President's open forum draws Skidmore crowds

No easy answers but a down-to-earth sense of touching base to ride out a faltering economy came out of President Philip Glotzbach's campus community meetings Oct. 22 and 23.

Following up on his earlier online memos to the campus addressing the ongoing national and international financial turmoil, Glotzbach reported on how Skidmore is being affected by the stock market downturn and answered questions from faculty, staff, and students in a packed Davis Auditorium Oct. 22 and Gannett Auditorium Oct. 23.

?Nothing like a good economic downturn to bring out a crowd,? Glotzbach noted wryly.

Glotzbach first listed ?all the many good things that are ongoing,? among them admissions, with 7,400 applications for 646 spots in this year?s freshman class; progress on the new Zankel Music Center, which will open on schedule in January 2010; good progress on the Creative Thought. Bold Promise fundraising campaign; successful athletics teams in field hockey and volleyball; and a positive campus dynamic with such events as the recent Carnegie Hall-affiliated concert, a Tang exhibition of work by alumna Heather Hurst, and the noted author Don DeLillo reading from his work for this year?s Steloff Lecture.

But, he noted, ?the economy affects us all, from our TIAA-CREF retirement funds to our car loans,? and he acknowledged that ?signs seem to point to a prolonged recession.?

The likely effects of that recession were the focus of Glotzbach?s remarks and the question-and-answer period that followed. Following are excerpts.

Endowment

Skidmore?s endowment had been approaching $300 million around the first of the year, but the stock market has been going backwards in recent months and ?we probably have lost anywhere from 10 to 20 percent our endowment value in that downturn,? Glotzbach said.

?Our endowment is superbly managed. We have a great team of people on the board of trustees and some outside folks who manage our investments for us, and historically we have outperformed the market when it?s going up and we have outperformed it coming down ? we have gone down less than the market. That?s still true. But the current market is so tough, it?s very hard not to have losses. So we?re going to have to ride this thing out.?

The College has a ?five percent spending rule,? Glotzbach explained. ?That means we take on average in a given year five percent of the value of our endowment and that goes into the annual operating budget as a line item for revenue. We had a target of about $15 million of that income this year. We will probably fall short of that because of the endowment performance ? perhaps by $1 million or $2 million.?

Short Term Investments

The College puts a certain amount of operating capital ? chiefly, current-year tuition ? into short-term investments ?and we usually make some good returns on that,? Glotzbach said. ?Due to the current investment climate, we?re not realizing those returns this year,? which amounts to another hit to the budget of approximately $500,000.

Annual Fund

Whatever the College raises through the Annual Fund goes directly into the operating budget as a line item. The College?s goal for this year is $6.7 million. ?But,? said Glotzbach, ?if donors are feeling a pinch we might see a drop in that number as well.?

?The good news about the annual fund is that we have a very sophisticated donor population,? Glotzbach added. ?They understand the needs of the college. They understand that this is a tough economic time for us and not just for them, and we?ve actually seen some people increasing their annual fund donation this year because they know that we need it. But I think it is prudent for us to project something of a shortfall in that just because of the general economic situation so that?s another hit to the budget.?

Financial Aid

The most worrisome aspect of the current economic situation ?is the effect of all of this on students and their families,? Glotzbach said. ?Forty-two percent of our students are on financial aid and we don?t know how many of them might be affected right now by changes in their family circumstances.

?The largest part of Skidmore?s operating budget is salaries, wages, compensation, benefits ? about 66 percent of our budget, The next largest portion of our budget is financial aid. This year it?s $27 million. What are we going to need to maintain the financial aid for our current students for next year and what will we need to meet the needs of our incoming student population? I think it?s fair to say that there will be some challenges there.

?Five years ago when I arrived at Skidmore our financial aid budget was about $16.1 million, and we projected at that time that we would have to increase it to $21.1 million ? an increase of 31 percent. In fact, we have increased our financial aid budget to $27 million, an increase of 68 percent ? more than double what we had thought possible and we?ve been able to do that largely through gifts and growth in our endowment.?

Tough Choices

?Skidmore is in a good position to deal with a short-term shortfall,? Glotzbach said. ?Fortunately, we have some additional ?below-the-line? revenues due to the fact that we have more students than we have budgeted. These additional students provide us with some surplus funds and we may be in a position, for this year only, where we use some of these funds to support the operating budget."

?The big problem is next year,? Glotzbach said. ?We?re going to have to scale back endowment support. And we know that financial aid is going to be an issue we have to address. I think we?re going to have to make some difficult choices. We will probably delay the budget process somewhat just because we?re trying so hard to get a handle on our financial situation.?

Emphasizing that the administration is in the earliest stages of discussions with the Institutional Policy and Planning Committee, Glotzbach said he didn?t want to speculate on specific ?tough choices? the College will have to make in next year?s budget. There may be delays in certain capital projects, such as the renovation of residence halls, the replacement of Scribner Village, or certain alternative energy projects.

With respect to the current fiscal year, Glotzbach said, ?I would ask every budget manager to take a hard and serious look at that budget and see where you might achieve some savings. Is there something that you might defer? Is there something that you may not have to spend this year. Because we are going to be coming to budget managers and asking for some savings this year. The Cabinet is working on that with IPPC.?

Going Forward

?I?m saying we?re in a good place,? Glotzbach concluded. ?Financially, we are sound. Great things are happening at Skidmore because of what all of you are doing ? because of the fact that everyone in this room works hard for the College. We just have to keep focused on asking continually what we?ve been asking: How can we continue to make Skidmore better today than it was yesterday, and better yesterday than it was the day before. We will find a way if we work together. But this is very much a ?stay tuned, news at eleven? moment and I expect we will be having similar meetings in the weeks ahead as we know more about our situation.?