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Posted By Vanderbilt Magazine On August 22, 2010 @ 12:25 pm In Collective Memory, Summer 2010 | 1 Comment
Feb. 19, 1932, was the worst day in Vanderbilt history. Wesley Hall, the largest and most versatile building on campus, burned. It had housed the divinity school, the divinity library, a cafeteria, and rooms and apartments for graduate students and faculty. The fire occurred just as the economy moved into the depths of the Great Depression. Insurance funds did not cover the cost of a replacement. For the next five years, the scorched walls remained as a visual reminder of hard times.
The Depression damaged Vanderbilt, but not to the extent that it devastated most public universities. The university did not face bankruptcy. It never ran a deficit, even in the awful years of 1932 and 1933. But the austerity that helped avoid deficits simply exacerbated already growing weaknesses that haunted all areas of the university except the medical school. It made an already provincial university virtually a Middle Tennessee institution, at least for undergraduates. Both its law and divinity schools were in deep trouble and would barely survive the Depression. The College of Arts and Science had only one department—English—with a nationally distinguished faculty, and it lost its most eminent professors during the 1930s. Vanderbilt as yet had no central library and no women’s dorm except one for nursing students, and its one men’s dorm—Kisssam—was hated by students and was usually half empty.
In its early years Vanderbilt largely survived on income from its endowment. By 1930 this income was more than balanced by student tuition and by Northern philanthropy, particularly from the Rockefeller-funded General Education Board and the Carnegie Foundation. Of these three financial pillars, the endowment of approximately $20 million suffered least from the depression.
But for years Vanderbilt Chancellor James H. Kirkland and his Board of Trust did not anticipate such good fortune. They spent sleepless nights worrying about the dire effects of New Deal policies on the corporations, largely utilities and railroads, whose top-rated bonds made up 90 percent of the Vanderbilt endowment. Ten percent of this was in the bonds of Wendell Willkie’s Commonwealth and Southern holding company, the largest electrical utility in the South. It carried on what seemed a life-or-death battle with the Tennessee Valley Authority until a fair purchase of many C&S assets took place in 1939. The TVA, so popular among both students and faculty at Vanderbilt, became the devil incarnate in the eyes of Kirkland and most board members, who constantly lamented what they saw as President Roosevelt’s encroachments on private business. Meanwhile on campus, several polls showed overwhelming student and faculty support for Roosevelt and his New Deal.
Before 1932 Vanderbilt had no treasurer or business manager. Kirkland, who presided as Vanderbilt’s second chancellor from 1893 until 1937, made all the important investment decisions. He bought no common stock, although the university accepted a few gifts of such stock (less than 5 percent of the portfolio). Such a conservative strategy prevented Vanderbilt from profiting from the stock market boom of the mid-1920s. But after the stock market crash of October 1929, his conservatism paid off. His bonds, which yielded from 5 to 5.5 percent interest, actually rose in market value as overall interest rates fell, particularly after 1932. Less than 5 percent of Vanderbilt’s bond issuers defaulted on interest payments, and in most cases even those eventually paid in full.
But at Vanderbilt the critical issue was income from the endowment, not its face value, because Vanderbilt never dipped into the principal to meet operating costs. As soon as contractually possible, bond issuers retired older bonds and issued new ones with a yield as low as 3 percent. This decreased endowment income led a newly appointed university treasurer, Andrew Benedict, to shift more and more of the endowment into common stock, marking the beginning of a highly competent professional management of the endowment that continues today.
The greatest threat to Vanderbilt’s finances came from the two other income sources: foundations and tuition. From 1929 to 1935 Vanderbilt did not receive a major gift from anyone. This was not a fatal blow, as many past gifts from foundations, particularly to the medical school, had gone into the endowment and thus continued to support programs.
Tuition income depended on the rate charged and the level of enrollment. Vanderbilt neither raised nor lowered undergraduate tuition during the early 1930s. It remained at $4 for each quarter hour of credit, or $192 for a full course load. Fees raised the total to around $280. This seems modest today, but ranked among the highest in the South. Nursing and divinity students paid no tuition; law students paid $200 a year, medical students $300.
Beginning in the fall of 1931, enrollment began a gradual decline, but at a lower rate than for most colleges. Peabody lost nearly half its enrollment. Enrollment in Vanderbilt’s College of Arts and Science dropped from 811 in 1930 to a low of 655 in the fall of 1933, and at a comparable rate in the School of Engineering.
Perhaps equally important, an increased share of students was from the greater Nashville area. Lowered admission standards (two language units rather than four, and less math) made it easier than ever before for students to gain admission, but Kirkland’s Vanderbilt refused to change the quota of only 50 women admitted to the College of Arts and Science each year. In 1933 only 16 students in Arts and Science were from outside the South, and more than 62 percent of undergraduates were from Nashville. Most of these students either commuted or lived in scattered fraternity and sorority houses.
The lost tuition, joined with the fear of what would be the effect of New Deal business policies, led Kirkland to cut spending as much as possible. For six years all construction ended. Buildings suffered from a lack of maintenance. Faculty replacements ended for all but the most essential positions. Yet, no professors lost their jobs because of financial stress.
Only in rare cases did any faculty receive raises from 1930 to 1936. In February 1933 Kirkland asked the board, as a temporary measure, to cut all faculty and administrative salaries beginning in 1934–35 (these cuts ended in 1937), with the amount ranging from only 4 percent for the lowest-paid to 10 percent for professors or administrators making more than $4,000. The average reduction was 8 percent and, as it turned out, was unnecessary because the budget each year had a surplus.
The faculty, with their jobs secure, had small reason to protest. Because of Depression deflation, the purchasing power of faculty salaries soared to the highest level in Vanderbilt history. And because of enrollment declines, they had to teach fewer students.
The Depression effectively ended for Vanderbilt by 1936. In the fall of 1935, enrollment rose by an unanticipated 100 students and continued to climb each year to a record Arts and Science enrollment of 1,046 in 1938–39. This increase reflected national trends, in part due to federal relief funds for work-study scholarships of $15 a month for students from low-income families (up to 215 a year at Vanderbilt). Such growth led to a series of faculty appointments and promotions under the new leadership that followed Chancellor Kirkland’s retirement in 1937. After solid economic growth by 1935, foundations resumed their gifts for Southern higher education. In 1935 the General Education Board gave $2.5 million for a large hospital addition, and in 1938 gave $1 million to Vanderbilt, Peabody and Scarritt College for a new Central Library. Finally, in 1940 Vanderbilt built its first women’s dorm—McTyeire. Left over from the Depression were three critical goals for a post-World War II Vanderbilt: to break out of its provincial box by building enough new dorms to make possible a truly residential university, to regain its educational leadership role in both undergraduate and graduate education for at least the South if not the nation, and to rebuild its two barely surviving professional schools—law and divinity.
Paul K. Conkin, Distinguished Professor of History, Emeritus, is the author of 20 books, including Gone with the Ivy: A Biography of Vanderbilt University.
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