Jan

28

PrezBo Announces Endowment Damage, Outlines Cost-Cutting to Come

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Another month, another depressing e-mail about the state of Columbia finances: earlier this evening, President Bollinger sent an email to the Columbia community (which may or may not have reached your inbox at this point) about the state of the endowment, and this time he included actual figures! After spending a paragraph on why “Columbia has maintained its impressive momentum as one of the world’s great research universities,” PrezBo announced that “during the six-month period ending December 31st, the total return of the University’s investment portfolio declined by approximately 15%.” 

The decline, while still significant, is not as bad as it could have been. Last month, Barnard announced a six-month decline (of the entire endowment, as opposed to its investments portfolio) of around 25%, while Harvard and Yale lost 22% and 25% on their investments, respectively, through the end of October (at that point, according to Bollinger’s email, Columbia’s own decline was only 11.8%).

Bollinger closes the dispatch with a summary of the budget cuts ahead. “Although certain parts of the University (such as the central administration) are significantly dependent on endowment for operating revenue…” he writes, “the University as a whole counts on its endowment for only 13% of operating budget.” Even though this number is lower than Columbia’s peers, Bollinger says, “to facilitate a smooth transition to these new financial realities, we are asking all budget units to model an 8% decline in endowment funds available for operations next year.” Bwog would like to suggest a 100% cut in the War on Fun. Full email after the jump.


Dear fellow members of the Columbia community,

I write because we are now entering the University’s season for preparing next year’s operating budgets, and it is therefore an appropriate time to provide an update on the economic environment we face and the context in which next year’s budgets will be crafted.

We are all aware that the global capital markets and the nation’s economy continue to experience significant problems, with resulting financial challenges for businesses, governments and universities across the country. At Columbia, it is difficult to give a general picture of the impact of the current conditions because each of our schools and administrative units has a different set of revenue sources and expenses. This fiscal diversity means that our schools must identify their own ways of achieving a sound financial equilibrium. To the extent I can, however, I want to offer some general observations and specific information about our university-wide experience and the future we will face together.

In the last six months, Columbia has maintained its impressive momentum as one of the world’s great research universities. Across our schools, applications for admissions for the coming year are extremely strong, reflecting the competitiveness of both our undergraduate and graduate programs. Our physicians remain the doctors of choice for patients who need the best health care, and patient care revenues have grown significantly in the first half of this year. Columbia’s research community is competing successfully for grants even in a time of a decline in real federal funding. Sponsored research has substantially outpaced the prior year’s performance for the same period. The bonds with our alumni and friends have never been stronger, nor has their generosity been greater. For the first six months of this fiscal year, gifts and pledges exceed last year’s record pace, and The Columbia Campaign passed the $3 billion milestone — ahead of schedule.

Yet encouraging as all this is, it tells only part of the story. The nation, New York State and the City are all confronting serious financial challenges, and the consensus is that matters will not improve in the short term. We must, therefore, plan with the assumption that the rapid pace of gifts to the University may slow and that the financial health of our students and their families may necessitate an increase in financial support from Columbia. Columbia’s greatness is built on our tradition of attracting remarkable students regardless of their financial situation, a commitment that is unqualified.

Furthermore, Columbia’s endowment, like most investment portfolios, has declined, although we believe that we have fared reasonably well under extremely difficult market conditions. For a variety of reasons, October 31st has become a date when some other universities have offered reports on their investment performance. Our performance in that period was a decline of 11.8%. Using the most current information available, and in the normal form of tracking investment performance, during the six-month period ending December 31st, the total return of the University’s investment portfolio declined by approximately 15%. Given the volatility of capital markets, one cannot accurately project what will unfold in the spring.

It is important to recognize that although certain parts of the University (such as the central administration) are significantly dependent on endowment for operating revenue — and will therefore have to meaningfully constrain spending — the University as a whole counts on its endowment for only 13% of operating budget. Our relatively small collective dependence on endowment means that the current market downturn hurts less than it does for some of our peers. But let there be no doubt, we still have to face hard choices in the months ahead. To facilitate a smooth transition to these new financial realities, we are asking all budget units to model an 8% decline in endowment funds available for operations next year. Hopefully, by accepting and planning for this new reality, we will be in a position to move forward in strength.

Let me conclude by saying that we enter this new environment after a strong period of rapid growth in both resources and enhancement of our academic mission.  Without doubt, the global economic scene is forcing us to pull back in our personal and professional lives. I am completely confident, however, that by addressing our challenges in a forthright manner and by focusing our resources on sustaining the core of our intellectual life we will emerge even stronger in the years to come.

Sincerely,

Lee C. Bollinger

President

 

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33 Comments

  1. hmmm...  

    A few decades ago, Columbia was one of the top school in the country, but HYPS has since made significant gains, mostly due to their faster grown in endowment. This is Columbia's chance to regain its former glory!

  2. you know what they say  

    Money cannot buy happiness. Only hard work, perseverance, dedication, appreciation, manipulation, fabrication, and embezzlement can--that is how true happiness is won.

  3. ...  

    what on earth has happened to his arms?!

  4. ...  

    oh by the way, you guys are mixing loss of principal with loss of returns. barnard lost principal, some of those other schools lost principal, this email only talks about returns.

    just because they're all numbers that end with a percent sign doesn't mean they're measuring the same thing.

    • wait

      1) I'm not an economist, so maybe someone can clarify: what is the distinction between 'entire endowment' and 'investments portfolio' here? Doesn't that whole pile of money have to be invested somehow, somewhere (mutual funds, bonds, accounts, whatever)?

      2) The WSJ & Bloomberg articles say that Harvard & Yale's endowments declined 22% and 25% overall ($8B and $6B, respectively), which -- correct me if I'm wrong -- is a loss of principal.

