Watch CBSN Live

Economic Downturn Challenges Northeastern U.

This story was written by Matt Collette, The Northeastern News

As the current economic woes and an uncertain monetary future threaten many institutions across the country, university officials say Northeastern University's $700 million endowment and the school's operating budget do not face major threats.

"University endowments, like all investors, have been negatively impacted by the current economic situation, including Northeastern University," Jim Chiavelli, interim university spokesperson, said in a statement.

"Our long-term expectation is that the university's endowment will rebound as the economy stabilizes."

Northeastern does not discuss the specific nature of the endowment, despite criticism from some outside groups, like the Sustainable Endowments Institute, which gave Northeastern an F on endowment transparency last month. University officials have declined to divulge specific information about Northeastern's endowment.

At the first Faculty Senate meeting of the year, Provost Stephen Director said recent economic developments had "affected every part of this university." He said that new faculty hires, which were a significant cost to the university, should achieve an institutional goal.

"We should view every faculty position as a critical resource," Director said. "Every time we hire somebody, we ought to consider why we're hiring them."

While university hirings may decline, the day to day operations of Northeastern will likely remain largely unaffected.

"Overall, the university's operating budget should not be dramatically affected this year because the university withdraws funds from its endowment based on a three-year average of its budget," said Jeffery Born, chair of the Faculty Senate's Financial Affairs Committee and a professor of finance and insurance in the College of Business Administration.

"We do this, and almost every university does this, so that the amount coming into the operating budget doesn't change dramatically from year to year," Born said. "So that will offset, or mute, what is going on."

What could be affected, Born said, is next year's operating budget, a draft of which should be released by the Board of Trustees early next semester.

Sy Sternberg, chair of the university's Board of Trustees, could not be reached for comment.

A large portion of the university's endowment is invested in bonds, Born said, which have not suffered significant losses.

Chiavelli, in a statement to The News, said Northeastern is constantly monitoring the economic situation and is confident of the university's financial position.

Financial aid remains "a top institutional priority," according to the statement.

Born said he had heard "nothing even whispered" about any budget cuts.

The American Council on Education (ACE), which represents Northeastern as well as 1,599 other colleges and universities, wrote to Congress urging it to pass the bailout bill Oct. 1.

According to ACE, most universities rely on their endowment to fund capital projects and their operating budget.

"During the past year, the higher education community has monitored, with increasing concern, developments in the nation's financial and credit markets," wrote ACE President Molly Corbett Broad. "Today's news has further highlighted the potential for these events to negatively impact colleges and universities and the students they serve. We learned that hundreds of institutions are unable to access critical short-term funds used to finance their day-to-day operations."

Some of Northeastern's endowment is invested in Commonfund, Chiavelli said. According to its website, Commonfund is th largest nonprofit investment firm, according to its website. Commonfund manages about $42 billion on behalf of more than 1,800 nonprofit organizations, including 72 of the 100 American universities with the highest endowments.

Commonfund had invested capital in Wachovia Bank and was hit hard when Wachovia froze about a third of its assets, according to local media reports.

Not all colleges and universities are faring well in the current economic crisis.

Boston University President Robert Brown announced a hiring freeze last week to protect the university's operating budget in response to potential budget shortages in the current economic climate, said BU spokesperson Colin Riley. Between 200 and 250 vacant positions, out of about 8,000 full-time employees, will be left empty until further notice.

View CBS News In