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After 13 years as Duke's executive vice president, Tallman Trask III is no stranger to tough times. He's navigated schools through two recessions-one in 1991 as EVP at the University of Washington and the other in 2001 at his current post-which perhaps makes him a good man to steer the University through these choppy financial waters. But experienced or not, this year may bring its biggest challenge yet for the University and its chief financial officer.

"Nobody has seen anything quite like this," Trask says. "It's not going to be a fun time for the next 18 months."

If the last year is any indication, Trask's prediction looks to be right on the money. The endowment, which hit $6.1 billion at the end of the previous fiscal year, stood at just above $4 billion in March. All large capital spending projects have been frozen, academic hiring has slowed and President Richard Brodhead has asked administrators to restrict spending and reevaluate priorities. Compared to Duke's response to the 2001's recession, this downturn demands more drastic measures.

"[The 2001 recession] didn't even come close in terms of impact," Trask says. "There weren't any major programs that got hit. There were a lot of adjustments around the margins whereas here, we're going to have to look at some more substantial reductions."

What might those "substantial reductions" be? Tough to say, Trask concedes. But he notes that he and other administrators will have a better sense of cost-cutting measures once a redesigned voluntary retirement plan enrolls its first participants and provides cost savings this summer.

"An awful lot of those reductions will be in non-academic areas," he says. "We're trying to do the best we can to not have faculty and students see very much of the direct impact of this."

Still, Trask acknowledges that the fragility of the global economy may only compound the uncertainty of budget cuts. The University is potentially exposed to a number of factors, factors like credit markets, global stock markets and federal stimulus money.

While many companies have struggled to issue debt, Trask has maintained that turmoil in the credit markets will not affect the University. As if to retroactively illustrate his point, Duke issued $500 billion in bonds in January, debatably the worst period of the bad market, a testament to Duke's strong rating. But uncertainties in investment returns and government money will undoubtedly shape Duke's financial strategy in the months ahead.

Trask also must keep an eye on the performance of Duke's multi-billion-dollar endowment, which provided 19 percent of last year's $2 billion budget. But although policies regulating endowment spending are designed to smooth ups-and-downs in investment returns, they also mean that poor performance one year will ripple far beyond the end of the recession, even if markets improve in the short term.

In May, Board of Trustees passed a pared-down budget of $1.8 billion for the upcoming academic year. Though slim, Trask clarified that the departmental breakdown for the budget is mostly the same as before. And federal stimulus money will prove an important part of financing.

"I think we're OK on the credit markets, and we're not going to take significant policy changes around the new endowment spending rules," Trask says. "The real unknown is how much of the federal stimulus money might head our way."

Despite the multiple moving parts, Trask remains confident.

"We know where we're headed and how to get there... and I hope people understand that just because we haven't had a number of draconian cuts doesn't mean we don't have a problem, but that we're trying to work through it systematically."


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