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reed magazine logoWinter 2009

Recession Squeezes College Budget

The instability of the stock market has sent portfolios and 401(k)’s falling like pebbles down a well, with anxious investors listening for a splash to signal that the market has finally hit bottom. Reed finds itself in a similar predicament. Fortunately, in December 2008, the endowment’s downward velocity seemed to slow—if only temporarily. By the year’s end it stood at $350 million, a decline of 24 percent from its peak of $461 million in December 2007.

Although no one is cracking open the champagne, the endowment’s apparent leveling brought the first glint of optimism after months of consternation and uncertainty in the budgeting process. President Colin Diver announced in the December 14 staff meeting that the 2009–10 academic year would bring a 5 percent cut in all non-personnel spending, but that faculty and staff layoffs were, for now, “off the table.”

Diver went on to echo a caveat he gave the Oregonian in a story about the economic downturn. “The thing that makes this so hard is that we just don’t know any more than anybody else how deep and how long this economic downturn is going to last,” he said. “If this recession turns into a depression, all bets are off.”

pie chart

Diver has outlined nine potential steps to slim non-academic operations. The actions include a soft hiring freeze;a reduction in inflationary pay increases; deferring nonessential renovation and repair projects; and considering a temporary increase in the rate at which Reed spends from the endowment.

The endowment currently contributes 30 percent, or $19 million, to the college’s $64 million operating budget (tuition and fees account for 63 percent; gifts, grants and other sources make up the rest).

Next year’s budget was calculated with a projected freshman class of approximately 355 in addition to 40 transfer students. The good news is that Reed’s pool of early decision applications is holding steady. The bad news is that admission staff predict total applications will be down by 10 percent, coming in close to 2007, which produced a freshman class of 347.

Meeting the anticipated greater demand for financial aid has played a major factor in all calculations moving forward. For the 2008–09 academic year, 51 percent of students received financial aid; the average package (including grants, loans and work) totaled $32,154. Already this year, 15 students have asked for an increase in their aid due to changes in their economic standing. It had been Reed’s policy only to reevaluate students’ need on an annual basis, but exemptions were made for these requests.

The administration has been transparent in its reporting of endowment declines and budget concerns in its dealings with stakeholders, including prospective students and their parents. Diver assured would-be students that his primary focus is maintaining Reed’s high academic standards and that the college’s financial aid policies “will continue to be formulated with the goal of making a Reed education accessible to the world’s brightest and most intellectually passionate students.”

reed magazine logoWinter 2009