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President’s Letter
The “less” comes in endowment. While clearly large, the Stanford
endowment is less than half that of Harvard, and only three-quarters
that of Yale or Princeton.
Princeton’s larger endowment also supports an undergraduate student body
of only about 4,600, compared to Stanford’s 6,500. That is one reason
that Princeton covers an amazing 94 percent of its undergraduate
financial aid obligation with endowment income, Stanford only 39
percent.
And examined a third way, Stanford derives only 12 percent of its annual
revenue from endowment income, compared to 24 percent for Harvard, 29
percent for Princeton and 15 percent for Yale. It is not much of an
exaggeration to state that, every year, Stanford must generate anew 88
percent of the budget required to support our range of activities
more than $1.2 billion in “soft” money every year.
As a source of Stanford revenue, endowment income ranks only fourth,
behind government grants and contracts (about 40 percent), tuition and
fees (23 percent), and private gifts, grants and contracts (13 percent).
The two largest of those sources face increasing constraints. Both
Democratic and Republican budget plans call for major reductions in
federal non-defense research funding. And Stanford has tried to respond
to the need to restrain tuition increases, even though full tuition pays
only about 60 percent of the cost of providing an undergraduate
education.
This compels us to become ever more self-reliant if we are to maintain
our quality, improve our competitiveness, and support our faculty and
students. We cannot, however, simply reach into our endowment. It is
not a checking account, but rather a trust fund; we, the current
generation, are trustees for all future Stanford generations. Common
sense and, in many cases, the law does not allow us to
spend the endowment’s principal. And we must reinvest enough of the
income to ensure that the principal’s value is not eaten away by
inflation.
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