During the deepest recession in recent memory, even the nation's wealthiest universities are slashing their budgets and producing serious economic consequences for the communities in which they reside.
The most recent economic impact study conducted by the Office of Public Affairs and Government Relations estimated that Duke generated an estimated $3.4 billion during the 2006-2007 fiscal year for the City and County of Durham economies.
But with the University curtailing spending as it attempts to close a $125 million budget deficit over the next three years, there will be a decrease in local investment.
Executive Vice President Tallman Trask said although the University will meet all of its current obligations and pledges in terms of investment, it will not be entering into any more commitments in the foreseeable future.
"We made it clear in the beginning we would do our share, but now it's time for others to do theirs," he said. "There's momentum downtown and other companies are moving down there and they wouldn't have been if Duke hadn't started five years ago."
Durham feels real estate pinch
Given the size of the University's investment in the community, especially in revitalizing downtown Durham, it is unlikely that another company or institution would be able to fill the gap. According to the study, Duke spent approximately $227 million on construction services alone in the 2006-2007 fiscal year.
Casey Steinbacher, president and chief executive officer of the Durham Chamber of Commerce, said a large number of development projects in Durham can only begin because of Duke's commitment to lease space in the new buildings when construction is completed.
"They have been very successful with their leasing program throughout Durham, and specifically downtown Durham, in using their leases to help development projects get off the ground," she said, adding that Duke will help reverse the downward real estate cycle.
Perhaps the most prominent example of Duke's investment downtown is the American Tobacco Campus, where the University is the largest tenant. When Duke completes its previously planned move downtown, the 1 million sq.-ft. complex will be home to more than 500 employees.
Bill Kalkhof, president of Downtown Durham, Inc., said without Duke, the American Tobacco Campus could not have existed. Currently, the University leases approximately 210,000 square feet of commercial space in the complex.
"Duke has been the major player in helping the development of downtown Durham," Kalkhof said. "Duke's contribution to the ongoing revitalization of downtown has been remarkable and they are certainly one who deserves all the major credit."
Durham City Manager Tom Bonfield said many private companies-who often partner with the University to develop commercial property-have also abandoned new construction projects in Durham. It is unlikely that either will come back with commitments until the economy recovers, he said.
"As Duke makes cuts to get through the economic crisis, we believe that as Duke's economic situation improves, it would coincide with the city's economic improvement as well," he said.
The University currently leases approximately 1.4 million sq.-ft. of office space in Durham and Durham County-making Duke and the Duke University Health System Durham's largest tenant, leasing nearly 30 percent of all office space in the county, according to the economic impact study.
Any decrease in development will mean fewer construction jobs, said Larry Parker, spokesperson for the North Carolina Employment Security Commission. According to statistics released by the ESC, the construction sector lost 2,100 jobs statewide in May.
The labor cost
In addition to the indirect employment opportunities created by Duke's investments, the University and DUHS combined are the largest employers in Durham County, Steinbacher said. According to the University's 2006-2007 study, 49.6 percent of Duke's 39,782 employees live in Durham.
Currently, the University is offering early retirement incentives to 825 bi-weekly employees to close its $125 million budget deficit. If this option does not provide the necessary savings, then Duke may offer early retirement to its salaried employers whose age and total numbers of years employed by Duke are equal to or greater than 75, according to the Rule of 75, Trask said. He noted that the administration was only in the beginning stages of planing for that outcome.
Trask said he cannot project the number of employees who would be laid off or if any employees would be laid off at all, because the University will wait until both retirement incentive programs are completed.
If the University reaches that point, then employees will be compensated based on Duke's employee compensation program, which constitutes a week of pay for every week they worked at Duke and their vacation accrual, he said.
After Duke's employee compensation ends, University workers-many of whom only make between $20,000 and $30,000 annually-could face a difficult time finding another job, several University employees said.
In May, unemployment reached 8.1 percent in the Durham and Chapel Hill metropolitan area, according to the ESC. While that number is 3 percent less than the 11.1 percent state average, it is almost a 1 percent increase from the previous month. The unemployment rate in April was 7.3 percent in Durham and Chapel Hill.
According to the ESC, only two of North Carolina's 11 economic sectors added jobs during May-Leisure & Hospitality Services and Trade, Transportation & Utilities.
"Well, certainly it's a difficult time for anybody to find a job in North Carolina," Parker said. "I think a lot of folks hear about education cuts and automatically think teacher, but there are others who work at the school... they are also affected by education cuts."
Millicent Rogers, an employee at the Duke Textbook Store, said although she would not like to be laid off, she is not too worried about the possibility because she would use the opportunity to go back to school.
"I'm 24, I'm young and I have opportunities that my older co-workers who have kids and families don't," she said. "I haven't been out of school that long. There are a plethora of opportunities that are available to me that aren't available to other people."
Part of the University's plan to save $50 million this year is to freeze salaries and wages, which has some employees feeling as though there are slim prospects for upward career mobility at the University.
Although the University does not offer additional assitance to employees who are laid off, the city of Durham currently offers workforce training programs to any Durham resident who loses his or her job, helping them re-enter the job market, Bonfield said.
He noted, however, that those programs will not be able to fully mitigate the effect of job cuts at Duke.
"It would depend on the extent to which it happens," Bonfield said. "But, obviously, at the end of the day, when Duke employees or any company's employees are laid-off, then there is an impact."
Rogers said while professors are an important part of the student experience at the University, the role the staff plays in the lives of students is often overlooked.
"Just because we are not professors does not mean that we are not essential to the atmosphere here at Duke for the students," she said.
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