Hiring freezes, construction halts and the prospect of layoffs are hitting area college campuses as their endowments have taken a beating during the global financial crisis.
Endowments at colleges and universities in Connecticut and across the country have seen sharply negative returns this year after a long period of steady growth. Though dwindling endowments may not have an immediate impact on their operating budgets for this year, schools have already undertaken emergency cost-cutting measures.
Trinity College's endowment, which supports 16 percent of its annual operating budget, dropped from $436 million at the end of 2007 to $371 million on Sept. 30, a 14.9 percent drop.
In a letter to the Trinity community, President James F. Jones warned that the school may be facing deficits equal to or greater than 2 percent of its $111 million operating budget in the coming year unless officials take action to control expenses.
Earlier this month, Trinity enacted an across-the-board 5 percent cut to all non-compensation discretionary budgets, instituted a hiring freeze on "all but the most essential staff positions," limited the use of outside consultants and contractors, reduced travel and froze all but the most critical campus projects, according to Jones' letter.
Trinity CFO Paul Mutone said the economic downturn has forced the school to put off construction plans for a new arts facility, which he said is still years away. The school will continue to raise money toward the project but will not take on any costs.
"When we see things turning around, we'll rethink that," Mutone said. "Clearly, for the next six to 12 months, there's going to be nothing major."
To encourage donations to the school's annual fund, Trinity will match the funds of those who donate the same or more than the previous year. Mutone said he hopes that strategy will provide incentive for people to donate during a time when everyone is keeping a closer eye on their budgets.
The school's goal to raise $350 million in donations in the Trinity 2012 Campaign may have to be pushed back, Mutone said.
"We're 40 percent of the way there," he said. "We're hopeful we'll reach that goal. Perhaps, given the status of the economy, we may have to extend the date."
Meanwhile, the University of Connecticut's endowment stood at $294 million on Sept. 30, down $23 million, or 7 percent, from the $317 million reported June 30, the end of its fiscal year.
UConn instituted a hiring freeze except on "essential positions," and the university has been under Gov. M Jodi Rell's travel ban since it was announced in May. UConn organized a task force earlier this month to explore cost-cutting strategies.
At the University of Hartford, the endowment dropped to $88 million on Oct. 31, down from $116 million at the beginning of the calendar year.
Arosha Jayawickrema, the university's vice president for finance and administration, said the school is well-positioned because only $3.5 million of its annual $200 million operating budget comes from the endowment. But the endowment's decline will hit the school's long-term goals.
Wesleyan Dips $120M
"We're going to go through this period the next two or three years," he said. "We're hoping in the long run we'll grow the endowment."
Wesleyan University saw its endowment of $700 million at the end of 2007 fiscal year shrink to $580 million Sept. 30, according to information posted on the school's Web site. John Meerts, Wesleyan University vice president for finance and administration, declined to comment on the school's financial situation.
The Web site said the school's Molecular and Life Sciences Building project will be delayed until it receives additional funds or sees endowment growth, and only emergency maintenance projects will be completed. The Web site also said the school will leave the door open for possible layoffs and adjustments to compensation levels if the situation worsens.
Even the country's richest schools have struggled to weather the financial storm.
Harvard University, which has the largest endowment of any U.S. school, said not even its $34 billion nest egg was enough to keep officials from taking on cost-cutting measures.
President Drew Faust announced earlier this month the school would explore cuts to programs and compensation, and would reevaluate massive campus expansion plans.
At Yale University, which holds the nation's second-largest endowment at $22.5 billion at the start of the calendar year, is also showing signs it is being affected by the slumping economy.
On June 30, Yale reported a 4 percent return on its endowment after returns of 28 percent and 22.9 percent in the 2007 and 2006 fiscal years, respectively. Yale declined to comment on the state of the endowment since the June 30 report.
'Beating' The Market
Yale President Richard C. Levin, acknowledging the financial crisis in a letter to the university community last month, wrote that the school "continues to maintain a strong financial position." Levin said the school will not stop plans to make significant investments in expansion and renovation plans, though he said the school has the "flexibility" to slow down some of those plans should the economic situation worsen.
Creative investment strategies have allowed Yale to grow its endowment to record numbers and will also keep the school from taking a huge hit in the financial crisis, said Matthew Tuttle, author of "How Harvard and Yale Beat the Market."
"The Yales and Harvards of the world have the best of the money managers," Tuttle said. "I think Yale will probably wind up coming out good from this."