Dive Brief:
- Stanford University is bracing for layoffs as it navigates “significant budget consequences” from federal policy shifts, President Jon Levin and Provost Jenny Martinez said in a community letter Thursday.
- Leaders recently released a plan for the 2025-26 academic year that will reduce operational funding by $140 million. University units have been advised to prioritize Stanford’s core mission of education and research when drawing up their budgets, the officials said.
- “The most difficult part of these decisions is that they will require some reduction in staff positions, not all of which can be accomplished by eliminating open positions,” they noted.
Dive Insight:
In explaining Stanford’s budget pain, Levin and Martinez pointed to tidal shifts in federal-level policies, including cuts to research funding and the likelihood of a higher endowment tax.
“We need to be realistic about the current landscape and its consequences,” the officials said. “There is significant uncertainty about how federal support for universities will evolve, but it is clear that the status quo has changed.”
When it comes to the endowment tax, Stanford would pay substantially more in either scenario proposed in the House and Senate’s respective reconciliation bills, which allow for passage with a simple majority in the Senate.
At $37.6 billion, Stanford’s endowment was the fourth most valuable among U.S. colleges in the 2024 fiscal year, according to the latest study from the National Association of College and University Business Officers and asset management firm Commonfund. Its value per full-time student works out to $2.1 million.
That means Stanford would likely pay the highest endowment tax rates in both the House and Senate proposals — those rates being 21% and 8%, respectively. The current endowment tax of 1.4% only applies to a few dozen institutions, Stanford included.
And Stanford’s endowment could be subject to significant government levies at a time when it’s arguably more important than ever to the university — to make up for drastic cuts to federal research spending under President Donald Trump, with more potentially to come.
For the upcoming academic year, Stanford will increase its endowment payout by 2.9% to help support its budget and operations, officials said Thursday. (For the 2024-25 academic year, Stanford budgeted for an endowment payout of $1.9 billion.)
As Stanford navigates a dramatically different funding environment from just five months ago, before Trump retook office, it is trying to balance reducing costs with maintaining funding for Ph.D. students and need-based financial aid, which Levin and Martinez described as the “pillars” of research and education at Stanford.
Along with the likely cuts to its workforce, Stanford is maintaining a staff hiring freeze implemented in February and focusing its capital spending on “the most critical” projects or those that have external funding, the officials noted.
“Though the budget reductions in the period ahead will be painful, we are confident that by acting now to put Stanford on stronger and more resilient financial footing, we will be better positioned to pursue excellence and new opportunities going forward,” Levin and Martinez added.
Financial pain is widespread throughout the higher education world as the Trump administration has made unilateral, unprecedented cuts to research funding. In that environment, many private and public institutions, ranging from Northwestern University to Temple University, have announced similar measures to Stanford in recent weeks.
