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2023 Annual Financial Update

Dear members of the Northwestern community,

As we enter a new year, each of us is optimistic about Northwestern’s future. Our university has risen in global eminence in recent years, and our community continues to strive to make an even greater impact on the world. We want to reach higher while maintaining a focus on what matters most — our students, staff and faculty. 

All one has to do is talk to our students to be inspired by their intelligence, ambition and commitment to making a difference, or examine the exceptional scholarly and creative work of our faculty to understand that our best days lie ahead. 

In this annual financial update, we will offer some perspective on why we believe Northwestern is in a position to stake out a greater leadership role in what we do best — creating and spreading knowledge.   

Positive Financial Performance

Despite the historic disruptions caused by the pandemic over the past three years, the University in Fiscal Year 2022 was able to generate a positive margin of $138.7 million, which represents a very small margin compared to our more than $2.7 billion in operating expenses. While this is very good news, it is important to understand these funds are not available to be spent on new central investments. A substantial portion of the margin was allocated to various units within the University in the previous year’s budget, and those funds typically stay within the units for future investments. Another significant portion is attributable to one-time revenues and an unusual number of job vacancies that are now being filled.

Therefore, while our finances are stable, we still need to act with prudence in prioritizing what is important to our mission. We also need to increase our efficiency both in how we operate and how we utilize our physical space. We encourage all schools and units to bring a spirit of creativity to resource allocation. By increasing efficiency, finding more effective paths to achieve our goals and developing new resources, we will be able to invest both in academic excellence and in our people.

Stewarding Assets Over Time

Another indicator of our financial health are the assets that underpin the University. In 2022, net assets decreased by $711.5 million largely due to bearish financial markets and increasing interest rates. Our endowment declined from a record high of almost $15 billion to $14.4 billion at the end of last fiscal year.

Nevertheless, despite this drop in value, the endowment still provided over $600 million in support to the operating budget last year, or 21% of total operating revenues. We also project that given current University endowment spending policies, the endowment will generate 9% more funds in our 2023 budget. This shows what a powerful asset our endowment can be — year-in and year-out for generations to come.

It is sometimes tempting to think that we should take larger amounts out of the endowment to invest in the University. However, we cannot responsibly spend down our endowment for short-term goals and hope to remain competitive long-term. Rather, we must continue to protect and grow that endowment for tomorrow’s needs as well as those of today. And most importantly, we cannot fund continuing expenses with one-time funds.

Our People Are Our Top Priority

We recognize that inflation and economic uncertainty have been stressors for many in our community. Northwestern relies on people for everything we do; our excellence is directly related to the efforts of our faculty, staff and administrators. Indeed, almost 60% of our operating expenses are dedicated to faculty and staff compensation. Despite the expectation that inflation will come down over the next year, we already have experienced a painful increase in the cost-of-living. 

Therefore, our top priority in this year’s budget is to provide overall compensation that is higher than our historical average. This compensation will be composed of both merit increases as well as funds to address equity issues. Furthermore, we will seek to increase salaries in parts of the University that have fallen below the market in recent years.

Northwestern’s Bright Future

As we look at our finances, we see promising signs of strength in key areas. As a premier research university, sponsored research funding is core to our mission and our impact. Here we achieved another record high of $923.8 million in 2022. Over the past 10 years this number has increased by 81%. Philanthropic support also remained strong in 2022, reflecting our alumni and friends’ continued commitment to Northwestern’s mission.

Our investments in financial aid also have promoted equity and access. Over the past year, we exceeded our goal of drawing more than 20% of our undergraduates from Pell-eligible lower-income families. In addition, our investments in Evanston and Chicago have created robust partnerships to enhance equity. 

While uncertainty continues to be a defining feature of this era, we believe that this is an exciting time — a time in which this community, with its distinct mix of talents and assets, can make a lasting difference and continue to grow in eminence.

We know that we have the resources and the talent across our faculty, staff and students to turn this uncertainty into opportunity. We look forward to working with you to do just this.