Due to recessionary pressures and diminished federal funding for research, this month the Priorities Committee is examining ways to more efficiently use the University’s funds.
The Priorities Committee will make preliminary recommendations on Dec. 10-11 and present them to the Finance Committee on Dec. 13, 2013. Committee members will then conduct final discussions in January before University president Christopher Eisgruber ’83 and University provost David Lee GS ’99 present the final budget recommendations to the Board of Trustees on Jan. 24, 2014.
At the November meeting of the Council of the Princeton University Committee, Lee explained that the University “was a little bit closer to having to think about trade-offs” and mentioned that sequestration and budgetary inflexibility would continue to pose significant financial challenges.
In a late November interview, Lee explained that it was much easier to fund new academic initiatives before the recession but that as endowment returns dropped significantly after 2008, the Priorities Committee was forced to reexamine the University’s use of funds, especially in the face of ongoing uncertainty about the strength of the national economy.
“We’re sort of in the post-recession period and we don’t really know what’s going to happen – are we going to go back to high returns like we did before or are we going to experience another financial shock?” Lee said. “We really have to make sure that we’re more rigorous in examining these initiatives, and we really have to think about which ones go first.”
Carolyn Ainslie, vice president for finance and treasurer, explained in an interview last month that the trade-offs the Priorities Committee was looking into have all been examined before.
“I wouldn’t say we’re looking at any new trade-offs; we’ve pretty much been looking at the same ones every year, especially since the recession,” she said. “It’s really important that we examine the rate of growth of our expenditures versus the rate of growth of our revenue, and we continue to do that.
Lee mentioned at the CPUC meeting that some of the trade-offs that the University was exploring were changes to faculty salaries and student tuition. However, Ainslie noted that even though the University is looking into potential changes to faculty salaries, it will ensure that faculty salaries remain competitive in the marketplace.
One particular point of emphasis in this year’s Priorities Committee’s discussions is the loss of federal funding for research, which has been critically impacted by the budget sequestration.
“We’re looking over many years, and we’re thinking about the funding of research. As you know, the federal government has sequestration ongoing, and there are issues with the debt ceiling and the government shutdown, so going forward, we’ll definitely be looking at that,” Ainslie added.
Both Lee and Ainslie said these financial problems are not unique to Princeton.
“All of these issues are the same issues that our peers are all facing. In that sense, our position relative to our peers is not threatened, and we remain excellent in all our areas of research and teaching. The factors I laid out are all macro factors and not Princeton-specific,” Lee explained.
Former University President William G. Bowen GS ’58 pointed to the 1970s as a period of financial difficulty for the University that it ultimately survived and offered advice for colleges managing budget constraints.
“Wise places that are well-led respond surgically. They don’t adopt one-size-fits-all across-the-board approaches,” Bowen said of colleges and universities responding to the recession. “They think very carefully about their priorities, and about where savings can be achieved with the least damage, not no damage, but with the least damage to the enterprise.”
During the CPUC meeting and in his interview, Lee explained that the University used a significant portion of its reserve funds during the recovery from the 2008 economic crisis, and that this move reduced the University’s ability to reallocate resources in the event of a crisis.
“It was like having a bank account as a safety valve: you can draw down on that in case of an emergency, but you eventually have to think about building it back up so when there are downturns, you can go back to it,” he explained of the University’s measures. “That’s where we’re at, we’re trying to figure out a way to get back to rebuilding that safety valve,” he explained.
Staff writer Jacob Donnelly contributed reporting for this article.