Carnegie Mellon effected by the recession

lvl_carnegiemellon_logoAccording to a story by the Associated Press, Carnegie Mellon is feeling the recession. CMU’s endowment investments dropped in value about 30 percent, and preparing for the long-term effects of this drop, the University froze salaries and hiring, and put capital projects on hold.

This is definitely troubling.  I suppose we’re just starting to see the long-reaching effects of the recession, but I didn’t think it would be this devastating for educational institutions.  I’m not sure if other educational institutions are feeling this – I’m sure some without gigantic endowments will be feeling it quite a bit.  I wonder how institutions like MIT, Harvard, Columbia and NYU are faring?  There’s typically an increase in NIH funding for education and research under a Democratic presidency, but Barack Obama has some tough choices to make if he’s going to get the economy back in shape, and hopefully keeping the NIH budget won’t suffer because of that.

I suppose we’ll see.  Hopefully we won’t see any educational institutions going out of business without getting the bailout treatment the industrial and financial sectors are getting.

Here’s a letter that CMU’s President – Jared L. Cohon sent to the CMU community last week, dug it up from the good ‘ole email pile:

Dear Carnegie Mellon Alumni,

As members of the university community I thought you would be interested in seeing this message that I sent to the on campus community about how the current economic conditions are effecting us and what measures we are taking to contain costs.

Sincerely,
President Jared L. Cohon

Dear Faculty, Students and Staff:

Since my last email on December 8, 2008, Carnegie Mellon’s administration has been hard at work. Our task has been to estimate the impact of the economic downturn on the university’s finances, both over the next several months and the long term, and to identify actions that will position Carnegie Mellon in the best way possible. This means producing responsible budgets that take into account the impacts of the economy, while also maintaining our institutional momentum and keeping focused on our mission: to recruit and retain the best and brightest faculty and students and to maintain the highest quality education and research for which this university is known throughout the world.

The global recession has affected and is expected to affect all of our sources of revenues. Our endowment has experienced a significant decrease in value, and we are forecasting that it will end this fiscal year down by 30 percent, with slow recovery in value thereafter. We are planning for the smallest increases in tuition in many years, at the same time that we expect financial aid requirements to go up. We are forecasting lower sponsored research revenues and reduced gifts, and slower payments of past pledges. This is why I previously announced the salary freeze for next year and the increased review of new hires and capital projects. These were prudent actions, but they are not enough to respond fully to the economic challenges we are forecasting over the next three years. This is why today I am asking even more of you.

Beginning next fiscal year, I am asking all academic and administrative units to reduce the centrally funded portion of their annual operating budgets. For academic units this will be 5 percent by 2012 with a minimum reduction of 2 percent in 2010. For administrative units it will be 10 percent by 2012 with a minimum reduction of 2.5 percent in 2010. These cuts will result in a significant reduction in the university’s projected operating deficits.

Deans, department heads and administrative unit heads will decide how best to make these reductions. We all fully understand that Carnegie Mellon faculty and staff, who embody Andrew Carnegie’s values of hard work and dedication, are at the core of our success. We are not asking departments to eliminate jobs, but staffing decisions – both academic and administrative – may come into play as departments decide how best to achieve these cuts.

With regard to our review of capital projects, at this time, we have decided to continue moving forward with the new School of Computer Science Complex and with renovations to the west wing of the Tepper School of Business. We are also moving ahead with renovations to selected laboratory spaces supporting science and biotechnology research. These projects reflect university priorities, have reached a substantial level of completion, and already have funding arrangements securely in place. Unfortunately, there are many additional worthy projects that will not be pursued at this time. In determining which capital projects to undertake in the future we will remain committed to our priorities.

Please let me emphasize that no amount of careful analysis and planning can eliminate the uncertainty that we all face today. We just can’t know what the next year or three years will bring. I promise you, however, that within the limits of our knowledge we are working as hard as we can to do what’s best for Carnegie Mellon’s people – our staff, our faculty and our students. Our planning includes a resumption of raises in FY11 and FY12. We expect that the cuts I announced above will be the last. And, if job reductions are called for, we will be as creative and flexible as possible in providing alternatives that will lessen the impact on current staff. But, all of these specific actions will only be good intentions if the economy gets much worse than we anticipate – and we will have to accept that this is a possibility.

It is important that none of us loses sight of the bigger picture: our region’s, our nation’s and the world’s challenges and the crucial role that Carnegie Mellon has to play in responding to them. This is what the world expects of us, and this is what I want you to be focused on. And, by all accounts, that’s just what’s happening. You continue to succeed disproportionately in bringing in research projects, in a very tough funding climate. You are on track to deliver our largest undergraduate applicant pool in history, and early decision applications, a particularly strong measure of interest in Carnegie Mellon, did break a record, up 30 percent over last year. And, you’ve even been bringing in some very nice gifts that will maintain our momentum in our priority areas.

Thank you for understanding why we are taking the actions I’ve announced today. And thank you for the role you’re playing in keeping Carnegie Mellon strong.

Sincerely,

Jared L. Cohon,
President Carnegie Mellon University

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