USG hosts budget town hall

Correction appended

Provost Christopher Eisgruber ’83 and Executive Vice President Mark Burstein presented the University’s plan to address the endowment shortfall to roughly 25 students at a town hall meeting on Monday evening in McCosh 10. Eisgruber and Burstein said the plan aims to preserve the University’s core obligations, such as the quality of the student experience, research and financial aid, at the cost of expenses deemed less crucial to the University’s mission.

The most noticeable changes students will experience, beyond the changes that have already been made to dining hall schedules and the imposition of a printing quota, will be a decrease in the amount of free food available at departmental events and a renewed effort to reduce utility costs by 25 percent over the next seven years, Burstein said.

He added that the University may cease to provide both Ethernet and wireless internet access across campus since only one is necessary.

Membership at Prospect House, which is currently only available to current faculty and staff, might be extended to alumni living in Princeton, he added.

Eisgruber noted that the financial crisis has wiped out more than 23 percent of the endowment’s value, a loss of more than $4 billion, and that the University will need to cut 8 percent of budget spending this year and another 8 percent next year and maintain those cuts for the foreseeable future.

“This isn’t a tighten-your-belt- and-hold-your-breath situation, it’s a lose-those-pounds-and-keep-them-off situation,” Eisgruber explained.

He added that, unlike many universities, Princeton relies on returns from the endowment to pay for 48 percent of the University’s operating budget. Though this heavy dependency on the endowment gives the University the ability to maintain high levels of financial aid, it also exposed the University to more risk during the economic downturn, Eisgruber said.

“The changes we are looking at [making to the investment portfolio] are marginal, rather than radical,” Eisgruber said.

Eisgruber also defended the use of this strategy in the past as well as the high salaries of the PRINCO managers.

“This is a talented pool [of PRINCO managers] that is highly compensated,” he explained. “We were invested in things that gave us an annualized 10-year return of 9.5 percent including this drop ... We invest for the very long term.”

Tilghman wrote in a Sept. 29 e-mail to the Princeton University Investment Company (PRINCO) would likely re-evaluate its investment strategy in the coming years.

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“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 on Sept. 29.

Eisgruber said peer institutions’ endowments have been affected similarly to Princeton’s, but Princeton is uncommon in that it leans so heavily on endowment funds: Among peer institutions, only Harvard’s College of Arts and Sciences draws a greater share of its funding from its endowment, he said.

Eisgruber and Burstein both said there was no chance that the operating budget would increase in the near future, even if the economy improves.

“These are permanent decisions on how we run the institution,” Burstein explained.

Correction

An earlier version of this article incorrectly stated that Eisgruber said marginal rather than radical changes would be made to the budget. In fact, this comment referred to changes to the investment portfolio.