"If you slam on the brakes, you're going to jackknife. But you can't keep going at the same speed you were, obviously. So we're really trying to feather the brakes," said IU's chief financial officer, Neil Theobald, during a break from a Nov. 19 meeting of IU's trustees.
By "feather the brakes," Theobald means IU President Michael McRobbie's decisions to delay a few building projects, to halt non-classroom hiring, and to have its vice presidents and deans identify potential spending cuts in case that patch of ice gets even more slippery.
The market plunge on Wall Street has hammered the value of university endowments and the portfolios of potential donors. At the same time, the freeze-up of the nation's credit markets has forced dozens of private student lenders out of that business — which threatens to curb university enrollments as early as January.
The sudden confluence of those trends — while not prompting drastic actions — has led most colleges and universities in central Indiana to back off.
"We're going to maybe have to slow down some things that we want to do," said Marian College President Dan Elsener. But, he added, "Right now, it looks like we can make it without getting into any muscle tissue."
The most obvious sign that university finances are under pressure are their returns on their endowment assets. Universities use their endowments to dole out student scholarships, pay some faculty salaries, fund academic programs and build buildings.
For the first nine months of the year, central Indiana schools saw their endowment investments drop about 10 percent to 20 percent in value.
The awful month of October brought the worst results yet. Ball State University's endowment investments dropped another 9 percent in October on top of the 21 percent lost through September.
The University of Indianapolis saw its endowment drop 16.6 percent through the end of September and then lost nearly that much again in October.
But those losses aren't as bad as they sound — at least not yet. Most Indiana colleges spend 4.5 percent to 5 percent of the value of their endowments each year. But they calculate the market value of the endowment money by averaging two or three years of data.
So two quarters of investment losses don't immediately plunge the amount of money they have to spend.
"If the market value of the endowment continues to fall, as Purdue experienced in 2000, the total endowment distribution could fall by approximately 20 percent," wrote Purdue University spokeswoman Jeanne Norberg in a statement. "If the market is not in a protracted state of decline, the effects will be less severe."
Besides, the schools in central Indiana don't rely heavily on their endowments for their annual operating budgets.
At IU and Butler University, endowment revenue accounts for less than 10 percent of annual spending. At Purdue and the University of Indianapolis, it's less than 5 percent.
Take Purdue as an example. Its $1.6 billion endowment produced revenue of $72 million in the previous academic year — out of a budget of $1.6 billion. Half of the endowment revenue went to teaching and research, 28 percent went to scholarships and fellowships, 15 percent to awards and prizes, and 7 percent to construction.
The schools that could really hurt are research-based private institutions, such as Harvard University, Brown University and the University of Notre Dame. Such schools derive as much as 30 percent of their operating budgets from investment gains on their endowments.
A spokesman from Notre Dame, near South Bend, would reveal only the school's investment results through June 30.
But, based on its mix of investments, Notre Dame's $7 billion endowment appears headed for steep losses. It had 52 percent of its endowment funds in alternative investments, such as private-equity funds and such things as real estate, oil, gas and other commodities.
"It's been one of the few times in my life that I've been glad we didn't have such a large endowment,' said IU's Theobald.
The bigger threat to most central Indiana colleges is any hit to enrollment. Tuition payments account for the lion's share of revenue at these schools.
Overall enrollment typically goes up during economic downturns. But no recession in recent memory has included the double-whammy to personal wealth caused by the plunge on Wall Street and cratering home values.
"The risk in the current cycle is that the absolute net worth of many families may decline far more than in previous cycles — it has likely already declined more than in the 2000-2002 period," wrote Roger Goodman, a senior education analyst at Moody's Investors Service in New York.
Goodman expects enrollment to hold up, but to shift from pricier private colleges to cheaper state schools, and from state schools to even cheaper community colleges.
Many Indiana schools — including IU, Butler, UIndy and Purdue — said applications are up this year over last year. That's usually a good predictor of actual enrollment.
But university officials are still on edge because 2008 has seen a meltdown in the student loan market.
"They are deeply concerned," Phillip R. Day Jr., head of a national association of financial aid administrators, wrote Nov. 17 to the Bush administration. The letter asked that some of the $700 billion bailout fund be applied to student lenders.
"The private student loan market is in a very troubling condition," Day added. "Nearly two-thirds of the 60 top lenders no longer offer loans."
Student lenders provide loans if students need more money than can be had through federal loans, which schools like IU and Purdue now get directly through the federal government.
At Purdue, only about 10 students so far have had to find a different student lender because their previous one left the market, said Joyce Hall, Purdue's executive director of financial aid.
"So we haven't seen a tremendous amount of difficulty yet," Hall said. But, she added, "We're going to start monitoring a little more closely, the weekly or biweekly amounts of loans."
The last area where universities could be pinched is on fund raising.
Ball State publicly announced a $200 million capital campaign Sept. 5 — just 10 days before the financial crisis touched off on Wall Street.
It already had $120 million in commitments. But Dave Bahlmann, CEO of the Ball State University Foundation, said he's watching to see if market losses mean fewer and smaller gifts from donors.
"We're doing well," he said. "The question is, will we be able to sustain that given that the people that support us have seen their investments lose value?"
Marian College is also in the midst of a capital campaign, for $70 million. It was ahead of schedule said Elsener, Marian's president, but now that pace might slow.
But then again, it might not. Joyce Rogers, vice president of development at Ivy Tech Community College, said she thinks donations might go up — because potential donors know their money is so crucial in a down economy. Ivy Tech's donations are up so far this year.
"When things get very, very difficult, a lot of donors want to feel like they're doing something or setting a legacy for the future," Rogers said.
Gene Tempel, chief of the IU Foundation, said educational giving typically drops during recessions, by about 1.1 percent. In spite of the down economy, he's still hopeful.
"Obviously, the psychology out there is not conducive to generosity," said Tempel, who for years was head of the IU Center on Philanthropy, a national leader in research on donations. "We still think people will give to the causes that they support. They just may not give as much."