With the national economy showing signs of emerging from its recent funk, the University stands to gain--and, surprisingly enough, lose.
On the positive side, an economic boom bodes well for employee wages and benefits, financial aid costs, charges on financial transactions, faculty growth, fundraising capabilities and the general mood at the University. However, a healthy economy is also associated with higher construction costs and, sometimes, rough sailing for graduate and professional admissions.
Provost Peter Lange said a strong economy is important in shaping an optimistic and ambitious spirit at the University.
"We'd like there to be an air of optimism. [2002-2003] was not a good year," he said. "[A slumping economy] does reflect back on the University, because if everything's going down, even if you're going up, it's hard to get things bubbly and positive. It's a much less conducive atmosphere to change."
Good economic times helped shape a lofty and bold long-range document, Building on Excellence, which was drafted in 1999 and 2000 with the intention of outlining the University's goals and priorities for the next five years. Buoyed by Duke's rapid ascent to the upper echelon of universities during the 1990s and perhaps encouraged by the rosy economic landscape, the plan calls for $720 million to be incrementally distributed.
After several years of recession and money-losing budget cycles, however, Building on Excellence is now underfunded. Executive Vice President Tallman Trask estimated that the University has less than $500 million in capital, and although he added that this is "a problem many people would love to have," administrators are in part counting on a strong economy to bring the plan's funding up to the original goal.
Still, Duke has come out better off than some. The current fundraising effort, the Campaign for Duke, has largely met expectations despite the downturn. "We've done remarkably well through this recession in terms of the campaign," Lange said.
Other universities, by contrast, have suffered both in terms of fundraising and in trying to avoid huge budget deficits. Given that Duke's $2.7 billion endowment is substantially smaller than that of peer schools like Harvard University, Princeton University and Stanford University, it is less dependent on endowment income for revenue and therefore can weather slow economic times better than others.
Stanford Provost John Etchemendy announced last February that all staff and faculty wages would be frozen this year to address his university's shortfall.
"We've actually done pretty well compared to some other places," said Trask, half-joking, "because we're brilliant and we're lucky."
Lewis Siegel, dean of the graduate school and vice provost for graduate education, said graduate applications tend to decline during a booming economy. By contrast, during the recession of the past few years, he said, "They went up like a skyrocket."
This year's crop of new doctoral candidates numbered 400 for the third straight year, a barrier that was seldom if ever broken during the 1990s, and Siegel said applications were up 15 to 20 percent. For the first time in Duke's history, it was able to fill a graduate class accepting less than 20 percent of applicants.
The other aspect of the University that could suffer in an economic recovery could be construction, as costs for it and other capital investments may rise along with interest rates. With dozens of projects underway at Duke, the extremely low interest rates--sometimes under 1 percent, Trask said--from which the University has benefited could be a distant memory.
On balance, however, a boom time is hard to refuse. Trask noted wryly, "In general, I prefer the 'up' economy to the 'down' economy."
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