Economy affects fundraising, endowment

As the events on Wall Street paint an uncertain future for the U.S. economy, departments across campus are preparing to bear the worst effects of the economic crisis. Coupled with the six percent budget cuts announced by the state earlier this year, many departments will have to work especially hard to meet their budget demands. Funding from the state and from other sources will become more difficult to secure.

Each department receives funding through a variety of sources, including state funds, sponsored funds through the Georgia Tech Foundation and private gifts. The institute budget allocation process begins with the state allocation to the institute, which is then split through the Office of the Provost to various colleges and schools. Each school supplements state funds with funds from other sources to conduct its daily activities.

As the state of the economy declines, the amount of funding from the state will become even tighter. “We are clearly going through this six percent budget cuts from the state, and those are real cuts. When the stock market loses 35 to 40 percent of its value, this means that despite the outstanding job the Tech Foundation does in investing and managing Tech endowments, it puts a huge strain on us financially,” said Bill Wepfer, chair of the School of Mechanical Engineering.

In addition, the amount of private gifts and funds is also likely to decrease. “We are just beginning to feel the effects of the economic crisis. We have a very strong alumni base that is very supportive of us. I’ve been out there and spoken with donors and they really want to help, but when their own portfolios have dropped 30 percent, they just cannot help. So, it hurts,” Wepfer said.

Others have also experienced a decline in their rate of growth. “We haven’t experienced the real crunch yet. The number of sponsored research sign-ups continues to grow, but at a much slower rate. We expect this number to level off if this economic situation persists,” said Harry Beck, the director of operations for the School of Electrical and Computer Engineering (ECE).

Many research programs and projects will be pressed hard to secure funding from other sources, as money becomes more difficult to find. The credit crisis had a particularly hard impact on the cost of student loans and decreased the pool of scholarships and fellowships available to students. Similarly, research projects funded by the federal government have been downsized, forcing faculty and students to find funding elsewhere.

“It’s phenomenal that we continue to grow in our research activities, but when the pie in Washington is flat, it really limits your ability to grow, and you have to be very competitive and literally steal away that extra money from competitors,” Wepfer said. However, in some areas like energy and the environment, more money is being invested.

Tech is preparing to weather tough times ahead. “We’re doing our best to maintain our competitiveness. It’s going to be a harder challenge to meet our budget this year, but we think we are going to meet our budget again. We are going to have to use some of our reserve funds, which won’t last forever. We need to see an upturn in the economy or an increase in state funding,” Beck said.

The School of ECE has already taken some action to decrease spending. “We used to have a machine shop that is now closed. We eliminated another position at one of our research centers. We are probably going to have to reduce our summer course offerings for summer 2009. We are also reducing state funded travel significantly this year,” Beck said.

There are those who believe that Tech can take up the economic challenge and come out of it in a stronger position than before. “On the other side of the coin is that good organizations get ahead in tough times, but that requires making tough decisions about our priorities. If… Tech can position ourselves and be strategic and pick those areas to maintain competitiveness, we may get out a real advantage coming out of this situation,” Wepfer said.