2012 Budget Signals Return to Normalcy

When Provost John Etchemendy presented Stanford’s 2012 budget to the Faculty Senate this past May, he called it a “boring budget.” This nickname, which signified the budget’s return to normalcy, was warmly welcomed after the two preceding years of volatility due to the economic crisis.

In fiscal year 2009, the Stanford endowment’s market value plunged by almost 30%, causing a general funds reduction of 15% over two years, a salary freeze, and a 25% decrease in endowment payout.

According to the 2012 budget plan, “the situation has now stabilized.” Looking forward, Stanford “will return to a more normal annual growth in endowment payout of approximately 4%.” Furthermore, general funds revenue is projected to increase this year by $36.5 million, up 3.6% from last year.

Therefore, this “boring budget” will result in a distribution of resources that will be anything but boring – students can look forward to swimming in the West Campus Recreation Center or enjoying a symphony in the Bing Concert Hall in the coming years. Both projects are part of the $456 million Capital Budget plan this year.

The next year will also mark the Graduate School of Business’s first complete year in the approximately $345 million Knight Management Center. With hopes of securing ten more top professors for the program this year, there will be continued funds allocated toward achieving this goal.

However, it is not only Stanford who will be spending more this year; many students will be too. Stanford’s revenue from student income is projected to rise by $30 million to a total of $722 million this year. The budget plan explains this increase as guided by a number of considerations including Stanford’s “programmatic needs, the effectiveness of [Stanford’s] financial aid program, the impact of the economy on the families of [Stanford’s] students and [Stanford’s] pricing position relative to our peers.”

The higher tuition expenses for some students this year will come in contrast to the increased financial aid budget, which will add an additional $7.5 million to last year’s $232 million.

Government sponsored research, which is one source of financial backing for Stanford students, will decline this year. Money that comes from programs such as the American Recovery and Reinvestment Act (ARRA) is expected to decrease by $7.9 million. That figure accounts for 3.6% of Stanford’s total federal support. Provost Etchemendy explained that traditionally in tight budget times, “Stanford’s share of the federal research budget tends to increase.”

With the federal research budget unlikely to keep up with inflation and new research awards expected to decline, “the long term funding issues for graduate students remain a source of concern,” the budget plan indicated.

How will this affect current graduate students? According to Etchemendy, it won’t. The Provost expects that the federal funding cuts will cause a “leveling of some sort to the PhD population” and the lack of continued growth will not affect post-doctoral scholars who are currently employed at Stanford.

The budget shows a positive outlook for the University’s current Capital Plan, endowment payout, and general funds. But while the national and global economic situation seemed to have been stabilizing as this budget was being passed in June 2011, the recent turbulence – including the U.S. deficit reduction debate and Eurozone debt crises – may present difficulties to the growth and security of the endowment in the months ahead.