Stanford Puts a Freeze on Faculty Pay

Stanford University, one of the nation’s wealthiest campuses, says it is anticipating a $25-million budget deficit for next year and has decided to freeze salaries for most of its faculty and staff.

The announcement, made in a recent e-mail from Provost John Etchemendy to Stanford’s 8,700 employees, follows a decision by the university last fall to impose a hiring freeze for most staff positions.

Experts in higher education economics said that while such cost-saving measures have become almost routine at public colleges and less wealthy private schools in recent months, Stanford appears to be the first elite private institution to freeze salaries during this economic downturn.

“It’s certainly indicative of the times when we’re talking about one of the wealthiest private universities in the country having to freeze salaries,” said William Tierney, a professor of higher education at USC and director of its Center for Higher Education Policy Analysis.

Etchemendy said the decision was prompted by the weak performance of the university’s endowment and other investments, as well as the rising cost of health care, increased construction costs and the growing financial needs of students.

Stanford’s endowment, valued at $7.6 billion at the end of fiscal 2002, has lost about $1 billion from its peak in 2000, university officials said.

“These are not insurmountable costs and they pose no risk to the fundamental strength of our university,” Etchemendy wrote in his Feb. 26 letter to faculty and staff. But he said it would take “effort and innovation” to balance the budget in the coming 2003-04 fiscal year. Stanford’s projected $25-million shortfall comes on top of a $17-million deficit incurred during the 2002 fiscal year.

By freezing salaries at this year’s levels, the university expects to save up to $8 million, which will minimize, although not eliminate, the need for layoffs, the provost said. He said it was not yet clear how many might be laid off but said the numbers were likely to be “in the tens, not in the 100s.”

Stanford has taken other measures to balance the budget, including cutting its allocations to academic departments this year and raising undergraduate tuition for next year by 5%, from $27,204 to $28,564.

In addition, Etchemendy said, he and Stanford President John L. Hennessy, along with several other top administrators, have volunteered to take a 5% salary cut for the coming year.

Etchemendy, who has been at Stanford for 20 years, said he could not remember the last time the university froze salaries, but said administrators decided it would be preferable for most employees to forgo raises than to have major layoffs or severe cutbacks in programs.

For the most part, the faculty appears to agree, said Hank Greely, a law professor who is chairman of the university’s faculty senate. The few faculty members he has heard from, Greely said, “are taking the position that times are tough and that everyone at the university is making sacrifices of one kind or another. It’s not surprising that we are, too.”

But he and Etchemendy noted that, despite the freeze, the university would still be able to give raises to those who can document that they are severely underpaid, compared to their peers at other institutions, or when necessary to retain certain faculty members.

Stanford faculty are among the best-paid in the country.

Other prominent private institutions have announced budget cuts in recent months. Duke University has said it will eliminate up to 50 faculty positions and Dartmouth has said it, too, is considering layoffs. But Tierney and others who study higher education said they were not aware of other top private institutions that are considering freezing salaries.

That is not true for public institutions, however.

The University of California and the Cal State system may either freeze pay levels or provide only small increases in the coming budget year, officials said. Gov. Gray Davis’ proposed budget for next year provides no funds for pay increases for faculty or staff in the state’s two four-year university systems.

In the Cal State system, however, unions representing faculty and some staff already have negotiated contracts that will provide increases of 2% or more, so the system is expected to pay for those raises by making cutbacks in other spending.

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Times staff writer Stuart Silverstein contributed to this report.