Cornell University's endowment tanked 27% in the final six months of 2008 and, if the broader market's performance is any indication, likely took a similarly severe beating in just the first two months of 2009.

The school is responding with aggressive spending cuts and a bond offering. Cornell says that it will cut endowment spending by 15% effective July 1st, and implement more server cuts in 2011 and 2012.

But with the endowment down at least 27%, even that isn't enough. Cornell will also look to raise as much as $500 million through the sale of bonds. It will be interesting to see whether the bonds, which are taxable, will be able to find buyers in this credit market. Widespread headlines about Cornell's financial woes probably won't help their prospects, but perhaps loyal alumni looking for income will send in some money.

"In less challenging times, we might have avoided some of the difficult decisions that lie ahead," president David Skorton said today. "But a new reality is at hand for higher education, as well as for the rest of our economy."

To increase revenue, the school is accepting more students while also looking to cut expenses by halting new construction projects, and offering buyouts to older non-faculty employees. Cornell is also raising tuition and fees, which should delight families who are already paying $37,000 per year plus room and board, especially as they watch their retirement savings cut in half.