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"We actually put the endowment to work in keeping tuition down, which is a Rice tradition," Shepard says. "When the markets are doing well, we can keep our tuition down. Universities rely on their endowment a lot; Rice more than most."
But with the stock market tanking, Rice's endowment is down by $620 million. In June 2000, the endowment was $3.37 billion, and now it's only $2.75 billion. Investment losses accounted for about 10 percent of the drop; the rest the school spent, Shepard says.
On November 18, Rice issued a memo to all of the university's deans, vice presidents, department chairs and directors reporting that President Malcolm Gillis had implemented a hiring freeze. The memo says that because of the "sharp decline in the value of the endowment and the slowdown in giving due to recession and slow recovery, it is in Rice's best short-term and long-term interests to give ourselves some budget flexibility."
For now, that amounts to 48 job openings that won't be filled, out of 1,614 positions in departments affected by the freeze.
"It's not a super-big deal," Shepard says.
"Our freeze is one means of slowing spending in a managed and thoughtful manner," the memo says. In April, the budget will be reviewed and re-evaluated and university officials will decide whether to extend the freeze through the academic or fiscal year, the memo says.
The hiring freeze does not apply to temporary staff, faculty or researchers -- most of their salaries are supplied by grant money. "Removing them doesn't save any money, and the research has to get done," Shepard says. Also excluded from the hiring ban are campus safety positions like police.
"The idea is just to slow down our budget a little bit, so when we get to the budget planning process in the spring, we can avoid some of the more drastic things like our competitors," Shepard says.
Rice ranked 16th out of 310 school endowments surveyed by the National Association of College and University Business Officers. "Which puts them in a very elite category -- only 43 in the country that have an endowment of $1 billion or more," says Damon Manetta, manager of external affairs for NACUBO. (Harvard was No. 1, with a $17.9 billion endowment.) According to the association, this is the first time in 30 years that endowments have decreased two years in a row.
"It's occurring all across the country, whether it's a state university or a private university -- all revenue sources are essentially declining," Manetta says.
Usually, university endowment investments have an average annual return of 11 percent, Manetta says. Last year, they lost an average of 3.6 percent. "That was the first year of negative returns since 1984," he says. "We haven't got all our data scrubbed yet, but it's looking like it's going to be another year of negative returns."
While Rice's finance officials did not return calls for comment, Shepard says some other schools have more drastic cuts. Stanford University imposed a hiring freeze and may have layoffs. Duke University, The New York Times reported, may cut about 20 faculty positions in the arts and sciences and may lay off 50 faculty members in the next three years.
"We're trying to even it out. We're doing things now to cushion later without having to have, 'Oh, my God, we need to cut millions of dollars from our budget this year,' " Shepard says. "It's easy to do something relatively simple and painless right now rather than have to do something more drastic later."