(FORTUNE Magazine) – Reengineering has made its way into academia's hallowed halls. Blame demographic pressures: The pool of high school graduates has been falling for a decade. Many states have slashed spending on higher education. California's 20 state universities, for example, have seen appropriations drop from $1.7 billion in 1990 to $1.55 billion for the upcoming academic year. The state chopped its faculty from 21,290 to 16,527. As a result, students choose from 8,000 fewer courses. The demographic and financial pressures have affected schools both big and small. Tiny Bennington, traditionally one of the nation's most expensive private universities, is one of the latest to reengineer. Looking to close a $1 million budget deficit, it plans to reduce full-time faculty from 62 to 51 by the end of next year. More radically, it will eliminate its version of tenure and ax some academic departments. Says university president Elizabeth Coleman: "In both the corporate world and academia, there's a need to get something better using fewer resources. It's always a huge challenge." Boston's Northeastern made itself America's largest private university by accepting 93% of those who applied. Then it had to trim $60 million from its operating budget, which stood at $240 million in 1991. The school has since cut faculty from 937 to 751 and is accepting fewer applicants. One bonus is smarter students; SAT scores are up 90 points on average. The school itself is trying to get smarter. It's willing to spend money to create high-tech classrooms that are wired for long-distance video transmission so students can enjoy guest speakers or notable professors from afar. Says Bob Culver, Northeastern's treasurer, who learned his reengineering p's and q's as a partner at Coopers & Lybrand: "We have managed one of the most successful downsizings and strategic realignments in the New England economy." They didn't used to talk that way inside the ivied walls.