Although the current economic recession has caused the government, companies and individuals to change their financial behavior, Duke officials said they do not foresee considerable adjustments to the University's balance sheet.
Administrators cited Duke's strong credit rating and smart investment strategies as reasons why it is protected against economic disturbances.
A sluggish economy may, however, cause a "scaling back" of larger-scale projects and an increase in the financial aid budget, said John Burness, vice president for public affairs and government relations.
"Usually what happens is that... you do more phasing in of things and you're faced with more tougher choices," he said. "Universities are not recession-proof."
Executive Vice President Tallman Trask called the University a "late retrencher," explaining that the University often refrains from big and sudden changes in activity during an economic slowdown.
The University tends to follow a policy of "slow and dependable increase instead of wild ups and downs," Trask said. "We won't do anything precipitously soon," he said. "We're talking about slowing the rate of increase."
Provost Peter Lange said a weak economy's effect on the University is mitigated by the structure of endowment payouts. The endowment's annual spending is determined by the previous three years' investment returns, so poor returns one year are unlikely to drastically shift endowment spending.
The endowment is well-protected from market shocks, Trask added. With a diverse portfolio including both domestic and international investments, the correlation between endowment returns and U.S. economic performance is minimized. He said state universities are more likely to be immediately affected than private universities, because their budgets depend on tax revenues.
"Endowments tend not to put a lot of weight into very complex derivative products," said Emma Rasiel, assistant professor in economics. "Endowments tend to have relatively long investment time horizons and you just don't tend to see them going for those types of investments."
She added, however, that she does not know what assets Duke invests in. The Duke Management Company, which controls University investments, does not speak to the media.
The University has no direct exposure to sub-prime mortgages, loans extended to individuals with poor credit profiles, Trask said. Many claim the sub-prime market's collapse initiated the downturn, which has been characterized by tight credit and sluggish stock prices. Additionally, home foreclosures have increased as home prices have fallen.
""There may be some in hedge funds [in Duke's invesments] but its not substantial," he said. "We're in every market in some form or another. [The Standard & Poor's index] does not correlate with our portfolio."
He pointed to Duke's strong credit rating of AA+ as indication that the tight credit market will likely affect the University less than it might other institutions.
Although endowment spending is unlikely to change, the slow economy may increase enrollment rates, especially among graduate students, said Charles Clotfelter, Z. Smith Reynolds professor of public policy studies and professor of economics and law.
"Sometimes [a slow economy] has an ironic effect of raising enrollment rates, because when job prospects are weak, a lot of people who might otherwise work decide instead to go to school," said Clotfelter, who specializes in the economics of education.
The Graduate School has seen a slight increase in applications as the economy has performed poorly, Dean of the Graduate School Jo Rae Wright wrote in an e-mail.
"Our applications are up about 4 percent compared to last year, but that is still within what I consider normal variation for our application numbers," she said. "If the job market is depressed, students may choose to apply to graduate school rather than take a job they don't really want."
With many American families affected by the struggling economy, the Undergraduate Financial Aid Office may see an increase in student need. Director of Financial Aid Jim Belvin said, however, that any potential effect of the economy on financial aid would occur next year.
"If there is a substantial crunch to the extent that lenders don't have the back-up, that will affect Duke students, and we are talking about ways in which we can deal with that issue," Belvin said. "We are looking to the future and preparing for any circumstance that presents itself.... Contingency planning is ongoing now."
Belvin emphasized, however, that Duke will do "whatever it takes" to meet full need.
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