Stanford University, one of the nation's wealthiest campuses, says it is anticipating a $25-million budget deficit for next year and has decided to freeze salaries for most of its faculty and staff.
The announcement, made in a recent e-mail from Provost John Etchemendy to Stanford's 8,700 employees, follows a decision by the university last fall to impose a hiring freeze for most staff positions.
Experts in higher education economics said that while such cost-saving measures have become almost routine at public colleges and less wealthy private schools in recent months, Stanford appears to be the first elite private institution to freeze salaries during this economic downturn.
"It's certainly indicative of the times when we're talking about one of the wealthiest private universities in the country having to freeze salaries," said William Tierney, a professor of higher education at USC and director of its Center for Higher Education Policy Analysis.
Etchemendy said the decision was prompted by the weak performance of the university's endowment and other investments, as well as the rising cost of health care, increased construction costs and the growing financial needs of students.
Stanford's endowment, valued at $7.6 billion at the end of fiscal 2002, has lost about $1 billion from its peak in 2000, university officials said.
"These are not insurmountable costs and they pose no risk to the fundamental strength of our university," Etchemendy wrote in his Feb. 26 letter to faculty and staff. But he said it would take "effort and innovation" to balance the budget in the coming 2003-04 fiscal year. Stanford's projected $25-million shortfall comes on top of a $17-million deficit incurred during the 2002 fiscal year.
By freezing salaries at this year's levels, the university expects to save up to $8 million, which will minimize, although not eliminate, the need for layoffs, the provost said. He said it was not yet clear how many might be laid off but said the numbers were likely to be "in the tens, not in the 100s."
Stanford has taken other measures to balance the budget, including cutting its allocations to academic departments this year and raising undergraduate tuition for next year by 5%, from $27,204 to $28,564.
In addition, Etchemendy said, he and Stanford President John L. Hennessy, along with several other top administrators, have volunteered to take a 5% salary cut for the coming year.
