What impact has the global financial crisis had on Duke?

Duke is strong financially. That being said, we are watching things closely, and we are going to have to be very careful about the new commitments we make. Our intention right now will be to protect what we have rather than making new investments.

We are fortunate not to have had some of the problems other institutions had with variable rate debt, bond insurance, and investments. We tend to have a pay as you go mentality. If you look at some of the corporations in trouble, they have 30 times more debt than the value of their assets. Duke has net assets of $8 billion and only $1.2 billion in debt. There are few corporations in America that have that kind of balance sheet.

If you look at the financial performance of the 25 largest research universities in this country, Duke's performance during the last two decades has helped put us among the top schools.

How have stock market losses affected the university's endowment?

Out of an investment portfolio of nearly $8 billion, including an endowment with a market value of more than $6 billion at the end of the past fiscal year, less than 20 percent was exposed to global equities, which suffered worse than domestic markets.

The university's long-term investment model assumes an annual return of roughly 10 percent. For the last decade and a half, we have averaged more than 15 percent. We have a lot of reserves built up over time. We would obviously like not to spend them, but the model has always assumed there would be ups and downs. So we are fairly well buffered to weather financial storms such as this.

Of course, like almost every other investment fund, our portfolio has declined in value since July, though by a lower percentage than the overall drop in global equity markets. But, we look at a three-year rolling average when calculating the payout and, ultimately, the impact on the University's operating budget, so if you add the losses this year with the gains from the two preceding years, we are still up more than 15 percent.

What impact does the financial crisis have on Duke's other sources of funding?

Other than the endowment, our primary sources of funding include grants, tuition, and donations. The federal government is the largest source of grant and contract funding for Duke, and currently the federal government is spending a lot of money on other things. It is possible that grant money we receive from the federal government will be reduced.

Regarding tuition, we are committed to making sure Duke's education is affordable, regardless of a student's ability to pay. Our commitment to financial aid for students is rock solid. We anticipate a greater need for financial aid, and we've put aside money for this. It is too early to tell about future giving to Duke. While  a lot of the people who have been very generous with us have been hit by losses in the market, Duke donors have been steadfast during good times and bad.

Has the credit freeze changed Duke's plans for the future?

Eighty-five percent of Duke's debt portfolio is fixed rate, which means it does not change with the market. The 15 percent that is variable rate only totals $174 million from a total debt portfolio of about $1.2 billion.

The big decision will be how much new debt we take on for capital projects. We have capacity to take on some new debt, but if you add up all the proposed capital projects, it is far beyond what we would want to assume. This situation has forced us to think through what is really important.

What operational changes might be implemented at Duke as a result?

We're not intending to impose any immediate or specific budget cuts right now. My biggest concern is about our expectations going forward. We don't currently have problems in our operating budget, but we could create problems by trying to take on more than we can afford. I think any changes will primarily manifest themselves in our inability to do some things that we wanted to do in the future.

Our employee benefits will be just as generous as they were this year, and it is too early to determine salary increases for next year. I think people at Duke are more secure here than at any other place they might work.

At the same time, I hope people generally understand that we are in very uncertain times, and any actions we can take now to be more efficient with resources will help us later.