Here are some things academic libraries are doing to cope. The primary caveat is that I have less experience in this area (my research lab is affiliated with a university, but we're different). I have heard a lot about this from my colleagues in my professional association and online. I would be happy to be corrected by those in the know!
Academic institutions vary widely - from large state institutions and private research universities to small liberal arts colleges - and so they also vary in how things are funded. Sometimes the various portions of the university- the colleges - will each pay some portion of the total based on their usage. Sometimes it's sort of a tax across the board or just a cost of doing business for the whole institution. Other money comes from grants (these are usually pretty small, like for preservation of a collection or doing some research, but I know of one institution that just won a $20M grant for digital data curation). There are also sometimes funds from donations that can be used to buy materials (and a nice little book plate goes in the front) and there's money from the endowment.
Clearly, money coming from the state is way down. Some schools have not been allowed to increase their tuition and some have. Endowments are down. Paying students are down.
Here are some of the things I've heard:
- close branch libraries
- combine service points or close service points (like circ desk and information desk)
- shorten hours open
- hiring freezes
- reductions in force
- no funding for training or travel
- no technology upgrades
- cancel print subscriptions to journals
- cancel journals*
- review standing orders and cut them
- buy fewer books
- preservation projects might go on hold
- new items purchased in packages might not be cataloged
- new or increased fees (for things like photocopying, maybe even for interlibrary loan)
* note: some package deals are like for 3 years so you can't touch them, or if you can, you can only cancel like 10% or you have to offset any cancellations with new subscriptions.
For more see: http://www.libraryjournal.com/article/CA6655234.html (after this was written we did hear that UW was faced with larger than 12% cuts - most seem to be between 3-10%) or just browse the results of this search. This piece talks a little more about endowments.