Through sound financial management over the years, the tremendous generosity of benefactors and superb management of our endowment, Notre Dame is in a strong position financially. Aside from a handful of institutions that stand out from the rest in terms of financial resources, Notre Dame is one of the most financially healthy, as evidenced in our triple-A (Aaa) Moody credit rating.
The financial crisis of 2008 taught us, however, that complacency would be a mistake. One area that merits attention is our endowment. The fact that University finances have become more dependent on endowment is a positive story for us, for the endowment allows us to maintain and even grow important programs and operations without increasing tuition. The downside is that our endowment and the operating funds we take from it are vulnerable to market downturns, which will inevitably occur.
"Notre Dame’s financial position is strong, yet we must not be complacent in the face of some serious threats."
Our policy has been to bring the spending rate from our endowment down when markets are strong and then, in the case of a downturn, to bring the spending rate up so that we can maintain a relatively steady flow of dollars in both strong and weak markets.
Though we have had a number of years of strong markets, our endowment spending remains at the top of the acceptable range. In coming years we will need to bring this spending rate down, which will require us to lower spending to a degree. Although somewhat painful in the short term, this will provide the latitude we need to maintain spending when markets turn down.
Other areas that we will continue to watch closely are the growth in the number of employees at the University and the growth in space, both of which add pressure to the University budget. The increases in both these areas are due, understandably, to the growth in important work in research, teaching and related areas, and we will continue to support this work.
We are also very concerned about the House tax plan released last week that includes a 1.4 percent tax on investment income of private colleges and universities with endowments reaching a certain threshold. Such a tax would reduce our ability to provide financial aid for poor and moderate-income students, fund programs that help the community, such as the Robinson Community Learning Center, and support research and education. This tax would not serve any educational or social mission, but would simply fill gaps created by tax cuts made elsewhere. If passed, it will have serious repercussions for our budget.
The bill also would repeal the tax-free nature of qualified tuition reductions we offer to employees, spouses and dependents, as well as any help the University provides for those attending other institutions. Such benefits would become taxable to the employee and to the University. We are working very hard to persuade legislators to remove these parts of the bill.
Notre Dame’s financial position is strong, yet we must not be complacent in the face of some serious threats. We must work to make sure our activities are sustainable and that we maintain the financial health of Notre Dame, something that has been one of the hallmarks of the University.