As the second quarter in the 2009 fiscal year comes to a close, the United States finds itself in a state of economic recession (1). Federal authorities, corporate heads, and the average Joe alike have felt the impact of the new seven-year, 48-year, even all-time lows across the economic and financial sectors (2). Somewhere among the many affected sit Dartmouth College and its scientific community. And while members of this community are well aware that they will soon encounter the extra constraints brought about by this recession, specifics about the looming limitations are still largely unknown.

An Overview: The Financial Crisis Thus Far

In a formal statement issued on December 11, 2008, the Business Cycle Dating Committee of the National Bureau of Economic Research (NEBR) announced that the United States is currently in a recession that has its roots in December 2007 (1). It was not until mid-September 2008, however, that the financial crisis was brought to the attention of an alarmed public when the mortgage crisis, trouble among major banks, and word of a $700 billion federal bailout made headline news.

Months before the NBER’s December announcement, the stock market also began a ten day fall at the start of October 2008. The drop included the “Black Week” (Oct. 6 to Oct. 10) during which the Dow Jones Industrial Average alone fell 1,874 points (3). Most recently, floundering American automobile manufactures GM and Chrysler have successfully sought the help of the federal government who has allocated over half of its original $700 billion bailout to the automakers (4). And all the while, the value of the U.S. dollar has been falling.

The financial crisis has affected many institutions, including Dartmouth.  Research funding will likely be reexamined in the coming years.

The financial crisis has affected many institutions, including Dartmouth. Research funding will likely be reexamined in the coming years.

In Context: The Dartmouth Endowment
As at many other colleges and universities, the recession has most directly impacted  Dartmouth  through  its  crippling effects on the endowment. Dartmouth’s endowment – an accumulation of donations that are invested in the market and are thus vulnerable to a volatile economy – fell 6 percent ($220 million) alone in the first quarter of the 2009 fiscal year (5).

Most affected by endowment among the Dartmouth scientific community are undergraduate departments. With 36 percent of the College’s budget based in the endowment, the undergraduate science departments are in the early but crucial stages of adjusting to the recession’s impact (5). “Everything is so uncertain,” said David Glueck, the chemistry department chair. “The College is rightfully planning ahead for the worst, because we’re probably not at the bottom yet” (6).

Glueck also explained that, for the time being, students may be minimally affected. “[The College has] consistently said that they won’t touch financial aid. They’ve also asked [professors], for example, not to raise course fees,” he said. This, however, leaves the science departments with no other streams of revenue for teaching classes, aside from small and heavily earmarked departmental endowments, Glueck said. Nevertheless, Glueck predicted that the science departments at the College will be the least impacted departments, as others with many visiting and adjunct faculty will be required to make more cuts.

The Thayer School of Engineering and the Dartmouth Medical School (DMS) will also feel some financial limitations from the fallen endowment, though to a far lesser degree as only 3.1 and 12.3 percent of the Dartmouth endowment are allocated to the respective professional schools (7).

Elsewhere in the Realm of Higher Education

“[The recession] is very much a problem for every institution of higher education, every medical school is facing the same pressures,” said Michael Wagner, chief financial officer at DMS (8).

Indeed, other top universities have also reported significant hits to their endowments in the first quarter of FY2009 (Yale, 13.4 percent (9); Princeton, 11 percent (10); Harvard, 22 percent (11)). And letters from college presidents across the nation have announced similar initial plans: hiring freezes, postponing building projects, beginning long-term cutback goals.

The extent of the damage and the emphasis on specific precautionary measures, however, will ultimately depend on which streams of revenue (tuition, endowment, etc.) various institutions rely upon most and the recession’s specific effects on these sources, noted Wagner (8).

When it comes time to decide what cuts to make, however, science’s importance to the future should be taken into consideration, said Mary Pavone, director of Dartmouth’s Women in Science Project (WISP). “To do anything that would hurt the development of scientific talent [or] the development of a strong scientific workforce would be really detrimental to the US. … I think that the College … recognize[s] this, as do other universities,” she said (12).