      But you're saying that only Columbia's returns declined, and by a mere 15%? Wouldn't that mean Columbia still made money over that 6-month period, albeit at a slower rate than '07? That doesn't seem possible given the losses incurred by our peers (and the fact that Prezbo clearly states that Columbia's endowment 'has declined'). Or maybe I'm mixing up terminology.

      I took Bollinger's (slightly confusing) wording to mean that the rate of return was -15% (i.e. -- a big loss on the principal) over that period. Am I off?

    • Alum

      I saw that too, but I think the error was PrezBo's and not Bwog's. His email says "the total return . . . declined by approximately 15%"; all Bwog did was quote him accurately.

      Columbia's return on investments last year was essentially zero, and it doesn't make much sense to refer to a 15% reduction in zero. Even if last year's results were slightly positive (I don't know whether they were), it is unlikely that CU's recent results have been almost as good while everyone else's endowments are tanking. Besides, PrezBo's message is clearly meant to convey that Columbia's finances have been hurt; he wouldn't send such an email if we were still gaining, even slightly.

  5. bottom line me  

    What I want to know is what this means for next year's tuition. Does it

    a) Stay the same because CU wouldn't dare raise the cost when family savings are suffering
    b) Get adjusted by inflation
    c) Go up by even more because Columbia needs cash

    In other words, is Columbia sympathetic, practical, or selfish.

  6. wow  

    Talk about an enDOWNment

  7. ...

    Cost Cut by Cutting Dean Kromm!
    Cost Cut by Cutting Dean Kromm!
    Cost Cut by Cutting Dean Kromm!
    Cost Cut by Cutting Dean Kromm!
    Cost Cut by Cutting Dean Kromm!
    Cost Cut by Cutting Dean Kromm!

  8. Yes Bwog  

    I don't know how many times this has been pointed out, but a loss of endowment is not the same thing as a loss on their endowments. Only a part of the endowment, I believe it is a third (but I'm not sure), is invested, and 15% (annualized) of that has been lost. If it actually is a third, that only represents a 5% loss of the actual endowment.

  9. i know!

    how about cutting costs by not expanding into manhattanville!

  10. I know better

    Ending the Manhattanville expansion would actually harm the university's finances because Bio labs are one of Columbia's main sources of income due to outside grant funding etc. The new labs in Manhattanville = big money for CU.

    The current gas station and self-storage warehouse that are the only holdouts in Manhattanville are a blight on the area and contribute zilch to the city and humanity.

    In short, hunger-strikers = morons.

  11. why we abbreviate

    that post was far too long!

    therefore i did not take the opportunity to read it!

  12. idea

    Save money by turning down heat in certain dorms. I should not have to leave my window open all winter. Seriously.

  13. HOW ABOUT  

    stop giving athletes:
    1. hundreds of dollars when dining services are closed
    2. an endless supply of apparel, shoes, etc. ETC. ETC.


    I'm so fucking sick of athletes getting all this superfluous crap. Not because I'm jealous, but because it's pretty obvious that no one really NEEDS all this and the money could be used elsewhere, where it is actually needed.

    • Lion Fan

      Sounds like you are pretty jealous so shut the f___ up yourself.
      Not sure about this, but as for your anti athletics diatribe, which I find pretty annoying, they probably get most shoes free.
      How do some students think they can weigh in or decide what to cut?

      • Heh

        Didn't take long for an athlete to comment on that. Do you really get stuff like this for free? I think that's pretty unfair honestly and should probably be stopped. I think I can weigh in on what should be cut because of the amount of money I pay this school every year.

        • mce  

          free as in the manufacturers provide columbia with apparel as a form of sponsorship. it also depends on the program, many donations are earmarked for specific programs and so they spend that money on equipment and perks. if the sport didn't exist or was dissolved then the money would not get spent on you otherwise anyways.

      • #25  

        Sounds like you can't justify the staggering amount of money spent on athletes by resorting to the "you're just jealous" argument.

  14. person  

    Cut Public Safety staff by 50% and only have them act when something actually threatens the public safety and stop being a delivery service for RIAA/MPAA nastygrams - if they're too lazy to get a subpeona they obviously don't have any real evidence.

  15. Former Athlete

    Compared to other Ivy League schools, Columbia athletes don't really get much free stuff. Columbia teams issue athletes clothes and other attire that they use during their sport. For example, volleyball gets sneakers and knee pads and jerseys. Rowers get unis and long sleeve shirts and tights for rowing in cold, bad weather etc etc. The items you're probably talking about, i.e. jackets, t-shirts, hats etc are almost always ordered through Columbia Athletes who gets discounts as a corporate purchaser, but paid for out of pocket by the athletes themselves. You also occasionally will get an Alum from that sport who will donate money to buy specific items for a team. Columbia athletes compared to any state school and even any other ivy school get pretty much nothing. One year the athletic department gave out free hats. Another year they gave out a free T-shirt. Its just like Student Activities giving student clubs an annual budget. You're talking a couple thousand dollars per year spread over hundreds of students. Per capita, most student groups affiliated get more money. Lay off the athletes, they work extremely hard for Columbia and don't deserve your pissing and moaning.

    • You Know Why

      Columbia athletes get less stuff?

      It's because as a whole they're awful at their sports. Has that not crossed your mind?

      • Former Athlete

        Columbia, like any school has teams with losing records. But what you and many others never recognize is that Columbia has many winning teams as well. Men and Women's track and cross country, Men and Women's soccer, Lightweight and Heavyweight Crew, Men & Women's fencing etc etc.

        Just because the high profile basketball and football teams are having a rough period doesn't give you the freedom to blanket condemn all other athletes.

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