As the effects of the recession worsen, Boston-area universities are predicting grim losses in the value of their endowments. Boston University (BU), the Massachusetts Institute of Technology (MIT) and Harvard University expect their endowments to drop at least 30 percent by the end of this fiscal year, and Brandeis University has already seen a 25-percent drop in its endowment. BU implemented a hiring freeze last October, and officials are now expressing concern over the impact high tuition rates may have on enrollment for the school's incoming freshman class. According to a university report, student tuition and fees comprised 47.8 percent of the university's revenue last year, The Daily Free Press reported last month.
"The major impact will be increased need to increase financial aid for continuing students and incoming students," BU spokesperson Colin Riley told the Daily. "The university has reserves [for financial aid] and will use those reserves and increase that budget."
In a letter to faculty and staff on Jan. 12, BU President Robert Brown said that the total endowment had dropped 24.1 percent between July and November and that figure is expected to hit 30 percent by June.
Harvard has also been hit hard. In a letter to the university's deans in December, Harvard President Drew Faust said that the institution's investment losses had reached 22 percent, or about $8 billion, since October.
That number is "unlikely to capture the full extent of actual losses for this period," according to Faust. The university, he said in the letter, is planning for a scenario in which endowment will decrease by 30 percent for the fiscal year.
"[T]he severe turmoil in the world's financial markets has affected all major asset classes in which the endowment is invested," Faust said.
Harvard's endowment funds approximately 35 percent of the institution's operating budget, covering more than 50 percent of some of its schools' expenses.
Harvard has not seen returns this severe since its endowment lost 12.2 percent of its value in 1974. Since then, there have only been three years of negative income, ranging from drops of one-half to 3 percent. In the last decade, Harvard's average investment return was 13.8 percent.
In light of this, Harvard is expected to cut 25 percent of its investment management staff -- about 50 positions. The job losses will affect investment professionals and support personnel in the legal, human resources and operations departments.
MIT has seen similar problems, forcing it to freeze salaries for various faculty and staff. In a letter to the MIT community on Feb. 19, MIT President Susan Hockfield said that by the end of the calendar year, the endowment had dropped 20 to 25 percent.
"Like virtually all major institutional endowments this year, MIT's endowment has lost significant value," Hockfield said in the letter. She said the institution anticipates a decline that could reach 30 percent by the end of this fiscal year if current conditions continue.
Despite these drops, Hockfield said that many donors have still continued their support, although she warned of a possible decline in giving.
"As of January 1, 2009, cash gifts received align with the average over the past three years," she said in the letter. "However, as economic uncertainty makes future commitments difficult for many, pledges for future gifts have fallen by more than 40 percent."
To address these issues, MIT has made cuts in various offices, but Hockfield says it will take more than that. "Achieving cuts on this scale requires more than simple belt-tightening; it demands new ways of thinking about how we can work more effectively at lower cost," she said.
At Brandeis, the overall 25 percent drop in the university's endowment has strongly affected Brandeis research centers like the Crown Center for Middle East Studies and the Schusterman Center for Israel Studies.
To tackle financial problems, the university is discussing increasing the number of students in order to enhance revenue, as well as making curriculum changes, according to Brandeis spokesperson Dennis Nealon.
"The faculty is discussing adding a business major and a special third-semester program to bolster incentives to potential applicants," Nealon told the Daily.
Brandeis announced in January that it would close its Rose Art Museum and sell the museum's entire art collection due to the university's worsening financial problems. That decision generated a large backlash and legal concerns.
The university is in the process of forming a faculty committee to deal with the situation, Nealon said. The future of the museum is still up in the air, he added, explaining that it was never Brandeis' intention to act too quickly.
Northeastern officials expected the university's endowment to even out after last October, but like officials at other colleges, recognized the destabilizing effects of the economy.
"University endowments, like all investors, have been negatively impacted by the current economic situation, including Northeastern University," Jim Chiavelli, the then-interim university spokesperson, said in a statement, according to an October article in The Northeastern News.
Provost Stephen Director told faculty members earlier this year that no part of the university has been left untouched by the economic downturn. "We should view every faculty position as a critical resource," Director said, later stressing that each hire would need to be carefully examined, The Northeastern News reported.
