Colleges feeling the burn of Wall St. meltdown

STATE COLLEGE, Pa. - As the nation's economy spirals downward, America's colleges and universities are feeling the pain in multiple ways and must take steps now to adjust, said Pennsylvania State University president Graham B. Spanier.

States are cutting funding. Donors are pulling back. Students are having trouble getting loans, and so are colleges, causing a slowdown in building projects. Meanwhile, cash flows are tight and endowments are shrinking, Spanier said in an interview at his office on Friday.

Spanier, chair of the Association of American Universities, will lead a special session on the financial downtown at the association's annual meeting in Cleveland today. About 50 college presidents will participate in the session that was hurriedly put together to respond to the Wall Street meltdown.

One important issue for all universities, he noted, will be that families crunched by their own financial troubles may be unable to pay tuition.

"We need to be on the alert as to how this will affect our students' ability to pay tuition," Spanier said. "Tuition is our single biggest source of revenue."

It promises to be one of the most challenging financial times for colleges and universities, which already were facing an expected drop in high school graduates over the next 10 years.

With the university's campus awash in homecoming activities, Spanier pulled out a paper with notes he was sketching on 10 ways the economic downtown is affecting universities and how they can begin to cope.

"It's a late-breaking issue for all of us," said Spanier, who has been at the helm of the 92,000-student university since 1995. "We're going to talk about how to handle all of this."

Penn State recently got word that Pennsylvania will impose a 4.25 percent mid-year cut on funds for state-related schools. That will take $15 million from its $3.7 billion budget. Others affected are the University of Pittsburgh, Lincoln University and Temple University.

Penn State has already begun making changes.

"We already put some of our building plans on hold," Spanier said.

He also has directed the university's staff to work more closely with seniors on job placement, which looks to be increasingly difficult.

The university plans to cope largely by not filling vacancies among its 40,000 employees, he said. He has asked university departments to put off equipment purchases and reduce travel and expenses.