We are living through an unprecedented time. At the beginning of this year, none of us would have imagined that we were on the verge of a global health crisis. Now, as we face these extraordinary circumstances, it is inspiring to see the Carnegie community rising to this occasion and finding new, creative ways to keep on working and making important contributions to the scientific enterprise.
As we manage through this pandemic, our apprehensions about health and safety are being compounded by economic concerns. Given the pandemic’s impacts on the financial markets, it has become necessary for us to take action to reduce spending and preserve our ability to support your important work and fulfill our science mission. To date, the losses in the equity market have reduced the value of our endowment by about 10 percent.
In response, beginning July 1, 2020, we will reduce our FY21 endowment spending by approximately 4 percent by carrying out the following: reducing discretionary spending across all of Carnegie by 4 percent; freezing salaries and benefits at FY20 levels; and delaying most replacement and new administrative hiring. We will work closely with our directors to implement these actions.
We will complete most approved scientific staff searches and will pursue some new, priority scientific hires. These measures, which have been reviewed and endorsed by our Board of Trustees, will make it possible for us to support the science in all of our divisions and continue our planned consolidation of research activities in Pasadena.
I want to acknowledge the leadership of our Board’s Investment Committee, working with our investment team, in managing the endowment during this critical time. Our long-term investment strategy has helped us to limit the decline in the value of our endowment as the market has fluctuated.
This difficult period underscores the benefit of a diversified funding stream. Right now, our dependence on endowment revenues to support the majority of our research and operations leaves us vulnerable to market volatility. In 2015, we relied on our endowment to support 46 percent of our work; in 2019, the proportion of endowment-supported work had risen to 60 percent. By increasing our support from federal awards, private grants, and philanthropic gifts, we can maintain our culture of independence while improving our ability to sustain our work despite economic headwinds.
As you know, this is a dynamic and complex situation. While we continue to weather this storm together, I am grateful for your commitment to Carnegie, to our work, and to each other.
As always, I encourage you to contact me with any questions or concerns. I hope you will join my webcast on this topic tomorrow at 2 p.m. EDT.
Please take care of yourself and those closest to you. Together, I know we will make it through this.
Dr. Eric D. Isaacs
President Carnegie Science