Bollinger Reports Portfolio Losses

The value of Columbia University’s investment portfolio fell by around 15 percent over the six-month period that ended December 31, according to a Columbia-wide e-mail sent by University President Lee Bollinger on Wednesday evening.

To address a tightening budget, Bollinger asked each “budget unit”—such as schools, centers, or offices—to plan for an 8 percent decrease in the amount of revenue they receive from the endowment fund for the next fiscal year.

University endowments nationwide have been severely impacted by the financial crisis. Although Bollinger acknowledged potential losses in a November e-mail, Wednesday’s was the first message he sent with concrete figures about endowment performance. Each year, Columbia releases financial figures in January.

Bollinger prefaced the numbers he released on the endowment by saying that Columbia has fared “reasonably well” given the current financial climate. From the beginning of the fiscal year, which started on June 30, through October 31, a date chosen by various other universities to release financial statements, Columbia’s investment performance had declined 11.8 percent, Bollinger wrote. As of December 31, that number had become approximately 15 percent.

“Let there be no doubt, we still have to face hard choices in the months ahead,” he wrote, adding later, “Hopefully, by accepting and planning for this new reality, we will be in a position to move forward in strength.”

Compared to Columbia’s Ivy League peers, the University may be in a better financial place due to its institutional structure. For example, Harvard University reported a 22 percent loss through October 31.

Columbia’s many divisions allow it to rely on more factors than its peers for the compilation of its operating budget, which makes it less dependent on its endowment. For example, patient care revenue from the Medical Center provided 23.2 percent of the University’s overall 2008 revenue. The University also relied on government grants, private gifts and contracts, and tuition for the majority of the operating budget, and only counted on the endowment for about 13 percent of 2008’s spending.

While Columbia may be faring better than its peers, the University still must enforce necessary measures to account for the loss. Because schools and administrative units each have unique financial compositions, Bollinger said that they will be free to choose appropriate cost-cutting measures. “This fiscal diversity means that our schools must identify their own ways of achieving a sound financial equilibrium,” he said in the e-mail.

To “facilitate a smooth transition to these new financial realities,” Bollinger said, “we are asking all budget units to model an 8% decline in endowment funds available for operations next year.” It is unclear how this decrease will manifest itself across the University’s dozens of budget units, which include schools, divisions, and offices.

While Columbia used the endowment for about 13 percent of 2008’s spending, each budget unit gets a different percentage of its money from endowment funds.

In a December message to the Faculty of Arts and Sciences—a budget unit within the University—Vice President for Arts and Sciences Nicholas Dirks wrote that the division was projecting the need to find “over $20 million in new funds or budget cuts in FY 10 just to stay even with where we are this year.” He said he expected decreased enrollment in certain programs, the market’s fallout on the endowment, and a slowing in the stream of gifts.

To be more efficient in the financial climate, Dirks wrote, “we are engaged in ongoing and serious deliberations about how to make cuts that will not do irreversible damage to the core mission of the Arts and Sciences, namely our capacity to support our faculty and provide the same level and quality of instruction for our students.”

In a January interview, Dirks mentioned that authorized searches for faculty are deferred as the University weathers the crisis. He also said that his division has established an Arts and Sciences-wide hiring review board “that will exercise caution in all administrative hiring.”

In the meantime, Bollinger acknowledged that forecasts are grim for short-term improvement of the financial crisis in both New York and the country as a whole. As a result, Bollinger stated that the University anticipates that “the rapid pace of gifts to the University may slow” and that students may need more financial aid in the near future, so the University needs to strategize accordingly.

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