Financial Plan - Cornell University Division of Budget & Planning

Tuition, Financial Aid & Endowmentpolicies by regulating the amount of money in circulationand the cost of credit issued by central banks,such as the Federal Reserve in the United States.In theory, it should not matter whether costs andprices inflate, deflate, or remain the same as long asall elements of the economy experience the changesimilarly. In practice, there is great psychologicalvalue in managing the economy to create a low,modulated inflation rate that can be anticipated andaccommodated. Because inflation creates the illusionof constant improvement, it masks real (fundamental)changes in costs and earnings. In this capacity,inflation has become the endorphin of the moderneconomy. Alternatively, lack of inflation, or worse, deflation,connotes regression and deterioration. Even ifit is demonstrable that one’s decrease in salary is beingoffset by a decrease in one’s cost of living, the formerremains difficult to accept.For higher education, inflation is especially problematic.While tuition, endowment payout, and salaryincrease rates may be announced six months prior tothe start of a fiscal year, they must be planned wellbefore then. That planning involves making educatedguesses about hundreds of individual cost elements,most of which will experience a variety of inflationarychanges and taken together constitute a complexmoving target. Under- or over-estimating these individualinflationary pressures will result in rate changesthat fail to maintain parity with the general measuresof inflation such as the CPI, even if that goal weredesirable. The tendency is to overestimate inflationarygrowth, as many rates (such as tuition) are difficult toadjust once the fiscal year begins, and the economicpenalty for underestimating inflation is real.pressing demands of the immediate situation and theeventual needs of future generations. Increasingly, theuniversity makes these decisions in an environmentwhere the federal and state government commitmentto higher education appears to be wavering, the abilityand willingness of students to bear a fair share of thecost of education is in question, and public understandingof university finances is minimal.In her March 2008 Academic State of the Universityaddress, Provost Martin noted that:…the relative disappearance of a focus on interiority isone of my biggest concerns. I am not talking about aninteriority that takes the form of navel gazing or asocialindividualism, but one that fosters awareness, a senseof responsibility, the development of individuality, theability to integrate what we take in and to establishour own sense of value—all things that require engagingwith the world around us, with other people, butalso engaging with the person we are in the processof becoming.The importance of this “interiority” can be extrapolatedfrom the individual to the institution as Cornell, inthe face of external pressures such as the U.S. SenateCommittee on Finance’s inquiry, continues to focus itspolicies on what is best for Cornell and its communityof students, faculty, staff, and alumni. Doing so requiresthat the university employ the balance of freedomand responsibility that was articulated so well byCarl Becker, who observed that despite the free rangethat he was granted as a faculty member at Cornell hewas nonetheless “…very much bound. Not bound byorders imposed upon me from above or outside, butbound by some inner sense of responsibility [to do] …the best I was capable of doing.” 37External Pressures/InteriorityWhile it is clearly Cornell’s legal prerogative to determinetuition, provide financial aid, and set endowmentpayout, it has historically considered the interestsof all constituencies in establishing policies andmaking annual rate adjustments for these factors. Indoing so, the university attempts to balance the financialneed of its academic programs with the significantimpact that its tuition and financial-aid practices haveon students and their families and to maintain anequilibrium in the use of its endowment between the37 Becker, Carl L., “Freedom and Responsibility,” [In]Cornell University: founders and the founding. Ithaca: CornellUniversity Press, 1943.31