage costs by increased use of email and website communications.
I have written about the potential benefits of the recession for higher education. See my article in the NACUBO Business Officer magazine this month. There’s much that we can do institutionally to become even more effective while reducing the cost of higher education.
At the same time, I draw the line on decisions that harm our employees. Here at Trinity, I’m pleased to say that we will continue our modest (@2%) annual wage increases — the administrators who make more than $100,000 have agreed to skip their annual increases in Fiscal 2010, but everyone else gets a raise. Nobody is laid off. We are still hiring in select positions. We believe that supporting our dedicated and hard-working employees is extremely important, a direct benefit to our students who deserve the best possible teaching and support services. Many other colleges and universities are laying off staff, cutting salaries by as much as 20%, reducing or eliminating pension contributions. I am very proud of the fact that Trinity has not had to contemplate any of these actions, and in fact, is able to keep moving forward.
Trinity’s endowment also took a hit this year — we went from about $10 million (that’s with an “m”) to about $8 million right now, but it will come back. We didn’t have a lot of multi-million-dollar guys playing with our money; the downturn was simply a result of what’s happening in the economy, and is consistent with the experience of most endowments today.
Unlike Harvard, Trinity does not use endowment income for current expenses. Our operating costs are funded through our tuition revenues and other fees we charge like the fee for use of the Trinity Center, room and board, and income from our conferences.
Harvard’s tuition is $32,000. Trinity’s is $18,800. Harvard gives a lot of financial aid. So does Trinity. And, Trinity’s is not supported by endowment for the most part, our financial aid is simply a reduction on tuition price.
So, why is Harvard laying off 275 employees while Trinity is giving raises? Good question. Part of the answer can be found in Trinity’s historic (some say notorious) frugality. We get that from our founders, the Sisters of Notre Dame, who set the gold standard for modest compensation — they worked all those years for free, what we call “contributed services” worth millions of dollars. Today’s lay faculty and staff need salaries, but virtually all who work here accept more modest compensation than they could earn at any other university in town. Our colleagues do this because they are so deeply committed to Trinity’s mission. In the same way, we do not spend money on the kinds of “perks” that personnel at Harvard and other big universities have previously enjoyed — lavish travel and entertainment budgets, memberships in private clubs, expensive parties and other perks. We give thanks for the occasional boxed lunch where the sandwich is not smushed by the apple.
Reducing staff costs may well be an important strategy for Harvard for many good reasons. But, somehow, in this economy where jobs are scarce, laying off employees when the institution still has billions in the bank seems like a most unhappy choice. Higher education’s choices — especially very influential institutions like Harvard — influence how other companies behave. For better or worse, we universities need to think about the messages we send to the world when we make institutional choices.