Budgetary Outlook, 2009-2015
Dean of the College Andrew Shennan
October 13, 2009

To: The Wellesley College Community

From: Andy Shennan, Dean of the College, for the Senior Staff Budget Sub-Group

Re: The College’s Budget Outlook, 2009-2015

Last year, as we are all aware, the College had to weather one of the most difficult financial years in our history. By year’s end, our endowment had yielded a return of negative 17%. The value of the endowment in July 2009 was almost $400 million lower than its value of twelve months earlier. I am writing to you now to offer an update on the College’s budget outlook in the wake of this steep endowment decline.

The budget outlook remains challenging. Because of the budget cuts and workforce reductions we made last year, we are in a sound position in this budget year and well-positioned for 2010-11. But beyond next year, our projections indicate a series of years (beginning in 2011-12) in which we will face $10-12 million deficits in the College’s operating budget, as the full impact of last year’s endowment decline takes effect. To be sure, the deficits would have been far larger (on the order of $25 million) if we had not taken action last year. Still, filling an approximately $10 million hole in our budget for several years in a row will be a major challenge.

It will be essential to involve the whole Wellesley community in the consideration of how best to meet this challenge. With the immediate emergency behind us (at least we hope so), this is a year for us collectively to weigh the options for rebalancing our resources and expenditures.

To inform the Community about the extent of the task ahead, the Budget Sub-Group of Senior Staff (Debra DeMeis, Dean of Students, Andrew Evans, Chief Operating Officer, Cameran Mason, Vice President for Resources, Donna Ng, Controller, and Andy Shennan, Dean of the College, Chair) have developed two summary documents. The first, entitled “Multi-year Budget Projections and Assumptions,” presents updated projections of revenues and expenses for the next five years. The second, entitled “Possible Strategies for Addressing Multi-Year Budget Deficits,” lists some of the measures that we might take to address multi-year deficits in 2011-12 and beyond. This list is not necessarily exhaustive. The sole criterion for inclusion on it is the potential to have a major impact on this problem of multi-year deficits. We do not assume that all of the measures on this list will be implemented or should be implemented. We simply suggest that they should be considered. I invite you to review them and to send me any comments that you might have about them.

Since the material presented in these summaries is complex and requires considerable contextualization, we are making a concerted effort to communicate in person with all constituencies on campus. We have presented these summaries at the October 7 meeting of Academic Council and will do so at the October 14 meeting of Administrative Council. In the near future we will be consulting with student leaders to determine the best way to involve the student body in this critical conversation. Within the Senior Staff, the Budget Sub-Group has been charged by the President with the task of coordinating the College’s strategy for addressing the multi-year budget problem. However, we do not believe that the Budget Sub-Group should do this work in a vacuum. Each of the revenue-generating or cost-saving options that we have identified should be considered by the appropriate governance committees or groups (as noted in the second summary document). The Budget Advisory Committee, which includes faculty, students and staff, will have a particularly important role to play in advising the President and the Budget Sub-Group. As this semester progresses, the perspectives and recommendations of the various committees and constituencies considering these budget ideas will have to be brought together and synthesized into an overall budget plan that will prepare us for the hard years after next year. We know that not all of these decisions can be made within this budget year; some decisions will carry forward for a year or two. But our expectation is that by early in the spring semester we should have a clear sense of the overall multi-year strategy that the College will be adopting.

The precise manner in which this strategy will be decided is still to be determined. Our hope is that it will be a consultative process, engaging all constituencies and making full use of relevant committees and organizations. We acknowledge the difficulty of achieving broad agreement, let alone consensus, on painful choices. But if our budget projections prove even moderately reliable, it is clear that we will have no alternative but to make some of these choices. And it would be a heartening and important vindication of our shared governance system if we were able to agree, as a community, upon the right strategy for tackling our long-term challenges.