The Economic Crisis & Universities – my take on why it’s different
As with just about any financial entity in the country and possibly the world, Santa Clara University has been dealing with the ramifications of the economic crisis that the entire nation is facing right now. Frozen credit markets, liquidity concerns, dissolution of various funds which were the basis of our wealth – they are all on our minds whether we work at a university or a for-profit corporation.
However, something struck me while walking into work today. While there is a liquidity concern here and probably at most universities (all are at least mostly tuition-based, though the percentages vary), the fact is that we don’t utilize debt to fund our operations. A university uses cash assets in the form of tuition income, then a percentage of the return from the endowment. Now, if the endowment loses money – as almost all have in the last several months (Harvard’s endowment was nailed for $8 billion as of early December) – a major problem is a-brewing. But the credit freeze itself, which has massively hit corporations doesn’t, it seem, have much of an impact on schools themselves. We just don’t rely on debt to finance things.
NB – I’m not sure if we make much use of the commercial paper market, but I didn’t hear anything about it (and we heard a lot about a lot of things) so I’m thinking not.
January 30, 2009 Musings, Rants, and Random Thoughts 1 Read more >