Operating Budget for FY10
President H. Kim Bottomly
May 13, 2009

I will begin my last budget letter of the year by thanking all of you for your understanding and patience as we worked to address serious economic problems this year. Members of our community participated in many ways: offering helpful suggestions for budgetary savings and constructive suggestions for other improvements; engaging in fiscally aware behavior to save the college money; continuing, in these trying times, to do the essential educational work of the college.

At their April 24th meeting, the Board of Trustees approved our 2009-2010 budget, a budget that reflects the difficult decisions we made this year to address the financial crisis that began last fall. I am very pleased that we were able to develop a budget for the next academic year that allows us to address a portion of the looming projected $20 million deficit for FY11 (which covers the 2010-2011 academic year). Our guiding principle in reducing the budget was to preserve our core academic enterprise and our need-blind admission program. I think it is a significant achievement that we accomplished this despite submitting a budget that is $6.2 million less than the current year budget.

The approved budget document for 2009-2010 is posted on the Finance Office website (http://www.wellesley.edu/Finance/finance.html).

Our planning this year has been based on projected endowment returns, and I want to provide you with the most recent information Debby Kuenstner, Chief Investment Officer, has given me about this year’s returns. In the first nine months of the fiscal year, the estimated return to the endowment was –25.2%, leaving the value of the endowment at approximately $1.2 billion. This March 31, 2009 estimate is based on two components: 1) we have firm valuations for 75% of the portfolio and, 2) for the remaining 25%, which includes partnerships in private equity and real assets (such as timber, oil and gas), we adjusted our December 31, 2008 valuations to reflect cash flows and the estimated impact of economic deterioration. In simpler terms, three-quarters of our endowment is a known value, just like you know what is in your 401K account or your savings account, but the value of the remainder of the endowment is like the investment in your home, where you have a sense of its value, but cannot know that value for certain until you sell it. The investment return through March 31, 2009 is consistent with the -25% return for fiscal year 2009 that we have been assuming in the budgeting process for future years. I am pleased at this evidence that our original projections seem reasonably accurate.

I am confident that through thoughtful transitional measures and wise long-term planning, we will adjust to our altered budget and continue to provide an unparalleled education for our students and a premier intellectual environment for our community. I am confident that we will continue to be one of the finest liberal arts colleges in the world. I know that this is due in large part to your talent, hard work and dedication.