Less than one month into President Donald Trump’s second term, attempts to curtail funding for higher education prompted Northwestern University to announce “immediate measures” aimed at stabilizing the school’s financial footing moving forward.
These preliminary belt-tightening measures were announced Tuesday in a “Leadership Note” from President Michael Schill, Provost Kathleen Hagerty and Vice President and Chief Financial Officer Amanda Distel. In it, they wrote that effective immediately:
— Spending in all “non-personnel expense budgets” will be cut by 10% for the rest of the fiscal year, which ends Aug. 31. This spending totaled over $1.4 billion in fiscal year 2024, according to NU’s annual financial report, representing about 44% of overall operating expenses.
— All “personnel actions,” such as new hiring and pay raises, will be reviewed by central administrators to determine whether they’re “necessary to the operation of the University” and its academic mission. While this stops short of an outright hiring freeze, all open positions will be reviewed “to determine their necessity.”
— All expenditures greater than $25,000 must be pre-approved by Distel, and employees are encouraged to “exercise prudence” in spending requests.
“While we are doing all we can to advocate for and protect our community,” the administrators write, “we feel it is necessary to take these steps until further notice to help ensure Northwestern is best positioned to navigate this period of uncertainty without permanent damage to our operations or mission.”
Grant cuts and endowment taxes
Virtually all federal funds and related policies are in serious question at the time of writing, but Northwestern cites two potential changes in particular as potentially causing “significant financial repercussions” to the tune of over $170 million.
The first is the attempt to restrict funding for “facilities and administration” costs, also called indirect expenses, given alongside grants from the National Institutes of Health. A directive issued last Friday aimed to cap this funding at 15% of main grant values for both future and existing grants, which would leave NU with only a quarter of the indirect funds from its existing negotiated rate of 60%.
A federal judge blocked this change nationwide after Illinois and 21 other states sued, and it remains tied up in litigation at this time. Northwestern estimates the indirect rate reduction would cause it to lose over $100 million annually in research support.
The second change is a potential hike to the 1.4% tax on certain private university endowments, which was created in 2017 during Trump’s first term. A variety of dramatic hikes have been pushed by Congressional Republicans, like a recent 21% proposal from Texas Rep. Troy Nehls and a 34% proposal in 2023 from then-Ohio Sen. and current Vice President JD Vance, but Northwestern took note of the 14% rate suggested in a January menu of options created by the House Budget Committee for the federal reconciliation package.
Northwestern estimates that this hike “could result in a more than $70 million budget impact.” The university’s endowment is around $14.3 billion as of Aug. 31, 2024, making it the ninth-largest among private universities in the country. About $756 million was spent from the endowment on operational expenses in fiscal year 2024.
Northwestern braces for federal changes with 10% budget cuts, new hiring review is from Evanston RoundTable, Evanston's most trusted source for unbiased, in-depth journalism.