Even With a $27 Billion Endowment, Stanford University Expects Layoffs

Gene Naumovsky

Stanford President Marc Tessier-Lavigne finds future layoffs "unavoidable."

In a letter to the Stanford community, University President Marc Tessier-Lavigne reported that the school is facing financial barriers and that future layoffs are mostly “unavoidable,” according to CNBC.

Tessier-Lavigne wrote, “We don't yet know the scale of job reductions. We hope they will be limited, but they will be driven by the program needs and budget capacity of individual units. Our expectation is that some of these reductions will be temporary layoffs (furloughs) until we are able to resume services and bring employees back, and that other reductions will be permanent layoffs. At this time, we expect to be able to communicate more detailed decisions about layoffs in late July.”

Stanford University projects a $267 million loss from March 1 to August 21. Even more significant financial losses may be expected to follow.

While the school holds the fourth largest endowment in the country ($27.7 billion - as of 2019), most university endowments are held in the stock market and often suffer from volatility. Stanford withdrew $1.3 billion in the 2019 Fiscal Year to finance more than a fifth of the school’s operating costs.

Tessier-Lavigne wrote of a planned 15 percent cut in funding from endowment payout, as well as a 10 percent cut in support from general funds. School officials are restricted from withdrawing the total $27.7 billion, and only have access to a fraction of the funds. As the endowment consists of many donations, each specified for a certain use, the school could face lawsuits over a misappropriation of funds. Yet, “an existential threat” could allow Stanford to withdraw extra funding through a special court order.

Mark Kantrowitz, education expert and vice president of research for savingforcollege.com, said, “The purpose of an endowment is not just to generate income to supplement typical spending, it's also to be a rainy day fund. And frankly, it's pouring.”

Tessier-Lavigne also wrote, “I know this is difficult news to hear, and it is difficult for me to share, knowing the dedication and contributions of the people across our Stanford workforce," he added. "To be clear, we will provide pay continuation through August 31 in all cases, and we will be providing more information about assistance the university will provide for anyone we're unable to retain.”

Read the full story here.

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