- 2011-2012 Cornell University Annual Report (22.7MB pdf)
September 26, 2008
I write to share some thoughts and information regarding our university at a time of financial volatility in our state and nation. Recent news raises concerns about our personal finances as well as those of the university. From the outset, let me underscore the overall soundness of our university's financial position. Nevertheless, it is an opportune time to make plans that will ensure continuing excellence at Cornell.
I hear widespread concerns across campus about how instability in the financial markets might threaten future endowment support for academic programs, financial aid, jobs on campus and other initiatives; about the impact of the Wall Street bailouts and other pressures on the federal government's ability to support NIH, NSF, NEH and other federal sources of research funding; and about renewed economic pressures on families that might result in even more stress on our financial aid budget. These concerns are understandable and point to the need to evaluate continually the university's strategies to sustain the strength of our programs of teaching, creativity, discovery and outreach, even as we work to create opportunities for students from all walks of life, to produce economic benefits for New Yorkers, and to remain an employer of choice for staff and faculty.
At the beginning of this academic year, I addressed the changing situation surrounding the New York State budget, which has been very favorable to Cornell over the past three years, and the state's economic situation more generally, which continues to present substantial challenges for New York, for Cornell, and especially for our contract colleges. The deans of these academic units, working with Interim Provost David Harris and Vice President for Human Resources, Mary Opperman, have the latitude and responsibility necessary to respond to the limitations placed on their programs. While the university's capacity to provide budget relief from central resources is limited, we understand that the contract colleges may not have the ability alone to absorb the proposed budget cuts, the magnitude of which remains uncertain. Therefore, we will follow this situation very closely and be prepared to provide some direct support. We are continuing to communicate with SUNY and the leaders in Albany as events unfold.
Beyond these short-term challenges, we must also review other factors—attenuation of the rate of rise of tuition, the impact of our new financial aid policy, a very robust capital program, flattening or actual inflation-adjusted decrease in federal research budgets and uncertainty about near-term future cash gifts and investment returns—that could cause the rate of expenditures to steadily exceed revenues. Earlier expenditure decisions were obviously well founded as evidenced by Cornell's success. Now, however, we must carefully assess our ability to sustain these gains and set the stage to respond to future opportunities. For these reasons, I established earlier in September an ad hoc working group of vice presidents, deans and a vice provost to suggest how we should deal with these budget issues.
This working group has submitted to me a series of recommendations to reevaluate costs and sources of revenue across the university. While this analysis was prompted originally by news of pending reductions in state operating support (please note that state-sponsored construction projects funded primarily through state bonding are expected to continue as planned), the group confirmed that thoughtful stewardship will require a broader reassessment of all our fiscal strategies. My senior staff and I continue to study the ad hoc budget working group's report, and I will soon turn their recommendations over to the officials and campus bodies that are responsible for developing the university's budget (e.g., Provost, Vice Presidents, Deans, Provost Budget Advisory Group, Operating Plans Committee) for their consideration and action in the months to come, with the following institutional principles to guide this work:
Yet even as we consider what changes we might pursue, it is equally important to recognize that Cornell is in a stable position thanks to the sustained, diligent work of our leaders throughout the institution. In particular, David Harris and Paul Streeter, who are serving as interim provost and interim vice president for planning and budget, respectively, are providing the continuity that we require as we search for new leadership in these key positions. In addition, Executive Vice President Steve Golding, Joanne DeStefano, the university's chief financial officer, and their staffs are ensuring the stability of the institution's finances.
Furthermore, Cornell has just completed a strong financial year during which our fundraising campaign made tremendous strides, thanks to the hard work of Vice President for Alumni Affairs and Development Charlie Phlegar and his team, securing an additional $617 million in cash and pledges. This was the second most successful year in the university's history, including a record-breaking $448 million for the Ithaca campus. As of the end of June, the campaign had reached an important milestone of $2.25 billion toward our $4 billion goal. Despite the challenges of the national, state and regional economies, the alumni and friends of Cornell continue to be incredibly generous.
At the same time, our endowment and other invested resources, which now exceed $6 billion, earned 2.7% in the year that ended on June 30th, bringing the more significant three-year average to 14.5% per annum. The endowment, which is being monitored carefully by the university's Chief Investment Officer, James Walsh, as well as the investment committee of the Board of Trustees, allows us to look beyond the ups and downs in the marketplace. We are fortunate to have a highly diversified portfolio that was designed to weather storms of this sort; and, because of the diversity of our revenue streams and the accumulation of some reserves, we are not facing a dire financial situation. In fact, we should all be comforted to see Cornell's endowment perform so well in the tough financial market environment we are now witnessing.
We have an obligation to be prudent amid the rapidly evolving circumstances besetting the nation's economic outlook. We must ensure that future generations of Cornellians have the same flexibility and opportunities that we enjoy today. Strengthening the long-term financial health of the university and thus our ability to achieve our highest priorities will require consultation, planning, prioritization, meaningful cost containment and pursuing real revenue enhancements. As we work together to strengthen Cornell's financial foundation, even in these turbulent times, I will be guided in specific actions by the deans, my senior staff, the provost's staff, the university's financial experts, as well as the views of the faculty and the various assemblies that comprise our shared governance system as we adjust to state budget reductions and the general economic climate of the state and nation. We will keep the Cornell community informed as the funding situation and our response to it evolve. I look forward to providing you with an update on the financial situation and our plans during my State of the University address on October 17, 2008.
As always, please let me know of any questions or ideas you have.