The Economic Situation
President H. Kim Bottomly
November 6, 2008

We are all very aware of the ongoing economic uncertainty. I know that many of you are concerned about the effect of this uncertainty on Wellesley College. In recent weeks a number of universities and colleges have announced cuts in spending, hiring freezes, and the halting of building projects. Because of our relatively strong financial position, Wellesley College can take the time to carefully plan the adjustments we will need to make over the next few weeks and months as we strive to minimize the effect on our community of these global financial problems which, by every indication, will be facing us for some time to come.

A significant proportion of our operating budget comes from the endowment, so economic downturns do have an impact on our operating budget. To help insure a stable income stream from the endowment to support our operating costs, we smooth endowment earnings over several years to mitigate the effect of any one year’s endowment results. This is in accordance with a spending policy put in place by the Board of Trustees two years ago based on the recommendations of the Financial Planning Working group of the 2015 Commission. It is this wise policy that allows us time to plan in this difficult period.

Our endowment includes investments that have been affected by the recent volatility. What this means for us is that we will almost certainly continue to feel the effects of the market turmoil for some time, and thus we need to take steps to prepare for the coming impact on our operating budget. The advantage of our spending policy is that we will be able to be thoughtful in any steps we take, rather than reactive. It also means, of course, that as the market recovers, the positive impact on the budget will be felt gradually, and we will need to be prepared for that as well.

Wellesley has been fortunate to benefit from the strong financial support of our alumnae. We are mindful that the economic situation may affect many individuals and families who may no longer be in a position to support us as they have done in the past. Therefore, we anticipate a decline in giving during this time. This, too, will have a negative impact on our operating budget.

We know that families of current and prospective students are also concerned about whether their ability to afford Wellesley might be jeopardized. I will be sending a letter to families of current students ahead of the Thanksgiving break to assure them of the college’s ongoing commitment to meeting 100 percent of each student’s demonstrated need. As always, we are prepared to work individually with families and to extend help to those whose changed circumstances have reduced their ability to pay. Staff in Admissions and Financial Aid will continue to work closely with prospective students to ensure that they understand that Wellesley’s strong endowment allows us to enroll and retain the best and brightest young women.

As I have been describing in my meetings with many of you, the senior staff and I began the development of a new budget process during our retreat this summer, one designed to ensure that there is an alignment of the budget with our priorities, more flexibility in the operating budget for innovation, a more realistic view of depreciation as a part of the budget, and adequate contingency to respond to unforeseen pressures. There was some urgency then, but there is greater urgency now. We are confident that this work will allow us to have a more flexible and responsive budget, and to be more thoughtful and agile in response to economic conditions.

These are uncertain economic times, and we will be diligent in monitoring the situation and in making the changes necessary to adjust to a smaller operating budget. As always, consultation with the community, and with the appropriate committees, will be an important component of my decision-making process.

Despite the economic pressures, I am confident that we will continue to manage our resources strategically and in accord with our institutional priorities. Communication is especially important during uncertain times, so I will continue to keep you informed in the weeks and months ahead.