The Ivy Coach Daily

April 11, 2020

The Revenue Loss at the Ivies

Dartmouth College has lost quite a bit of revenue this year. But Dartmouth is certainly not alone among universities in declaring financial losses due to the pandemic (photo credit: Derrick Smith).

There are lots of folks who, as a result of the pandemic, have been made unemployed. There are lots of folks who are struggling to pay bills, to teach their children, to feed mouths, to maintain some sense of sanity as they obey strict stay-at-home orders. There are, in short, lots of good people and businesses to worry about these days. But here’s one group we’re not worried about: elite universities writing off significant losses for 2020. Come on…is Harvard’s financial situation really keeping you up at night these days?

University Endowments Aren’t What They Were in February

Every university is feeling the pain and our nation’s most prestigious universities are no exception. After all, lost room and board fees aside, the endowments of these schools are heavily invested — in private equity funds, hedge funds, real estate, public equities, and more. At Harvard, as an example, as Ellen M. Burstein and Camille G. Caldera report for The Harvard Crimson in a piece with a slightly exaggerated title, “COVID-19 Leaves Harvard in ’Grave’ Financial Situation, Experts Say,” “Harvard retains most of its wealth in the endowment, which totalled $40.9 billion in June 2019. It’s also the single largest source of revenue supporting the University, comprising 35 percent of its operating budget. Darrell Duffie, a professor at Stanford University’s Graduate School of Business, said Harvard’s endowment will likely shrink due to the volatility in the market. ’Financial markets are reflecting a very big macroeconomic shock,’ Duffie said. ’What was 40 billion is going to be a lot less by the time the devaluations are marked into it.’”

These Losses Are Across the Board

And it’s not like Harvard is alone. At Dartmouth, as Andrew Sasser reports for The Dartmouth in a piece entitled “College projects $83 million loss in revenue for fiscal year 2020,” “According to [chief financial officer Mike] Wagner, of the $83 million in projected losses, $51 million is based on losses in operating income, including losses related to room and board fees, investment income shortfall, professional schools and unrestricted gifts. The other $32 million is based on anticipated losses in investments. Wagner added that while the College has a $19 million surplus for the 2020 fiscal year, most of that surplus has already been earmarked for future projects.”

But Don’t Lose Sleep Over University Revenue Dips

So, yes, even the deep-pocketed Ivy League institutions are grappling with financial losses this year. As the Associated Press reports in a piece with another exaggerated title, “Financial Hits Pile Up for Colleges as Some Fight to Survive,” “Even colleges with deep reserves are expecting a painful financial blow from the pandemic. Brown University was among the first to announce a hiring freeze, citing ’dramatic reductions in revenue.’ Yale University followed on March 31, asking departments to update budgets in preparation of a ’significant loss’ in revenue.” Just how far the endowments dip at our nation’s elite universities remains to be seen but we’ll be reporting on the figures in the weeks to come. Stay tuned.

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