Dare to Deliver: A Depression
It is no secret that the world is in the midst of an economic downturn. World markets have fallen near 30 percent in the last year and the brunt of these losses has occurred within the past six months. This market spiral has had significant impact on the financial standing of the University of Alberta, due to the fact that the university endowments are heavily invested in equities and bonds. Current projections indicate that University of Alberta endowments will have fallen in more than $100 million in value, while interest earnings will be less than half the original projected earnings. This financial hurdle is due to hit the university financial board and faculty deans in the upcoming fiscal year, with the current fiscal year ending on March 31st, 2009. The impact of the endowment deficit will be felt by staff and students as early as fall of 2009.
Although the majority of students do not possess significant market investments, all students are dealt some fashion of punishment from the current economic downturn. University of Alberta students, akin to nationwide students, will be reprimanded in the near future. With this nine figure deficit, current and future scholarships and bursaries will be one of the expenditures to suffer. Phyllis Clark, vice president of finance and administration, says that scholarship funding will be closely monitored and protected because they are key for attracting and retaining students. Although Clark seeks to ensure that scholarships and bursaries will remain in full health, students must acknowledge the dormancy that will inevitably befall current and future scholarships. Lack of endowments will put a hold on scholarship increase and new scholarship development.
However deflating this endowment deficit may seem to students, there are redeeming factors unique to the University of Alberta. Clark points out that, “This is touching universities all across North America.” The majority of these are suffering the expense of lost and forgone interest revenue. The encouraging thing about the U of A lies in the fact that the university takes a low-risk approach to investing. The Edmonton Journal reported that Harvard University, which holds the world’s largest endowment fund, saw a 22 percent endowment loss. Harvard saw decreased endowments of over $8 billion dollars from July through October. Given this staggering statistic, the U of A seems to pale in comparison. So before students start to pack up their books and spend countless hours on their computers investigating and applying for rival universities, they should realize that the U of A is status quo for North American universities.
Two overwhelming factors of this financial pillaging will drastically, all be it indirectly, impact current and future students of the university. First, it is not widely known that endowments go far beyond funding scholarships and bursaries. These endowments are also the main source of revenue for non-tenured professor salaries, graduate research grants, and several key aspects of institutional financing. This undoubtedly lends to a decline in both the instructional quality for students as well as educational pursuits in graduate studies and research pursuits. The second impact on students strays away from the direct nomination of future endowment and looks at university funding from external forces. As the markets continue to fall below the red line, Alberta industries fall along with the market. The floundering Canadian dollar in combination with suffering public markets have left Albertan international industry reeling for conservation and decreased expenditures. This means that the university and students alike will lack the previous financial support from local industry, most notably oil and gas. So as students aside of post-secondary institutions cry out for post-secondary priority and acknowledgment, the province, the market, the interest rates and the industry fall by the wayside in their ability to help. Students must critically sit back and observe the institutional reaction to this change from record high endowment earnings and investments, to the now abysmal endowment allocation which will inevitably take place at fiscal year end.