Budgetary Actions for FY09 - FY11 Update
President H. Kim Bottomly
February 5, 2009

Realizing the anxiety and uncertainty created by the current economic situation, as well as the progressively gloomier picture presented almost daily in the media, and holding to my promise to keep you informed about decisions being made on campus, I want to update you on the latest budget projections and our planned actions.

Update on the Budget Status
Late last semester, via reports at Academic Council, Administrative Council, Unity and a letter to the community, I informed you about our projected $20 million deficit for FY11 (which covers the 2010-2011 academic year).  The Investment Committee of the Board reported on the state of our endowment as of December 31, 2008.  While returns on a portion of our investments have yet to be valued, that $20 million shortfall projection still seems valid today.  The investments for which we do not have data largely involve partnerships that are not publicly traded, and thus we will not know these returns until the end of March.  In the past these investments have provided significant returns, but there is little consensus now on how this segment of our portfolio will fare.  We do need to recognize the possibility that our deficit could be greater than projected.  This is a very sobering possibility, and one for which we must be prepared. 

Our operating budget is also influenced by the level of financial aid we provide and indirectly by donor giving.  We remain committed to continuing current financial aid programs and policies. Due to the economic situation, we expect that there will be increased need for financial aid and decreased donor giving.  While we have not yet seen an unusual increase in demand for financial aid from current students, the needs of future students and any changing circumstances of continuing students in the coming years are unknown.  In terms of annual giving and restricted-use gifts, we have already seen a modest decrease from prior years.

Recent action of the Board of Trustees
The Board of Trustees met on campus last week, and we had a full discussion of the current financial issues facing the College.  The trustees endorse our priorities; they fully support our efforts to review all expenditures and to reorganize in order to meet these challenges.

As they do each January, the Board of Trustees took the preliminary actions necessary to develop next year’s budget, including setting Wellesley’s comprehensive fee.  Our comprehensive fee for 2009-2010 will be $49,848, which is an increase of 3.9% over this year’s fee.  The recommended fee that I brought to the Board resulted from thoughtful deliberations by the senior staff and extensive consultation with the Budget Advisory Committee.  A range of factors was considered, including economic conditions, benchmarks, trend data, enrollment and admission competition.  In taking the vote, the trustees thought carefully about the economic context in which this decision was being made.  This is the lowest percent increase in the past eight years.

The Board of Trustees also approved the endowment distribution for the FY10 operating budget, using the standard spending rule applied in previous years (see my November letter.  All budget communications are available at http://www.wellesley.edu/PublicAffairs/President/announcements.html).  They did that despite the fact such distribution will further erode the value of the endowment.

Update on current actions
In December, we identified savings from the current year’s operating budget and began identifying savings from the 2010 budget.  This included a salary freeze for all personnel, a hold on hiring for vacant positions, elimination of merit pay and bonuses, and reduction in use of discretionary funds. 

Since that time, we have been compiling savings ideas, including many ideas submitted by the community.  We will continue to gather these ideas from the Savings Ideas First Class Conference, from the Compensation and Personnel Policy Advisory Committee, from student, faculty, and administrative governance bodies as we move forward with our planning.  We have organized our thinking about the actions we are taking into a number of categories: across the board measures, (e.g. salary freeze); strengthening our sense of priorities (e.g. moving forward with academic planning and maintaining our financial aid program); streamlining operations and services (e.g. reducing redundancies by centralizing); tightening our belts (e.g. consolidating or centralizing services that are currently decentralized); and making the organization more efficient.

Reorganization and workforce reduction
The senior staff and I are reviewing all programs, services and activities currently supported and their relation to the core mission of the college.  It is clear that the actions that we will be taking will change the way we are organized, the work we do, and the services we provide.  It is also clear that this will result in reductions in most areas.  Some of these changes will be introduced locally, some divisionally and some campus wide.  This process has already begun and will continue this year and next year.  To the extent possible, we will continue to focus on “how can we do our work differently and better,” rather than thinking only about “what to cut.”

Planned reorganizations and the need to meet the $20 million shortfall will result in a reduction in the number of employees.  Some of this reduction will come from attrition and the remainder will have to come from layoffs.  In total, we anticipate reducing the College workforce by between 75 and 85 positions.  We have also decided to offer a retirement incentive program. We believe that this generous package is an appropriate way to signal the college’s appreciation to employees who will be 60 years old or older as of December 31, 2009 and have 10 or more years of service.  We recognize that many would welcome the opportunity to actively shape their retirement decisions.  This program will be offered to all administrative employees and notification and a detailed description of the program will be delivered to those who are eligible next week.  An early retirement program already exists for faculty, and we are looking into the possibility of offering an additional one-time enhanced retirement incentive program to faculty timed to correspond with the hiring cycle. 

I know that we will have painful and difficult moments in the months ahead; this is inevitable in any process of change.  I also know that many people will be affected, some whose jobs will be eliminated and the rest of us whose jobs will change in ways large and small. In all cases, these people are ‘us’….ourselves, our friends and our colleagues.  Those of us who are charged with making these decisions will do our best to treat each individual in the way we would want to be treated ourselves.  We are still a community, all in this difficult situation together; we all must contribute to the good of that community in any way we can. In recognition of this, members of senior staff and I will recommend to the Board of Trustees that our personal salary freezes be extended for an additional year, through FY11.  Though the amount that will be saved will have only a very small impact on a $20 million dollar deficit, the senior staff and I believe it is an important action for us to take during this difficult time.  It is my intention that the rest of the community will resume salary increases for FY11 based on the appropriate processes.

Despite the economic challenges, we will remain true to our values and focused on the issue of utmost importance to the College: ensuring that our primary focus is on the academic and intellectual life of students and faculty at Wellesley.  We will continue to stress our major priorities: recruiting and retaining excellent faculty; admitting the most academically able students and meeting their demonstrated financial need fully; and providing a dynamic intellectual environment on campus.