President Glotzbach’s Message Regarding the Economic Crisis
October 7, 2008
Dear Members of the Skidmore Community:
As all of us certainly are aware, these are very challenging economic times. This past week, especially, financial markets in the U.S. and around the world exhibited tremendous volatility – mostly, and unfortunately, in a downward direction. These conditions affect all of us directly through the performance of our own personal retirement and savings portfolios. The College is not immune to these conditions, and we are likely to see continuing effects for some period of time. So I would like to take a moment to comment on these developments and to indicate some of the actions we have taken and will take in response.
First, we currently are projecting a significant decline in interest earnings from short-term investments on working capital – primarily cash receipts (most notably, tuition and fees) that we manage so as to earn interest between the time they are received and the time when they need to be spent.
Second, and more importantly, our endowment’s value had dropped by roughly 6 percent as of August (the most recent figures available) from its high point this past December, and we anticipate further declines with the September figures. This reduction in value will lower the income generated from the endowment for our operating budget.
Third, along with many other colleges and universities, we now anticipate a slow-down in charitable giving, both in support of operations and for capital projects and endowment, although it is still too early to tell the full extent of this trend.
Fourth, we also are experiencing considerable increases in the cost of energy and other base operating costs as well. Potentially more significant could be a marked rise in the demand for financial aid among our students, current and prospective, as many families see their income and assets decline and their access to credit diminishes.
The $700 billion rescue plan that was signed into law last week can be expected to restore some degree of normalcy as its measures are implemented – although it seems reasonable to anticipate that the markets will continue to experience turbulence in the coming weeks. As these developments continue to unfold, we must plan thoughtfully and seriously for what may be a prolonged and significant economic downturn. We already have held conversations along these lines in President’s Cabinet, and this week the IPPC will begin to consider ways to address this far-reaching and still developing situation. The College’s Investment Committee has met and will continue to monitor our portfolio; other Trustee committees will be involved in related discussions this month at the Board’s regularly scheduled meeting.
What I want to make clear today is that the Administration is working diligently and responsibly – but without any sense of panic or alarm – to address the issues before us. We will do this work in consultation with the appropriate campus governance bodies and the Board. As things progress and as we have additional information, we will update the community and create opportunities for dialogue with the entire campus. Specifically, we will schedule an open meeting sometime over the next two weeks, which will allow us to discuss our situation in more detail.
I believe that, working together, we will be able to chart a safe course through these unsettled waters. From an absolute perspective, it seems clear that we are likely to experience some rough going in the months ahead. From a relative perspective, however, Skidmore is as well positioned as most colleges, and better than many, to navigate these challenging circumstances. Thus far, our endowment has performed better than those of many of our peers, and it is both well managed and well diversified. We have good controls on our spending and access to sufficient funds to meet our needs. Finally, and perhaps most important, our admissions picture remains strong. Taken together, these factors should help us weather this storm.
Philip A. Glotzbach