The State of Research Funding

The bigger story in collegiate scientific communities – and the American scientific community at large – is the recession’s impact on research funding.

A substantial portion of the College’s financial transactions lie in those related to sponsored research. In 2007, the College received $173,989 million in sponsored research recovery, the second highest source of operating revenue behind tuition and fees (13). However, with the economic downturn, both federal and private sponsorship are expected to grow more focused and less generous.

“No doubt the recession is going to cause problems [for external grants]. First, there is less tax revenue coming in, and second, the politicians are spending it somewhere else,” Glueck commented on federal research sponsorship in the near future of the recession.

A look at the federal budget in recent years further reveals that this anticipated sluggishness in the growth of federal research funding is not a new trend. Funding from such federal bodies as the National Institute of Health (NIH), for instance, has “flattened off” over the last few years, noted Wagner (9). In fact, in his budget proposal for FY2009, former President Bush allocated 0.5 percent less money to NIH than he did in FY2008. Moreover, statistics show that since NIH completed its five-year budget redoubling in FY2005, funding growth for the NIH has been a meager 1 to 3 percent – growth that has been overpowered by high biomedical inflation rates of 3.5 percent during the last two fiscal years (14). And overall, general basic research funding has grown minimally since its sharp drop in 2006 (15).

This is only half of the story, however, as cuts from some agencies’ budgets have supplied increased funding to other R&D efforts – a heightened specificity in funding allocation that is expected of shallower coffers. “We expect that [future growth in funding] could be focused growth on certain areas of healthcare research that the administration might be interested in,” said Wagner (8).

The give and take of this “focused growth” is evident in former President Bush’s FY2009 budget proposal. Aside from increasing funding for research into such diseases as HIV, the president has further increased funding to the Department of Defense (DoD), over half of which goes to research in universities. Also, there has been a proposed 19 percent increase in the Department of Energy’s Office of Science and a 16 percent increase in the National Science Foundation’s “Research and Related Activities” funds. These specific efforts come as a result of the president’s American Competitiveness Initiative, a plan to bolster American scientific efforts and thereby help the U.S. remain a major player in the global arena. However, the plan also comes at the cost of cuts in overall funding to the Environmental Protections Agency (EPA), NIH, and Department of Agriculture (14).

Non-governmental sponsors, too, are feeling the pressures of the recession. The American Chemical Society’s Petroleum Research Fund, for instance, has already released a statement to announce that funding for grants accepted this year may be delayed, said Glueck (6).

Funding from private companies and foundations may also change, according to Wagner. “[N]ow going forward, companies are being hit by many pressures … and they’re having to think about how to reallocate R&D dollars … Most of the money that [foundations] use to distribute for grants, it originated from a contribution from family and generates investment income. The extent that [the contribution] was invested in money in the stock market or investment vehicles that are experiencing [the consequences of the recession], they will have less to give,” he explained (8).

Guarded Optimism

Though it is too early to tell exactly how the new budget will impact the Dartmouth scientific community (It’s all “very fluid,” said Glueck (6).), there is, at present, a sense of guarded optimism for the near future of science at Dartmouth, in the U.S., and globally.

As Asia continues its explosive, competitive R&D expansion and President Obama shows promising support for scientific research, the stage is set for scientific advancement that can push through the recession.

Back at the College, construction of the new Class of 1978 Life Sciences Complex has begun, and neurobiology will soon be upgraded to department status (16). Moreover, the College appears determined to continue its legacy of dedication to the undergraduate experience. “The Dean of the Faculty (Professor Carol Folt) and the faculty themselves are deeply committed to student research.  In addition, this has been a top priority of the President’s throughout his time at Dartmouth,” said Margaret Funnell (17).

