How does a university worth $16 billion proclaim a solvency crisis?

The historian François Furstenberg takes an almighty kick at the overpaid suits that run our universities.

My university, Johns Hopkins, recently announced a series of exceptional measures in the face of a coronavirus-related fiscal crisis. Suddenly anticipating losses of over $350 million in the next 15 months, the university imposed a hiring freeze, canceled all raises, and warned about impending furloughs and layoffs. …. How does a university with a $6-billion endowment and $10 billion in assets suddenly find itself in a solvency crisis? How is one of the country’s top research universities reduced, just a month after moving classes online, to freezing its employees’ retirement accounts?

Read on here.

John Hopkins is home to the Peabody School of Music (pictured).



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  • It is common knowledge that many administrative teams at US universities are rather greedy and pay themselves very well. The place where I used to teach, a well-known institution in the Midwest, increased tuition by 5% every year. When I attended its MA program more than 20 years ago, its tuition was $23,616 per year. Now it is more than $60,000 per year (same division). This same university has had massive layoffs of staff in several divisions, many construction projects that are inconsistent with traditional values of this place, and let it library budget slip out of top-20 (was in top 10 or even 5 when I came here). Did the US have economic growth plus inflation by 5% every year over the past two decades?

  • How is it that people don’t understand or purposely ignore the fact that most of the money in endowments are restricted? And with universities in particular, most of the that money is restricted for financial aid and faculty salaries (so even if you could raid the endowment to plug a budget hole, you’d end up eliminating a generation of scholarships).

    As for the assets, that’s almost all things that cannot be easily liquidated, such as the land the university sits on, the university buildings, the equipment in the university, everything in the various university owned museums, patents, etc.

  • It’s Johns Hopkins (note the S at the end of the first name).

    And if the founder’s parents had learned to spell, we would not have had this mess.

  • The endowment is there to generate income. Cut the endowment, and you get a smaller stream of earnings. It is not a “rainy day fund” to be tapped in emergencies.

  • Administration personnel at all university’s must be reigned in with huge cuts in their bloated salaries.

    This one doesn’t have a sports program so to speak of but those that do must also cut drastically their coach salaries. Some are making more than $10 million a year and there are many of them at most universities.

  • The linked article seems to be accessible only with a subscription.
    Also (with the caveat that I haven’t read the article so don’t know the author’s thinking on the matter is!), it needs to be pointed out that assets and endowment funds are (generally) not liquid assets, i.e., they aren’t cash, and can’t be used to address the sudden shortfall of funds that the University is facing.
    So while the values discussed are quite impressive sounding (“billions”!), the assets and endowment fund – just like the article that the above post refers to – may in fact be entirely inaccessible!

  • Hint, the $ 9 billon in assets isn’t worth 9 billon anymore. The book value of the endowment and assets refers to the pre crisis values. Johns Hopkins will be doing well if those values have only gone down by 15%. The endowment has probably been hit very hard by the market collapse. Furstenberg going on about his pension being frozen won’t go down to well with 11.7% of the US workforce that have lost their job in the last 3 months.

    Sticking you fingers in you ears and pretending that the US second quarter GDP figures are not going to be the worst on record is not good management.

  • Excuse me, Norman, but the correct title of the Peabody is , first of all, the Peabody Institute if the Johns Hopkins University. But WITHIN that umbrella organization, it is called the Peabody Conservatory of Music.

    Just for a bit of history, the school was officially, from 1857 until 1977, The Peabody Institute of the City of Baltimore.

    The reason for this is that originally the Institute was made up of, besides the conservatory, a library, now part of the Enoch Pratt Free Library, an art museum, and a lecture series to be given by people of distinction in letters, science, etc.

  • Paywall prevents reading on, but the opening premise is not sound. A large endowment is not really relevant since the core cannot be diverted to spend on operating costs; in general only the income from the endowment can be spent, and that income is likely to be significantly down given market movements at this time.
    A large asset base is also of little immediate relevance to operating costs – selling off ‘the family silver’ as buildings, land, and other assets is not a good way to pay ongoing operating costs (and only really a last-resort for cash; also silly to do so when the market is heavily depressed), and would most likely have a negative impact on the institutions’ ability to bounce back post-crisis.

  • Everybody, just use your limited corona-affected assets to subscribe, and you will be able to read the article.

  • A $6 billion endowment isn’t that big for a major university; Harvard’s is around $40 billion. They can draw 5% from the endowment – $300 million – which they surely are doing, but they can’t responsibly draw more. The buildings may be worth $10 billion but you can’t eat a building. And they require upkeep. The school’s assets have commitments; they’re not a slush fund. Seriously, don’t historians (and music critics) not know anything finance?

    • I presume you mean “isn’t that big for a major university **in the USA**”. In the rest of the world, a $6 billion endowment would be considered enormous. In the UK, there are only two universities with endowments in the billions at all (no prizes for guessing which two).

  • This is going to hit a lot of universities. Academia is a business just like anything else, but it is a business run by people who aren’t that great at running businesses.

    The interesting thing will be seeing how middling universities handle this. So many professors have no idea how to do anything else and are drawn to academia because of their risk aversion (tenure). But now academia has significant risk. It is a real shame, but bloated departments of average professors create issues for universities.

    Peabody has some very good instructors, and a whole bunch of really average ones. Trimming some of that fat might not be terrible, overall. But it is always sad when people lose their jobs.

    • Its always annoying to hear people mouthing off about professors when they are completely clueless.

      • There are 36 million unemployed people in the US. Complaining that your pension is being frozen is completely clueless.

    • If their students are really average, then perhaps the instructors match. Yale has plenty of them, too. Most schools do, because hiring is either so corrupt or mindless. What looks good on paper is everyone’s concern.

  • Kind of embarrassing that a senior academic apparently doesn’t understand an economic concept as simple as liquidity.

  • This is also happening my university, and at most of the great research and scholarly universities in the United States. I am not familiar with the situation in other countries, where universities may enjoy far more direct government support than we do here. It would be foolish not to take precautionary measures under the present circumstances, and I find it hard to sympathize with colleagues who complain without looking around at what other people are enduring.

  • Endowments can certainly be tapped for emergencies. But most of the economic royalists here would rather balance this on the backs of the little guys. That’s exactly the author’s point.

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