Stanford will be laying off employees and making $140 million in budget cuts because of federal policy changes, President Jon Levin and Provost Jenny Martinez announced today (June 26).
“Though the budget reductions in the period ahead will be painful, we are confident that by acting now to put Stanford on stronger and more resilient financial footing, we will be better positioned to pursue excellence and new opportunities going forward,” Levin and Martinez said in an open letter to employees.
Stanford is facing cuts to federal research funding and a bill that would raise a tax on endowment gains from 1.4% to 21%.
The tax would apply to Stanford’s $37.6 billion fund, resulting in an estimated $637 million impact to Stanford’s annual budget, Martinez told the Faculty Senate on June 12.
“For example, an endowment tax will heavily impact undergraduate financial aid,” Martinez said. “We intend to continue the generous aid we currently provide, but that will require moving money from other areas to fill in the gap.”
Martinez said Stanford will also continue to fund PhD students.
Schools and units have been asked to prioritize research and education and to simplify their administrative processes, Martinez and Levin said.
The budget cuts exclude the School of Medicine, which will identify cuts in the coming weeks.
“We expect schools and units to absorb general funds reductions in different ways,” Martinez and Levin said.
Employees will be getting modest raises to reflect cost-of-living increases, and laid off employees will get benefits and compensation, Martinez and Levin said.
Stanford is a $9.7 billion enterprise, not including its hospitals.
Stanford spends about 5% of the total value of its billion endowment each year, according to a fact sheet from the university. That includes $1.9 billion budgeted for the current school year, paying for 21% of total university expenses.
The endowment has been in place since 1885 when founder Leland Stanford gave about $20 million to establish the university.
House Republicans passed a bill on May 22 that would raise taxes on the largest endowments to the corporate rate of 21%.
The tax bill still needs to pass the Senate and get President Trump’s signature.
Stanford also faces risk of reduced funding from the National Institutes of Health, Department of Energy and National Science Foundation. Martinez told the Faculty Senate that Stanford has no substitute for this money.
“There is significant uncertainty about how federal support for universities will evolve, but it is clear that the status quo has changed,” Levin and Martinez said.
MAGA: the pernicious endowment that keeps on giving.
The 21% tax that would apply to Stanford’s $37.6 billion dollar endowment, could result in an estimated $637 million (tax) impact to Stanford’s annual budget, Martinez told the Faculty Senate on June 12. So, Stanford is earning over $3 billion on their return on their endowment investments (ROI) and might have to pay a tax of approximately 21% or $637 million which would reduce their ROI to approximately $2.5 billion.
Stanford potentially receives over $2 billion annually from all of their students in tuition, fees, housing, etc. Stanford also receives millions in annual donations from alumni/donors, and all of Stanford’s buildings are paid for, they own their land and rent some of their land for millions in income annually, the professors’ chairs are paid for/endowed, Stanford does not pay property taxes or other taxes, their scholarships are paid for/endowed, financial aid has to be paid back with interest, they receive grants/money from the government and businesses for research among other things, much of what Stanford does at their medical center is covered by insurance and the state and federal governments, they make money from their research and discoveries, etc., so why is Stanford hurting for money and why will Stanford have to cut jobs?
Stanford would have potentially $4-5 billion coming in annually after paying the endowment tax, so where does all that money go?
I realize Stanford has costs, but are their costs more than $4-5 billion annually? If so, what is the breakdown of their income vs. costs and why does their endowment keep growing if they are bleeding money?
Is their endowment growing because they receive more than they spend? If so, do they really need to cut jobs?
Harvard has almost double the number of students that Stanford has, and Harvard’s endowment and ROI are larger than Stanford’s too. Where is all of Harvard’s money going?
This scenario and questions raised could be applied to many of our universities, charities, churches, etc. (It has been reported the Mormon Church has over $100 billion in savings/endowment.)
May be the best course of action would be to get rid of tax deductions for donations to universities, charities, churches, or any nonprofit because it is a double whammy to other taxpayers who have to pay more taxes to make up for the deductions and lack of taxes, especially property taxes that nonprofits do not pay. A gift is a gift, and you should not expect something (a deduction) in return for your gift. If you want to support a cause and/or organization, go ahead but you should not receive a deduction for your donation.
In my opinion, universities, charities, churches, and all nonprofits should pay taxes, and no one should receive a deduction for their gift/donation to anyone or any entity.
If we removed the tax deduction for donations and if all nonprofits paid taxes, then I don’t think large endowments would be an issue.