Area universities have entered a period of cost-cutting and retrenchment, when ideally they ought to be starting new projects on a "counter-cyclical" timeframe, according to Tufts University President Lawrence Bacow.

Addressing a NAIOP Massachusetts breakfast in Boston this morning, Bacow said "in an ideal world," research universities "would be counter-cyclical." But times right now are from from ideal, Bacow warned, and the future holds "really, really tough times for us."

"We’ll continue to be the flywheel of the region’s economy. But that wheel won’t spin as quickly," Bacow said. "Things will get better – just don’t ask me when."

Because private educational institutions are far wealthier than they were during the 1990 economic downturn, "We’re far more exposed to downturns," Bacow argued. In 1990, he said, Tufts’ endowment only accounted for 2 percent to 3 percent of the university’s operating revenue. Now, the endowment accounts for 12 percent of its annual budget.

Large educational capital projects would have a stimulating effect on the local economy, but when the school’s endowment tanks, it has to cut costs. And because salaries represent a fixed cost, Bacow said, "We can’t afford to build hard costs into the budget. So if we’re overextended in our capital budget, there isn’t enough in the discretionary budget to balance it out."

 Asked to predict when university building projects would regain momentum, Bacow said, "It’ll be awhile."

"In 1990, we had a sense of the extent of our liability. Nobody knows the extent of their liabilities today," Bacow said. "That’s quite scary. And it makes it very difficult to assess and price risk. That’s something every institution is coming to grips with."