Swarthmore College endowment down $400M; budget cuts loom

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Specialist Arthur Andrews, foreground, works at his post on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

Swarthmore College's endowment is down by $400 million, to around $1 billion, and it joins the University of Pennsylvania in slowing hiring and other expenses. Excerpts from an email from Swarthmore College President Alfred Bloom (who plans to retire soon) today:

"As you are all aware our nation and world are facing the most dramatic decline in financial assets in recent times. Unfortunately the College has not been immune from the effects of this decline.

"Swarthmore has benefited from a continuing tradition of generous philanthropy and has over the years enjoyed exceptional investment success. The College has held prudently to a conservative spending rate on its endowment during years of excellent return so that it would be well positioned in years of disappointing performance. It has also maintained a 15% allocation of the endowment to U.S. Treasury securities to support the budget and to avoid having to sell equities during periods of market weakness. This history and these measures have placed the College in a relatively strong position today.

Nevertheless, the almost 30% decline in the endowment from its June 30 value of $1.4 billion has been much steeper than anyone anticipated. If the endowment remains at its current level or declines further and we continue to spend at our current level, we would soon start to erode the financial foundation of the College's future. Moreover, until a turnaround takes place we can expect a reduction in philanthropic support and an increase in the cost of meeting the demonstrated financial need of our students. These conditions, coupled with the distinct possibility of a protracted recession ahead and uncertainty over when an eventual financial turnaround may take place, make it essential to plan for, and move prudently toward, a significantly more constrained budgetary environment.

"This past weekend the Board of Managers discussed the situation fully... Effective immediately, the College will pull back from all non-essential construction work, refrain from initiating any new programs, and stringently evaluate any faculty or staff hiring...We will develop a contingency plan for more significant reductions in the budget." But financial aid for this year and next stays in place.