The College’s Planning for Fiscal Constraints
President H. Kim Bottomly
February 18, 2009
Over the past several months, as the problems in the financial markets and the broader economy have deepened and their impact on Wellesley College has become clearer, I have been writing to you to keep you up to date on my thinking and the thinking of the Board of Trustees and the senior staff. I have had conversations with large and small groups of you on many occasions about these challenges and have announced some steps we are taking to address them.
Presentations on the structure of the budget and how the endowment contributes to our annual spending will be made in several venues over the coming weeks, in ways that make them available to all members of the community. Members of the senior staff and I will be holding brown-bag lunch sessions in which we invite conversation on the budget. Before we have these conversations, and as we move into the final stages of developing the College’s budget for 2009-2010, I wanted to take a moment to summarize all the activity of this difficult year and give you a sense of the factors guiding the budget decisions.
Aligning Budget Expenditures with Institutional Priorities
Last summer, I spent three days in meetings with the senior staff developing long-range priorities for the College. At that time, we began discussion of how we might better organize ourselves to meet those priorities more fully and effectively. One of the first items on our agenda was a revised budget process, one that would produce a multi-year budget that was closely aligned with our institutional priorities. We established a new way of working on budget planning among the senior leadership, across departments and divisions, and placed the Dean of the College in a new role at the helm of that process as chair of our Budget Subgroup. When the present financial crisis emerged in the fall, that group began planning our approach.
It was important to begin by identifying those policies that form the foundation of the College’s mission and identity. We sought to preserve the core academic program, while also allowing for enhanced quality. We determined that our need-blind admission program and our financial aid policy of meeting the full need of students who qualify are crucial elements in maintaining the quality of our academic enterprise, and we re-affirmed that policy. From there, we began to ask other questions: In what areas do we expend more resources than our peer colleges? Is it essential to the core academic program that we spend more in those areas? Where have we, over time, become accustomed to levels of service or programs that many colleges do not enjoy, and do they make a material difference to our students’ education and to the intellectual vitality of the campus? We have several ways of measuring what we offer and how we deliver services and programs in comparison to our peers, and we examined those surveys and consulted with colleagues at other colleges. We found many indicators that our costs per student were comparatively high, and the consensus was that we need to manage our costs better. We sought suggestions from the community on how to conserve resources, and those ideas became part of this process.
Beginning to Address the Budget Shortfall in 2008-2009 and 2009-2010
This process led to the identification of many contractions, reductions and eliminations of services and activities, some of which were immediately incorporated into the 2008-2009 budget and others of which will be realized in the 2009-2010 budget. These reductions include lower funding in such areas as travel, consultants, casual wage, overtime, building maintenance, vehicle fleet, food and entertainment, and supplies. We paid particular attention to paring down discretionary expenditures that seemed to us non-essential in a period of economic stringency. For example, we will reduce expenditures for meals and receptions at major events and will end the practice of holding Commencement under a large and expensive tent. We will extend the replacement cycle for faculty and staff computers and for college vehicles, and review the practice of free printing. We are adopting cost-saving practices that also advance sustainability goals, such as reducing the number of printed publications, using energy-efficient equipment and reducing the purchase of bottled water.
The combination of budget reductions in the current fiscal year with some of the cuts in next year’s budget will enable us to establish reserves to cover one-time costs such as the retirement incentive plan and severance pay for employees whose positions were eliminated. These reserves will also serve as a general contingency for other one-time expenses that may occur before the economic environment improves, buffering us against additional unanticipated events. This is a necessary and prudent measure during a time of great uncertainty.
As I announced in December, in light of the fact that salaries and benefits comprise half of our operating budget, it is not possible to make the reductions required without implementing a salary freeze for all faculty and staff for next year. Given our commitment to attracting and retaining the best faculty and staff, however, I do not believe that multiyear salary freezes are an effective or desirable long-term strategy. My goal is for the community to resume salary increases next year. The senior staff and I will recommend to the Board of Trustees that our personal salary freeze be extended for an additional year as a means of communicating our commitment to the institution during this challenging time.
We determined that no vacant positions should be filled until they have been reviewed to determine that they support institutional priorities. The deans and I approved a reduction in the number of faculty leave replacements. In addition, after a careful review, we decided this year to suspend approximately 20 percent of previously approved tenure-track searches. In the coming years, we will continue to allow searches to go forward only if compelling curricular and enrollment needs justify them; however, we do not plan to increase the faculty-student ratio. Similarly, we continue to hold most current administrative vacancies open although some of these vacancies will need to be filled as we reorganize.
