Financial Review

The impact of the recent recession continues to be felt in many ways. Certainly the public debate over the role of government in society has been enlivened. The American public is being presented with divergent views of the government’s role in health care, in corporate finance, in industrial policy and the environment, in job creation, in national security, and in many other spheres of life. Hoover scholars are energized and engaged in the vigorous dialogue, providing reasoned and researched views of the effect of government actions relating to public policy. Output and outreach have never been greater or timelier, as evidenced by the number of op-eds, books, and media appearances by Hoover fellows on the issues being confronted today.

The impact of the recession on the Hoover budget is developing in a manner largely consistent with expectations. The Hoover Institution fiscal year runs from September 1 through August 31 of the following calendar year, coincident with Stanford University’s fiscal year and academic calendar. Revenue declines related to the recession began in fiscal year 2008–9 and are expected to continue to decline through fiscal year 2010–11. The Institution is funded primarily through two sources: endowment payout and expendable gifts, both of which are sensitive to the economic climate. During fiscal year 2009–10 (ending August 31, 2010), expendable gifts for the base budget were $17.7 million, up from the previous year but down substantially from the high of $20.4 million achieved in fiscal year 2007–8. Endowment payout declined to $20.6 million in fiscal year 2009–10 due to a 10 percent reduction in payout from existing accounts during the previous year. Furthermore, endowment payout is expected to decline an additional 15 percent during fiscal year 2010–11. Total base budget revenues were $39.4 million in fiscal year 2009–10 and are budgeted at $36.5 million for fiscal year 2010–11.

Reconciling the need to fund increased output and activity with revenues that are declining in the short run is a challenge. The Institution has instituted a budget plan with the dual goals of ensuring that the Hoover Institution remains financially secure while simultaneously allowing for investment of new resources in strategic areas that promise to have the highest impact. Expenditures for the base budget in fiscal year 2009–10 were $37.1 million. Expenses for fiscal year 2010-11 are budgeted at $36.5 million, consistent with achieving a balanced budget for the year. The budget plan will result in a 10 percent decline in Hoover’s annual operating budget from fiscal year 2008–9 to fiscal year 2010–11. Within this constrained budget Hoover has been able to fund a number of new initiatives, enhancing the already impressive intellectual and policy environment at the Institution.

Hoover’s endowment provides both immediate revenue and long-term security for the Institution. The market value of the endowment declined dramatically during May 2008 to April 2009 but has now begun to recover. The endowment was valued at $342 million on August 31, 2010, down from a high of $462 million in May 2008.