Spotlight on University Finances
Weathering a down economy -- Senior Vice President for Business and Finance discusses Northwestern’s fiscal state.
With the recession adversely affecting university endowments across the nation, we sat down with Senior Vice President for Business and Finance Eugene Sunshine to discuss this and other financial matters.
Giving: The endowments of several of Northwestern’s peer institutions were affected severely by what people are now calling the Great Recession. What is the current state of the University’s endowment?
Eugene Sunshine: It has rebounded significantly – to about $6 billion at the end of October 2009 – from its low point last winter and early spring. The endowment remains, however, well below its maximum size of about $7 billion.
G: Endowment spending comprises a relatively small percentage of Northwestern’s revenues. How prudent did this turn out to be?
ES: The University has been fortunate that, in the last couple of years, endowment spending comprised only 18 percent of its annual expenditures. A number of premier research universities had much higher percentages, causing extreme budget pressures as the value of their endowments dropped substantially. For all universities and colleges, building back the size of endowments, and growing them further, is essential because the financial support they provide to operations is critically important.
G: Northwestern has responded to the recession by increasing scholarship spending and capping debt for undergraduate students. How will the University pay for that?
ES: Increased expenditures in such areas as financial aid have been met primarily by new endowment moneys created by new gifts and our receipt of royalty payments from the sale of the drug Lyrica (a painkiller developed by Northwestern researchers to treat patients with diabetes and other diseases).
G: Northwestern now has three campuses, in Evanston, Chicago and Doha, Qatar. How does that impact the institution financially?
ES: It is not the number of campuses itself that impacts the University’s finances but the growth of overall expenditures relative to revenues. Moreover, the revenue/expenditure picture is very different campus to campus as it is school to school. Expenditures relating to our Qatar program are met pursuant to agreement with the sponsoring organization.
G: Despite the downturn, gifts dropped by only 15.6 percent and donors decreased by only 4.3 percent in fiscal year 2009. What does that say about the generosity of the University’s alumni and friends?
ES: Northwestern supporters have a wonderful loyalty and a deep appreciation for the breadth and quality of what the University does. Their recurring generosity in both good and bad times is impressive.
G: Endowment and philanthropy aside, how has the recession affected Northwestern financially?
ES: Liquidity ― or cash on hand to meet the University’s obligations ― has been much tighter. Reduced revenues against projections in a number of areas have caused expenditure cutbacks or delays. Construction projects are one example.
G: What are the biggest fiscal challenges you see moving forward?
ES: The biggest challenge is finding the resources to enhance Northwestern’s excellence. This impacts such matters as faculty recruitment and retention, financial aid, graduate fellowships, research, and facilities. Standing still is not an option; positioning ourselves to be opportunistic is an imperative.
G: Do these economic times increase the importance of giving to Annual Fund accounts, including the President’s Fund, the University Unrestricted Fund, and the various school annual funds?
ES: Annual giving is always vital to the University’s financial well being. Today’s financial circumstances ― no matter what their cause ― only heighten the need. Annual giving helps provide a margin for University management and the deans to maintain and expand essential functions.
G: With new President Morton Schapiro being a leading expert on the economics of higher education, do you foresee the finances of the University being managed any differently?
ES: President Schapiro will continue the growth of the University’s excellence and do so in a financially responsible manner. His expertise will ensure we accomplish both.
G: You’re an alumnus and giving back to your alma mater has been a personal priority for you. Why?
ES: It has been a big priority for both my wife and me for many years. Much of our professional successes in life and friendships we have established are directly attributable to Northwestern. We regard it as a true pleasure and privilege to support the University and never as an obligation.
For a more complete look at the University's budget, please visit http://www.northwestern.edu/budget/.
This article originally appeared in the Winter 2009 edition of the Northwestern University Leadership Circle Newsletter.