At the Thayer School of Engineering, Dean of Graduate Studies Brian Pogue seemed relatively optimistic that Thayer can keep negative change to a minimum. He cited the DoD, the military, and the Department of Homeland Security as major contributors to research funding – all departments in which the president has consistently increased funding.

“[The big dotcom bust in the early 90s], certainly in my experience, had a bigger effect on the engineering world because it was funding for high tech things that was decreasing. … This financial crisis seems to be more localized around money that’s invested in stocks or housing or financial issues, so it seems to me that it’s affecting engineering schools less,” Pogue added (18).

Wagner seemed to sum up the atmosphere within the Dartmouth scientific community: “I think people are always thinking about new ideas. I think they recognize the reality [of the recession].  … [The right approach] is to try to focus on what we’re great at, which is educating great students and doing great research and having a really important impact … nationally and, in some cases,  internationally. That’s what we have to keep an eye on: the things we’re doing so well at, figure out where we want to invest money for new initiatives, and just keep executing” (8).

References

1. Business Cycle Dating Committee of the national Bureau of Economic Research, Determination of the December 2007 Peak in Economic Activity (2008). Available at http://www.nber.org/cycles/dec2008.html (29 December 2008).
2. CNNMoney.com Staff, The Crisis: A Timeline (2008). Available at http://money.cnn.com/galleries/2008/news/0809/gallery.week_that_broke_wall_street/ ( 29 December 2008).
3. Yahoo!Finance, Dow Jones Industrial Average (2008). Available at http://finance.yahoo.com/echarts?s=^DJI#chart6:symbol=^dji;range=20080929,20081029;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined (29 December 2008).
4. C. Isidore, Bush announces auto rescue (CNN, 2008). Available at http://money.cnn.com/2008/12/19/news/companies/auto_crisis/index.htm (29 December 2008)
5. T. Lahlou, Endowment plunges $220 mil. in 3 months (The Dartmouth, 2008). Available at http://thedartmouth.com/2008/11/10/news/endowment/ (29 December 2009).
6. D. Glueck, Personal interview, 9 December 2008.
7. The Dartmouth College Endowment (pamphlet, 2008). Available at http://www.dartmouth.edu/~control/endow/ppp/2007dcendowment.pdf (30 December 2008).
8. M. Wagner, Personal interview, 26 November 2008.
9. R. Levin, Budget Letter (Yale University, 2008). Available at http://opa.yale.edu/president/message.aspx?id=84 (13 January 2009).
10. Staff, Tilghman letter on Princeton’s response to the economic downturn (letter from President Tilghman, 2009). Available at http://www.princeton.edu/main/news/archive/S23/13/63G01/ (13 January 2009).
11. Endowment Declines 22 percent through October 31 (Harvard Magazine, 2008). Available at http://harvardmagazine.com/breaking-news/endowment-declines-22-through-october-31(13 January 2009).
12. M. Pavone, Personal Interview, 7 January 2009.
13. Appendix A, Dartmouth College Financial Highlights: Fiscal Years 1999-2007 (posted by the Board of Trustees at Dartmouth, 2008). Available at http://www.dartmouth.edu/presidentsearch/position/leadership/appendix-a.html (30 December 2008).
14. J. F. Sargent et al., Federal Research and Development Funding: FY2009 (Congressional Research Service, Washington, DC, 2008). Available at http://www.ncseonline.org/nle/crsreports/08-Sept/RL34448.pdf (30 December 2008)
15. Trends in Basic Research by Agency, FY 1975-2009 (American Association for the Advancement of Science, 2008). Available at http://www.aaas.org/spp/rd/trbas09p.pdf (30 December 2008).
16. Dartmouth College Office of Public Affairs, Dartmouth Board of Trustees, administration discuss College’s financial strategy (2008). Available at http://www.dartmouth.edu/~news/releases/2008/11/08.html (30 December 2008).
17. M. Funnell, Personal interview, 14 January 2008.
18. B. Pogue, Personal interview, 1 December 2008.