Endowment value drops 22.7 percent; layoffs expected

The endowment, which was valued at $16.3 billion in June 2008, is now valued at $12.6 billion.

Stanford’s endowment is also currently valued at $12.6 billion, having sustained a 27 percent drop in the last fiscal year. The only two university endowments larger than those of Princeton and Stanford also saw very steep drops: Harvard’s endowment fell 30 percent to $26 billion, and Yale’s fell 20 percent to $16.3 billion.

The University had not previously announced any plans for layoffs, but it did implement an incentivized retirement program this past summer. Roughly one-third of the 460 eligible University staff members are participating.

Tilghman’s e-mail on Tuesday noted that the University would likely be laying off staff members this fall, but in an interview Tuesday evening, she declined to speculate who would be let go.

“They’re still being determined,” she said. “Each department has been asked to meet a certain set of budget targets, and each one of the department managers is [still] working to see how they are going to meet those budget targets.”

The retirement program helped the University reduce the number of layoffs it would otherwise have had to make, Provost Christopher Eisgruber ’83 said in an e-mail to The Daily Princetonian.

“The number will be less than it would have been without the successful [program] and the vacancy savings achieved by our managers over the last six months, and significantly less than the number of layoffs that have been necessary at some of our peer institutions,” he explained.

In April, the University announced that departments would be subject to an average cut of 7.5 percent from their budgets over two years, a number they are still adhering to despite the fact that the University saw a smaller endowment loss than was initially projected.

That same month, Tilghman sent out an e-mail in which she estimated the endowment’s loss at 30 percent and announced a two-year plan to reduce the University’s operating budget by $170 million.

“We developed a plan last spring that we are adhering to, and we are not changing the two-year plan that we developed,” Tilghman explained in the interview. “If, in fact, the endowment continues to do better than we expected, we will use that huge benefit to bring us back into line with our current spending policy.”

Tilghman also noted in her e-mail that the Princeton University Investment Company (PRINCO) would likely re-evaluate its investment strategy in the coming years.

“It’s not going to be a radical change, but it will essentially put the University in a more secure place going forward, and that’s very important,” she explained in the interview.

Get the best of the ‘Prince’ delivered straight to your inbox. Subscribe now »

Currently, 48 percent of the University’s annual operating budget comes from the endowment. The University’s policy is to spend between 4 and 5.75 percent of the endowment each year, though with the drop in the value of the endowment in the last fiscal year, that spending figure is now up to 6.04 percent. To get back within the recommended spending range, PRINCO will either have to post greater investment returns than current projections show, or the University will have to find ways to spend less than 5 percent of the endowment each year, Tilghman said in her e-mail.

In creating the budget for fiscal year 2011, the University is assuming that the endowment will not lose any money in the current fiscal year, and it is leaving open the possibility that further budget cuts could be implemented for fiscal year 2012.

The budget for the current fiscal year is roughly $1.3 billion, roughly the same as last year’s. The University cut $88 million from the budget for the current academic year and plans to cut $82 million from next year’s budget. Eisgruber attributed the success of these cuts to the “hard work from managers, staff, and faculty members in every single sector of this University,” noting that student efforts, like reducing the amount of paper used in printing, have helped as well.