Jan. 13 (Bloomberg) -- Cornell University probably will cut spending by 5 percent next year after the school’s endowment fell 27 percent in the final six months of 2008, President David Skorton said.

“We’re throttling back our expenditures,” Skorton said in an interview today in New York. “We’re going to need a 10 percent correction in our budget in the next three to five years,” which will be achieved through increased revenue and reduced spending.

The Cornell fund had $5.39 billion in assets after a 2.7 percent increase in the fiscal year ended June 30. The fund gained 25.9 percent in fiscal 2007.

The global financial crisis has battered higher-education endowments, squeezing budgets and forcing schools to consider job cuts and bond sales to raise cash. Yale University in New Haven, Connecticut, said on Dec. 15 it lost $5.9 billion, or 25 percent of its value. Harvard University in Cambridge, Massachusetts, said on Dec. 2 it had losses of at least $8 billion, or 22 percent, since June 30, when its endowment was $36.9 billion.

Cornell’s second-half loss doesn’t include returns from hard-to-sell holdings in real estate and private equity, which account for a third of the fund. Values for those assets have yet to be updated, Skorton said. The Standard & Poor’s 500 Index fell 28 percent, including dividends, in the second half of last year.

Earnings from Cornell’s endowment make up 14 percent of its operating budget, which is $2.9 billion for the current fiscal year, said Simeon Moss, a spokesman for the university, in Ithaca, New York.

While the university is looking at raising tuition, those increases will be less than past hikes, Skorton said. The school may also fire staff and consider borrowing, he said.

“Everything is on the table,” Skorton said.

Debt Sales

Princeton University, expecting a 25 percent loss in its endowment by next June, plans to sell $750 million of debt as soon as today, according to a person familiar with the offering. The New Jersey university said on Jan. 8 it may set the lowest cost increase to parents and students since 1966.

In September, the Cornell endowment sold assets to raise cash and reduce the effect of declining markets, Skorton said. Harvard, the world’s richest college, Columbia University in New York and Duke University in Durham, North Carolina, are seeking to unload their stakes in private-equity funds.

Cornell was founded in 1865. Of the university’s seven undergraduate colleges, four are private, including the college of arts and sciences and an engineering school. Three are public and part of the State University of New York system, including the school of agriculture and life sciences and the school of industrial and labor relations.

Sandy Weill

Cornell has seven graduate and professional schools, including the Weill Cornell Medical College in New York City and in Doha, Qatar. The school was named in honor of Sanford “Sandy” Weill, the former chairman of Citigroup Inc. and a Cornell alumnus, and his wife, Joan.

Cornell is a member of the Ivy League, a group of eight schools in the northeastern U.S. About 20,800 undergraduate and graduate students attend the university.

Besides Weill, prominent alumni include Irene Rosenfeld, the chief executive officer of Kraft Foods Inc., poet E.B. White and former U.S. attorney general Janet Reno.

To contact the reporters on this story: Gillian Wee in New York at gwee3@bloomberg.net; Janet Frankston Lorin in New York at jlorin@bloomberg.net.

Last Updated: January 13, 2009 16:44 EST