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BY JAMES ROBINSON The university has yet to experience the hardest part of the current economic downturn, President John Hennessy said in an address to the annual meeting of the Academic Council last week. While noting Stanford's fundamental strengths and stressing that "the purpose of discussing our financial challenges is not to instill fear," Hennessy seemed to brace the campus community for further ramifications from tighter budgets. "We must choose how much to devote to maintaining existing strengths, what areas need increases in resources, what new ventures to initiate and, perhaps most difficult of all, what areas to deemphasize," Hennessy said at the May 1 meeting in Kresge Auditorium. "These will not be easy choices, given the constraints of dollars and of space. For example, I anticipate that we will need to make difficult choices between building new facilities and building additional endowment." In his prepared remarks, Hennessy also reviewed the year's past accomplishments. And following his address, three officials -- Law School Dean Kathleen Sullivan, former Dean of the School of Humanities and Sciences Ewart Thomas and University Librarian and Director of Academic Information Resources Michael Keller -- gave the audience their perspectives on dealing with limited resources. Distinct challenges Hennessy noted that, compared to its peer institutions, Stanford faces three distinct challenges: the size of its endowment, its sources for undergraduate financial aid and its debt capacity. Despite the university's $7.6 billion endowment, on a per-student basis it "does not even rank in the top ten" in the country, Hennessy noted. And while Princeton and Yale fund 80 and 70 percent, respectively, of their undergraduate financial aid from endowed or restricted funds, Stanford funds less than 50 percent of its aid from endowment money. Among six peer universities, Stanford has the second highest ratio of debt to assets. While the Board of Trustees has wisely placed an upper limit on that ratio, "we are rapidly approaching that limit" because of reduced assets from a falling endowment and increases in new debt incurred in the 1990s, Hennessy said. Yet Stanford remains "uniquely positioned" for the future because of its extraordinary faculty and students, he added. "Our faculty will continue to display a pioneering spirit and an entrepreneurial character that have characterized Stanford from its beginning," he said, noting the faculty's ability to "foresee new directions and new opportunities." The university also is strengthened by dedicated and loyal alumni and friends, with the success of the Campaign for Undergraduate Education -- which has now reached $850 million of its $1 billion goal -- a reminder of the kind of success that, he said, is driven by a "clearly articulated, compelling vision." Three perspectives In the first presentation following Hennessy's remarks, Sullivan noted accomplishments in the last four years at the Law School including the hiring of seven new faculty; retaining faculty against competing offers; the creation of a new clinical faculty line; the opening, with the university's help, of a legal services clinic in East Palo Alto; and the beginning of renovations of the school's physical plant. "Resources matter ... but they're not all that matter. We're on Yale's reputational heels with only three-quarters of Yale's budget and only three-quarters of Yale's faculty size and only three-quarters of Yale's endowment," she said. "So there are also obviously intangible factors as well." To separate yourself from the competition, Sullivan said, "you have to have a vision -- you might want to even say, if you don't think it's too crude, a brand." In that respect, "what we've developed is the idea that we are a law school where you can do law and other disciplines." Engaging alumni through Alumni Weekend and other activities and seeking media coverage of faculty research are "two things you can do with very limited resources," she added, noting that accepted applicants may select Stanford Law School partly as a result of a familiarity with its faculty members "as public intellectuals" who are often featured in the national media. Even more important, she said, is "maintaining commerce" with other schools through research colloquia. Notwithstanding bad times, annual giving has gone up at the Law School. "If [alumni] have gotten engaged, they're not going to leave you when the going gets tough," Sullivan said. She also detailed how the school has chipped away at expenses by undertaking a budget process with a rigid calendar and going after the instructional budget. "Our tenure-line faculty -- the people the students came to Stanford Law School to study with -- had grown accustomed to teaching a lot of luxury and boutique courses and not teaching the big basic service courses, and we just changed the rules," which resulted in a $500,000 savings, she said. Hiring has focused on junior faculty who are "considerably cheaper" than laterals and who turn out "to be good for us qualitatively as well." Little "boring" things add up, she noted, such as forsaking a $15,000 rented tent for the school's graduation and moving the ceremony indoors. And the school "benefited from other people's pain" when it bought Aeron chairs at a third of their normal cost, she said. Thomas was asked to speak because he presided over the School of Humanities and Sciences during the budget cuts of the early 1990s. Speaking in a more generalized way, he called for a "deliberative process" among stakeholders before deep cuts are made. Taking aim at across-the-board cuts, he said they "are attractive because it's easy to think of them as fair. We can say, we're in this together, and that's fair. ... The problem with proportionality as a budget-cutting principle is that it discourages discussion, for example, of the ways different schools and programs can use more efficiently their general funds and other funds." At the same time, one should resist the complete elimination of a program, Thomas said: "An argument you sometimes hear is that this is the sure sign that we are serious -- people want to see blood." Then, he said, there is the program considered "so precious that it should escape the scalpel altogether." Thomas argued that the best starting point is saying that cuts would not be across the board, that all units should expect some cuts and that it is unlikely any unit faced elimination. The university won't be able to absorb a 10 percent budget cut without "managing the faculty size downward, for example, by up to 2 percent," Thomas added. On a more optimistic note, he said the university "emerged strongly after sizable cuts 12 years ago, and I believe that we will get through these times as well in good shape." Keller, also speaking of previous budget cutting, said his area "took the challenge" given by former President Gerhard Casper and former Provost Condoleezza Rice "to innovate but not come back for more money." He cited the growth of Academic Computing, which was funded in part by cutting back and making more efficient book processing operations at the libraries. "We've had to take some risks," said Keller, under whose leadership the libraries have become more entrepreneurial -- spawning, for example, HighWire Press. "Sometimes we've succeeded, and sometimes there's been failure." Speaking of hard choices, Keller circled back to Hennessy's remarks. "One thing that has to be said, especially after two rounds of budget cuts in the last two years: There isn't an inexhaustible supply of new approaches. ... The community itself has to help make some choices about what won't be done as much or as well as in the future as has been done as much and as well in the past."
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During Thursday's annual meeting of the Academic Council, psychology Professor Ewart Thomas shared his views on navigating troubled financial waters, a perspective formed when he was Dean of Humanities and Sciences in the early 1990s. Other panelists included Michael Keller, university librarian and director of academic information resources; and Kathleen Sullivan, dean of the Law School. Photo: L.A. Cicero
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Stanford Report, May 7, 2003
