American Association of University Professors || A Year of Recovery

Newsletter

A Year of Recovery

Higher education has had a nasty headache, like the one that follows a night of partying. The headache stemmed from state budget problems, a depressed stock market, and anemic donations that followed the flush years of the late 1990s. But the pain is fading, and the New Year has a healthier glow.

Endowments generally saw high-single-digit returns in the 2004 fiscal year, and the stock market's "Santa Claus rally" that finished out December could push many more endowments into double-digit returns in the coming year. Savvier, more-sophisticated investment strategies are helping some institutions milk even higher performances out of the markets -- a handful of colleges earned returns of better than 20 percent in the last fiscal year.

Public universities appear to have a good economic year ahead, as increased consumer spending should spill over into state sales-tax coffers, and legislatures in turn may become more generous with

higher education. Retail activity over the holidays was up over the previous year, according to reports from stores and credit-card companies, and consumer confidence was climbing at year's end, according to national surveys.

But college leaders have had a recent lesson in how painful financial retrenchment can be. So, like children who have been warned not to spend their grandmother's Christmas cash too soon, many administrators are focusing on not-so-glamorous, fiscally conservative strategies: energy conservation, tight restraints on staff growth, modest pay raises, and catching up on building maintenance. On the revenue side, they are trying to get the most that they can out of tuition and fees without alienating students, parents, and lawmakers, and they are setting their sights on increasingly ambitious fund-raising goals.

But few people are celebrating their balance sheets. No celebration now, no headache later.