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Psychology departments across the country are preparing for cutbacks due to the nation's recession. Because most university budgets are still awaiting funding decisions from endowments, private donors and public grant agencies, many department chairs say the severity of any financial cutbacks remains uncertain. But they are predicting they'll have to implement hiring freezes and reduce financial support for graduate students.

Howard Nusbaum, PhD, chair of the University of Chicago psychology department, predicts the consequences will be similar to those his department dealt with during the early 1990s recession.

"We went through a period of scaling back," Nusbaum says. "I believe we hired one new faculty member for every two we lost. I don't think we cut back on admissions of grad students much, but our raises were lower. So I expect something similar this time."

The private sector

While public university budgets are set by legislatures, private school budgets, including the University of Chicago, are somewhat shielded from economic downturns because they have more control over their funding, Nusbaum says.

Private universities draw their funding from endowments, which are supported by institutional and individual donors. Because these donors aren't beholden to a whole state of citizens, like legislatures are, Nusbaum says that their contributions are more insulated against economic pressures. These endowments are often nested in the stock market, real estate and other investment opportunities—meaning many have recently taken a hit—but private universities are able to quickly respond to financial falloffs by raising tuition and raising further donations, Nusbaum says. "Privates can move more nimbly to start new programs, like executive education and master's programs, that bring in revenue," he says.

If administrators do tell him to tighten the department's budget, though, Nusbaum expects to slow down hiring and possibly reduce the number of grad students they can take in the coming years. He expects the budget situation to be clearer by February, which will give him a better idea of what exactly will happen, he says.

Similarly, Wake Forest University psychology department chair Dale Dagenbach, PhD, says that right now things are running smoothly, but he's anticipating significant cutbacks as the year progresses.

"This [past] year was okay for us," Dagenbach says, "but I expect that we'll feel the full impact [this year] and beyond."

Public universities

There's more uncertainty for state university systems, which are often the worst hit in bad economic times because they rely on public funding at a time when legislatures are dramatically cutting their budgets, says University of California, Berkeley, psychology department chair Steve Hinshaw, PhD. For fiscal year 2008–09, the state slashed UC funding by $48 million, with another $65.5 million cut expected sometime midyear. California's other public university system, California State University, faces a $97 million budget cut this year.

In response, both the UC and CSU boards of regents announced in November that together they would cut enrollment—possibly by tens of thousands of students—if California lawmakers can't provide sufficient funding.

As a result, Hinshaw says he's wrestling with a hiring freeze and says the outlook is uncertain for staff funding and financial support for grad students.

Richard Petty, PhD, psychology department chair at Ohio State University in Columbus, is optimistic, though. He says Ohio's governor, psychologist Ted Strickland, PhD, has been "quite good at protecting higher education," so Petty is hopeful that the downturn won't harm his department much. Also, OSU has tucked away rainy-day money that could help it cope with the worst of the downturn. If it becomes a prolonged recession, though, he concedes that his department will probably feel the effects.

"In economic hard times, we become more tuition dependent," he says. "If the downturn means fewer students attending college, that will ultimately erode our funding." But he also thinks that in economic hard times, students might be more compelled to attend college to position themselves for better jobs. Whatever the case, Petty says his department is prepared to handle whatever comes.

"I think, for now, there's no reason to panic," he says.

One thing both private and public universities have in common is that these types of economic hardships rarely have long-lasting effects, he says, echoing Nusbaum's recollections of recessions past.

"Over the years, I've seen economic downturns followed by recoveries," Petty says. "The trend I've seen is that for two to three years, things get bad. Then funds begin to emanate back to the universities."

How is the recession affecting psychology's graduate students?

The January issue of gradPSYCH, the Monitor's sister publication, includes articles on:

The new economy and you: What the economic crisis means for graduate students' training, research and job prospects.

Recession tips: How to fund a psychology graduate education despite the down economy.

To read those articles, visit gradPSYCH.