[NU Sports] Fwd: Northwestern's Financial Condition

[NEONRye at aol.com]

Here's the email I tried to forward in its entirety:
 
Dear Northwestern Alumni:

The following message regarding the  University's financial condition was 
sent to members of the campus community  today. I am sharing it with you so you 
are fully informed on the University's  financial condition. Thank you for your 
continued interest and support of  Northwestern.


February 25, 2009
Dear Members of the Northwestern  Community:

The Northwestern University Board of Trustees recently  approved the 
financial plan recommended by the University administration for the  remainder of this 
year and next fiscal year, which starts September 1. Like all  institutions, 
Northwestern faces significant financial challenges as a result of  the 
worldwide recession now under way. I am pleased to report, however, that as  a 
result of the University's historically prudent fiscal management, we enter  this 
period in a relatively strong financial position. I also believe that the  
financial plan that has been developed will enable Northwestern to not just  
survive, but to thrive, despite these challenging conditions.

There will,  however, be a need for sacrifices. Operating expenses across the 
University must  be reduced in the coming year in order to provide needed 
funds for faculty and  staff salaries and increases in financial aid for 
students. All requests for  incremental resources including proposals for additional 
faculty and staff  positions are being scrutinized carefully and few of those 
requests will be  approved. But in the coming year we plan to increase 
financial aid significantly  while holding our tuition increase to the lowest 
percentage in more than 40  years, provide modest, selective raises for faculty and 
staff, maintain our  top-level credit rating, and, most important, continue to 
do the extraordinary  teaching and research that have long been the hallmarks 
of  Northwestern.

Specifically, for the remainder of this year and for  2009-10, we plan to do 
the following:

* Increase undergraduate tuition,  room and board by 3.6 percent for 2009-10 
while increasing the amount of  scholarship funds by 10 percent to $86 
million. At a time when many Northwestern  families are facing their own economic 
pressures, we will keep our tuition  increase to the smallest percentage in more 
than 40 years while increasing  financial aid funds significantly. We also 
will maintain our longstanding  commitments to need-blind admissions and meeting 
the full financial need of our  undergraduate students.

* Require all academic and administrative areas  of the University to reduce 
their operating expenses (other than salaries) by 3  percent in the coming 
year. These areas normally receive a 2 percent increase  annually, so the 
reduction will essentially mean a 5 percent cut in operating  expenses for next year.

* Limit salary increases. The funds available for  salary increases in the 
coming year will be less than previous years, but there  will be modest, 
selective salary increases.

* Review rigorously all  requests for incremental resources, such as plans 
for new faculty and staff  positions, with a goal of adding to the budget as 
little as possible and only in  those areas deemed critical to the University. I 
want to emphasize that we are  not planning any University-wide personnel 
reductions; however, personnel  reductions may be necessary in some areas, such as 
those supported by external  funds that may no longer be available.

* Reduce our capital expenditures,  including delaying several large 
construction projects totaling about $90  million.

* Limit the amount of funds we draw from the endowment. Each  year, we have a 
guideline established by the Board of Trustees to provide a  payout from the 
endowment to be used to help support the University's general  operations. 
Given the high investment returns of the past several years, the  guidelines 
would have allowed the University (with approval of the Board of  Trustees) to 
increase the endowment payout by 9 percent. However, because of the  recent 
dramatic decrease in the value of the endowment, we are not increasing  the amount 
that will be drawn from the endowment next year. That means we will  face a 
tighter budget in the short term, but this will help preserve our  endowment 
principal for the long term.

These steps, along with other  budget management initiatives, are necessary 
because Northwestern, like all  institutions, is affected by the recession now 
under way. Our endowment, which  reached a high point of $7.4 billion in April 
2008, now stands at approximately  $5.6 billion, a 24 percent decline. There 
are no signs of a quick recovery;  indeed, it is likely that our endowment 
will decline even more.

For the  long-term health of the institution it's best to build an endowment 
to support  recurring costs, so we continue to seek gifts that help endow 
scholarships,  professorships and other important activities. Currently, however, 
we're  somewhat fortunate because our endowment contributes less to our 
overall  operating budget than is the case for some of our peers. At Northwestern, 
only  about 18 percent of our operating budget is funded by endowment earnings. 
By  contrast, some peer universities rely on their endowments for upwards of 
50  percent of their budgets. Relying less on the endowment and more on other  
revenue sources, particularly tuition, has been a disadvantage to us when  
endowments were earning high rates of return. But at a time when endowments are  
plunging in value and earnings dropping precipitously, the fact that we're 
less  dependent on the endowment for funding day-to-day operating expenses has  
actually made things more manageable.

Nevertheless, Northwestern, like  many other institutions, has had to work 
hard to maintain sufficient operating  cash. We have been able to do so through 
careful management of our resources and  borrowing at favorable rates (the key 
rating agencies, Moody's, Standard &  Poor's and Fitch, confirmed their Aaa 
ratings on a recent University bond  offering). We have also secured additional 
lines of credit as a backstop in case  these financial pressures continue.

Alumni, parents and friends continue  to provide philanthropic support to the 
University, although we do not expect  our fundraising efforts to result in 
the level of success we've experienced in  recent years. Philanthropy is 
declining across the country; at Northwestern it  has declined slightly in the first 
half of our fiscal year. Our hope is that our  supporters will continue to 
make the University a priority during this  period.

Applications for admission are up in almost all undergraduate,  graduate and 
professional schools - but that isn't likely to translate into  additional 
tuition revenue. We simply do not have the capacity in most of our  programs to 
add students, nor do we want to do so, as it would change the nature  of a 
Northwestern education. In addition, we expect that both the number of  students 
needing financial aid, and the amount of assistance they will require  are 
likely to increase. That's why we're planning the 10 percent increase in our  
undergraduate financial aid budget next year, along with increases in aid for  
other programs. The increase in applications means that we are attracting some  
of the best students in the country, thereby demonstrating that, even in  
difficult economic times, the value of a Northwestern degree remains  high.

The major economic upheaval that we're now experiencing  understandably 
creates feelings of uneasiness. We cannot control the economic  forces that are now 
sweeping the world. But we can consider thoughtfully the  potential impacts 
of those forces and plan appropriately. I assure you that  we're doing just 
that. In its 158-year history, Northwestern University has  weathered some very 
difficult economic times, from the lean years following its  founding to the 
dot-com bust and aftermath of 9/11 earlier this decade. Through  all of those 
times, the University has remained a citadel of teaching, research  and 
scholarship. With prudent financial management and your assistance, I am  confident 
that Northwestern will continue to be a leader in the academic  community and a 
financially secure institution.

Thank you.

Henry  S. Bienen
President

**************************
This message was  sent using the NU Bulkmail service to a list of IDs with 
normal  priority.

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