Correction appended
Provost Christopher Eisgruber ’83 called the University’s budget cuts in response to the economic crisis the “new normal,” outlining the University’s plan for financial recovery for about 60 community representatives at a meeting of the Council of the Princeton University Committee (CPUC) on Monday.
“At this point, as we run projects, I think there is no doubt that we are at the beginning of a multi-year project,” Eisgruber said. “Nobody expects quick recovery.”
Areas with the greatest financial flexibility have already been targeted for cuts this year, Eisgruber noted, so the second year of budget cuts, if they are necessary, will be more complicated. Facing an $82 million “campus-wide challenge,” he added, the University will need to continue to consider effective resource allocations.
“We are beginning to live in the ‘new normal,’ and we should not expect to go back to how we operated in the last 10 years,” Eisgruber said. “Things are not likely to go back to the ‘old normal’ any time soon.”
The effect of the market drop, Eisgruber said, will likely be long lasting. Forty-eight percent of Princeton’s revenue comes from the University endowment, which was estimated this summer by Princeton University Investment Company (PRINCO) to face a 25 percent decline by the end of the fiscal year.
“A 25 percent gain [one year] does not wipe out a 25 percent loss [from the previous year],” he explained. “Two fabulous years do not compensate for a single awful one.”
Even with an optimistic projection of steady 15 percent returns, the endowment would reach last year’s value again in 2013, Eisgruber explained. With no returns in the fiscal year 2010 followed by steady 10 percent returnsin every year after, the endowment would regain its value in 2020, he added.
Despite the endowment’s decline, the University has been spending more relative to its endowment than it did in previous years.
Increasing the spending rate by dipping into the endowment is dangerous for sustainability, Eisgruber said. The spending rate should remain between 4 and 5.75 percent, Eisgruber said, adding that even with the announced budget cuts, the current spending rate sits at roughly 6 percent. A second round of budget cuts will likely be necessary to lower the spending rate to acceptable levels, he explained.
At the first CPUC meeting of the calendar year, the University president traditionally speaks to the town-hall assembly on the state of the University. In light of the economic situation, however, President Tilghman requested that Eisgruber give the address.
“This year, we are doing the meeting slightly differently because there is one issue on my mind right now,” Tilghman said. “Everyone on the administration is really focusing on addressing the econom[-ic]downturn we are facing right now.”

Following Eisgruber’s presentation, both Eisgruber and Tilghman answered several questions from community representatives about the University’s future actions regarding faculty employment, the development of an Asian-American studies program, graduate-housing renovations and the pilot bridge-year program.
“I don’t want to say that there are areas that are wholly exempt from [the budget cuts],” Eisgruber said.
Following the display of what Eisgruber called “unfortunately depressing graphs,” Tilghman assured the assembly of the University’s ability to weather the economic difficulties.
“We’ve been fortunate that we have prepared well for this,” Tilghman said. “I just want to say to everyone in the community that this University has a great deal to be proud of ... We are going into this downturn in a remarkable state compared to many, many of our peer institutions.”
Tilghman cited the four-year residential college system, the Lewis Center for the Arts, the University’s commitment to environmental sustainability, the bridge-year program and the Neuroscience Institute as commendable developments despite the economic circumstances.
Correction
An earlier version of this article stated that the spending rate should remain between 4 and 5.57 percent and that the current spending rate sits at roughly 12 percent. In fact, the spending rate should remain between 4 and 5.75 percent, and the current spending rate sits at roughly 6 percent.