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10/29/91

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Faculty Senate Meeting of 10/24

Questions about use of Stanford's endowment, the size of the student body, and whether the university should change to the semester system dominated a Faculty Senate session two days after university officials announced measures to close a $43 million budget gap.

Speaking at the Oct. 24 meeting, President Donald Kennedy said that extensive consultation would be the "critical element" as the institution's 20 organizational units develop specific recommendations to achieve budget cuts and income enhancements. Kennedy fielded questions on behalf of provost and chief budget officer James N. Rosse, who was out of town.

Kennedy also announced formation of a combined liaison team that will work closely with the School of Humanities and Sciences - Stanford's largest and most complex unit - to develop a budget-cutting strategy.

During preliminary summer planning, separate liaison teams studied the school's three components: humanities and fine arts, social science, and natural science.

The new team, formed at the school's request, includes Ted Mitchell, deputy to the president and provost; Rosse; Profs. John Eaton, mechanical engineering, and Robert Weisberg, law; students David Bradfute and Allison Derbenwick; staff member Antoinette Addison; and Ewart Thomas, dean of humanities and sciences.

Kennedy said the team would work closely with various planning teams of faculty and deans already in place within the school.

Endowment uses

Continuing a line of questions about the university endowment raised in open forums and earlier senate meetings, Prof. Ronald Rebholz, chairman of English, asked Kennedy why most shopping center income could not be funnelled to the operating budget instead of the endowment.

Funds to build the shopping center in the 1950s and to extensively remodel it in the late 1970s came from the endowment and have always been viewed as an investment, not a loan, Kennedy responded. Income on the investment accrues to the endowment, and is distributed to the operating budget the same way as other endowment income - through the payout rate.

The practice is being reexamined, he said, explaining his own view that income attributed to the increased value of the land could go the operating budget while the return on the capital investment would stay with the endowment.

However, it is "not an easy job" to discriminate between return on capital and appreciation of land value, Kennedy said.

Putting on his university trustee hat, Kennedy explained the complexity of the issue: Donors of endowed chairs and other similar gifts in essence purchase shares in a portfolio of investments that include the shopping center.

"The trustees have to be sure that they don't change the rules in a way that disadvantages" a donor's purpose, he said.

Prof. Raymond Levitt, civil engineering, cautioned against taking more money out of the endowment.

Because the shopping center returns a high rate on investment, people are interested in transferring more to the operating budget, he said.

"But do we expect the operating budget to contribute to those parts of the endowment that are returning less than the average?" Levitt asked.

Prof. Craig Heller, biological sciences, asked if development officials expected a drop in gift income when the Centennial Campaign ends in February.

Kennedy said that previous experience showed higher giving levels after major campaigns, but "that may be a little pious and hopeful given the economy."

He also told Heller that the Development Office is trying to raise more money for objectives that will provide operating budget relief.

Chemistry Prof. James Collman expressed disapproval that the cost of running the Development Office comes from the operating budget, but that fund-raising efforts for the most part benefit the endowment. "It is not illogical to have a payout" from endowment to cover that cost, he said.

Kennedy said officials were exploring the possibility.

Student body size

The idea of expanding income by enrolling more undergraduates or graduate students also was discussed.

Kennedy told the senators that a 4 percent to 5 percent increase in undergraduate enrollment could produce some financial gains, but not enough to justify the changes in quality of student life that would result.

About 35 percent of the income would be plowed back into financial aid and other costs would consume another 15 percent, he said. Within several years, any marginal revenue gains would be replaced by increased cost for services, Kennedy predicted.

Stanford's commitment to need-blind admissions remains very strong, Kennedy said. And the university's desire for diversity means it will continue to have a pool of admittees with a high need for financial aid.

Kennedy also said he opposed the "admit-deny" practice in which additional students would be accepted on the condition they not seek financial aid. Schools that follow that practice and say they are need-blind are "simply lying," he said.

Chemistry Prof. Richard Zare, head of the senate's ad hoc Committee on Education and Scholarship at Stanford, said his group supported need-blind admissions and rejected the idea of a larger undergraduate population, fearing it would jeopardize the quality of undergraduate education. This is contrary to the group's task force on revenue enhancement, which suggested increasing the student body size by 10 percent on an admit-deny basis.

Heller asked whether departments could increase enrollment of master's students, splitting the "profit" with the university.

The idea is getting serious consideration, Kennedy said, but has to be decided by each school.

Enrollment of doctoral students for the most part is limited by the amount of aid each department can offer, but master's students typically pay full fare. Master's degrees are not offered in some fields because a doctorate is the expected credential.

Prof. Terry Karl, political science, disputed the idea that adding master's students is inexpensive. For one thing, master's students would increase the size of classes meant to train doctoral students, she said. Also, larger departmental master's programs might infringe on current interdisciplinary master's programs.

Change to semesters

Prof. Ross Shachter, engineering-economic systems, asked if officials had investigated possible financial savings that might accrue from a change to the semester system.

Prof. Mary Pratt, Spanish and Portuguese and comparative literature, chimed in that many department administrative staff members apparently think a change would save a lot.

The university's third president, Ray Lyman Wilbur, shifted the academic calendar from semesters to quarters in 1917.

In the last decade, the senate turned down a suggestion to change back after lengthy debate in which engineers and scientists largely favored the status quo and humanists supported semesters. Only the Law School now operates on the semester system.

The registrar's office recently estimated savings of about $100,000 to operate on the semester system, Zare said.

Responding to Pratt, Sally Mahoney, acting vice president for student resources, questioned whether savings from the lightened workload could be recovered in individual departments.

The estimated savings do not take into account transition costs, a barrier that makes it "probably not worth the trip," Kennedy said. The decision, however, should be controlled by the faculty, he said.

Kennedy thanked the several school deans in attendance for returning early from long-planned trips to the opening symposium of the Stanford Japan Center-Research in Kyoto, Japan. Some of the deans also met with alumni groups and government and business leaders while in Asia.

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