We have also undertaken a careful review of our endowment revenue, examining every endowed fund throughout the College to ensure that its purpose is still relevant. Where we found that not to be the case, we approached donors and asked for adjustments in the designation so that the fund could be used to offset expense in the budget. We had many conversations with departments about the need to spend endowed funds for their intended purpose, before using operating budget resources, and that is becoming standard practice across the College.
In setting our strategy, we have been guided by our sense of the particular characteristics, strengths and vulnerabilities of this college. We considered the tuition increase with even more care this year, balancing our need for revenue with consideration for the financial pressures on our students and their families. While some of our peers may find it necessary to make aggressive tuition increases as a part of their strategy, our analysis of all the factors led us to a more moderate approach. Our increase of 3.9 percent over this year’s fee, for a comprehensive fee of $49,848 for 2009-2010, is our lowest increase in eight years. Some colleges are also admitting greater numbers of students, and while our applicant pool is certainly robust enough to allow this, we wanted to avoid adversely affecting our quality and selectivity. As a result, we did not budget for an increase in the size of the incoming class.
The endowment contribution to our operating revenue is set by a formula that is intended to balance the needs of today’s students with those of future students, and preserve enough of the endowment to ensure that future. This is an important judgment that the trustees must make every year, all the more important and complicated this year. While the endowment may sometimes appear to be a virtually endless source of revenue, its purpose is not solely for the solution of today’s problems. Our long-term institutional responsibility requires us to balance today’s needs with those we anticipate in the future.
Longer-term Strategies for Adjusting to New Fiscal and Organizational Realities
An important part of our work has been to ask ourselves if there are ways we can organize the administrative work of the College to be more efficient, and if there are redundancies inherent in the way we operate. This work of reorganization will be ongoing, and will not cease with the approval of the 2009-2010 budget. It will involve people working across divisions to better organize work and deliver an improved product or service with higher efficiency and at lower cost. Since the reorganization will necessarily involve changes in the roles of many administrative employees, it will not be work that is finished in the next few weeks, and, in fact, is part of the ongoing work of any healthy enterprise.
The decisions to reduce the number of employees, then, were made not in an across-the-board fashion, but on the basis of an examination of the work we do, the services we provide, and the efficiency of our organizational structure. Over the past several years, Wellesley has reduced the number of employees by attrition and reorganization, and we have increased administrative efficiency. Now we are called to take that process even further and become more efficient still, and as we compare ourselves to our peers, this seems to be achievable. These decisions are never easy because of their impact on individual members of our small community with whom we have personal relationships. It is made all the more difficult because we are incredibly fortunate to have a highly skilled and dedicated staff committed to advancing the mission of the College. The decisions we are making are based on the work that we must do and the positions required to do that work, not on the individuals who fill those roles.
Observing that some of the usual opportunities for reorganization, such as natural attrition of employees, were no longer as available, I approved a retirement incentive program to give employees, whose retirement plans might have been changed by the economic climate, an opportunity to rethink their future on a voluntary basis. While this program has substantial financial costs associated with it, I believe it is very important to do all that we can to acknowledge employees who have spent long and productive careers at Wellesley with a generous program and to allow them to make retirement plans voluntarily.
Finally, we are giving careful thought to all potential sources of revenue consistent with the College’s mission and identity. I want to be clear that we are not considering the sale of college assets. But we are certainly considering how we can use all of these assets (including land and property) to their full revenue-producing potential. We have received many useful suggestions to this effect from members of our community.
Addressing These Challenges as a Community
I have learned a great deal from my many conversations with members of this community: trustees, staff, faculty, students, alumnae. These conversations have helped to clarify my thinking about the essence of the Wellesley education and in many cases have pointed to specific areas we might consider to help solve our problem. These conversations will continue.
As we approach closure on next year’s budget decisions, I will be able to share more specific information with you, especially as it relates to staff reductions, but that work will be ongoing. In the meantime, I wanted you to have a full description of how I approached this serious and unanticipated financial challenge.
This is a difficult moment for the College and, I recognize, a difficult moment for all of you and your families. I know that the decisions we make have personal and institutional impacts. I understand that this period puts strains on our bonds of community. In the end, however, fiscal conditions will improve, and I am confident that Wellesley will emerge as a stronger institution, better able to confront unforeseen challenges with agility and creativity. We are one of the finest liberal arts colleges in the country and will remain such. It is important that as we do the work necessary to achieve this end, we care for each other and attend to the needs of our community life, which is such a significant part of Wellesley’s strength. My deep thanks go to each of you who are helping the College at this important moment.
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