Stanford Endowment Loss Prompts President to Suspend Smoothing

[marmar]

Stanford Endowment Loss Prompts President to Suspend Smoothing
By Oliver Staley


Oct. 26 (Bloomberg) -- John L. Hennessy, president of Stanford University, is drawing on his 32 years of experience in Silicon Valley to speed up budget cuts, ditching a formula universities use to soften the impact of endowment losses.

Stanford’s endowment fell 27 percent to $12.6 billion in the fiscal year that ended Aug. 31. Hennessy has suspended the school’s so-called smoothing formula, which spreads losses over five years. The university, located near Palo Alto, California, said it dismissed 412, or 3.2 percent, of its non-faculty workers, in the first eight months of 2009, postponed $1.1 billion in construction and will close its 58,500-volume physics library.

Stanford will now reduce the amount it withdraws from the endowment over two years, leading to deep cuts designed to speed the university’s financial recovery, Hennessey said in an interview. Stanford, which has the U.S.’s third-largest university endowment, relied on the fund for 29 percent of its operating budget in fiscal 2009, the school said. As a result, Stanford will recover faster and gain efficiency, he said.

“It is only in those crunch times that we really say, ‘Which things no longer make sense?’” said Hennessy, 57, Stanford’s president since 2000. “That’s a healthy process. Not a painless process, but a healthy process.”

By making steep cuts, Stanford will be able to return to normal hiring and growth sooner, he said. In a typical year, Stanford hires about 110 faculty members, said Lisa Lapin, a Stanford spokeswoman. For the 2010 fiscal year, the school froze about 50 faculty searches. ........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601109&sid=aY7Q_PLwFGoE

[Solly Mack]

1. They could always get rid of Condi Rice

but then Stanford seems to like having war criminals around.

[TexasObserver]

2. Recommend

[gratuitous]

3. Their endowment is $12.6 billion?

You'd have to have 32 years of experience in big business to consider yourself so broke you had to cut staff with that kind of money laying around. And all these years, I'd been told that people at Stanford are smart.

[Igel]

4. When you have a construction budget such that

you can postpone $1.1 billion, however, you have to wonder exactly how far $12.6 billion goes.

The point is the large losses it sustained. Now, go back what was it--18 months? When everybody was saying how the private colleges should spend down their endowments. Well, they're down. Let's all party.