Economic Crisis
President Glotzbach’s Message Regarding the Economic Crisis, 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 slowdown
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.
Sincerely,
Philip A. Glotzbach
President