Endowment growth supports initiatives
University trustees Jan. 27 approved a significant increase in endowment income spending that will be used to fund major increases in support for graduate students, undergraduate financial aid, important educational initiatives and building renovations.
The increase, adding approximately $57 million to the University's operating budget, also will provide substantial additional funding for library acquisitions, academic departments and a range of student life programs.
"This additional spending, made possible by Princeton's successful campaign, its annual giving program, its excellent investment performance and the strong financial markets in recent years, allows us to strengthen Princeton's leadership in several important areas," said President Shapiro.
"In a year when we are celebrating the centennial of our Graduate School, it allows us to dramatically improve our financial support for graduate students in ways that enhance the quality of their educational experience," he added. "At the undergraduate level, it allows us to increase Princeton's affordability for low- and middle-income families even beyond the levels we have achieved in recent years. It also allows us to begin our new freshman writing program immediately, and to make other important improvements in our academic departments, the library, student life and other areas."
Specifically, the increased annual spending will support:
All first-year Ph.D. students in the sciences and engineering will be supported by fellowships, not by research grants or teaching assignments.
All Ph.D. students in the humanities and social sciences will have an opportunity to receive summer support during their programs of study. (These students already are supported by fellowships during the academic year.)
Funds will be made available to increase graduate student stipends, particularly for assistants in instruction (teaching assistants), and to improve medical coverage.
Undergraduate financial aid
Loans will no longer be required for any Princeton students on financial aid; beginning next fall, where loans previously would have been required they will be replaced by scholarships.
The summer earnings expectation for financial aid students will be reduced, with the largest reductions for students from lower-income families.
The amount that students are expected to contribute from their own savings will be reduced.
Funding will be provided to support the University's new writing program, under which all freshmen will be required to take specially designed writing seminars of no more than 12 students. This program, recently approved by the faculty, will begin next fall (2001).
Funding also will be provided to strengthen advising and staffing in the residential colleges, support the expanded use of technology in teaching through the new Educational Technologies Center, and improve teaching labs in the natural sciences and engineering.
The dormitory renovation program that was established in 1996 and enhanced in 1999 will be accelerated, as will the pace at which older academic buildings are renovated.
The outstanding debt on the construction of Princeton Stadium and related projects will be funded, removing debt service on those projects from the annual operating budget.
This last action facilitated the funding of several improvements in student life that otherwise would not have been possible in next year's operating budget, including additional staffing in the Office of Career Services and additional program support in the Office of the Vice President for Campus Life. These were among the provisions recommended by the student-faculty-staff Priorities Committee, proposed by Shapiro and approved by the trustees in adopting the University's budget for academic year 2001-02 (see related story on this page). The budget includes a tuition and fee increase for next year of 3 percent, the lowest increase at Princeton since the 1960s.
Since the trustees' action to increase endowment income spending affects all endowed accounts, it directly benefits academic departments and other programs, especially library acquisitions, which are supported by endowed funds.
"The growth in our endowment and the extraordinary success of our recent campaign also allow us to take several other important actions at this time," Shapiro said. "We are committing to the construction of additional graduate student housing, making significant improvements in our medical coverage for graduate students and, in our undergraduate financial aid program, confirming as policy our practice of recent years of admitting international students, as well as American and Canadian students, on a fully need-blind basis."
Under Princeton's endowment income spending rule, spending per unit of endowment increases each year by 5 percent. The amount of spending is compared to the market value of the endowment to calculate a spending rate. The University's goal is a spending rate that is in the range of 4 to 5 percent of the market value of the endowment. The Jan. 27 action by the trustees will bring the spending rate into that range by increasing spending next year, per unit of endowment, by more than 25 percentage points on top of the usual 5 percent annual increase. The new spending level will then become the base against which the 5 percent increases in subsequent years are applied.
Of the $57 million in additional funds that will be made available for next year, about $16 million will be provided to restricted accounts (including library acquisitions and academic departments), $15 million will support the building renovation program, $10 million will be allocated to debt prepayment, and the remaining $16 million will support the new initiatives in graduate student support, undergraduate financial aid and educational programs.
Robert H. Rawson, chair of the Trustee Executive Committee, said, "One of the most important responsibilities of the trustees is to try to find the right balance between achieving the highest possible standards of excellence for this generation and ensuring the University's financial capacity to continue to achieve those standards for future generations. We don't want to spend too much of our endowment income each year, or too little. The trustees strongly believe that this adjustment meets this test: It provides resources that will strengthen Princeton's current educational programs in important ways, while also ensuring that we will be able to sustain these commitments in the years to come."
This is the fourth time in the last decade that Princeton has made an upward adjustment in its endowment income spending rate. Adjustments in 1992, 1996 and 1999 were used primarily to create a stable source of funding for building maintenance and renovation.
Provost Jeremiah Ostriker, who chairs the Priorities Committee and helped develop the proposal to increase endowment spending, said, "We have been fortunate in recent years to be able to increase our endowment spending while also preserving Princeton's financial capacity for the longer term. These spending adjustments have allowed us to invest more of our financial capital in the physical plant that is such an important University asset, and in the human and intellectual capital that lies at the heart of the University."
While the University's overall endowment is just over $8 billion, the portion governed by the endowment spending rate is approximately $6.5 billion. With the additional spending, the University's operating budget for 2001-02 is projected to be approximately $760 million, of which roughly 37 percent would come from the endowment.