College's Response to Current Challenges

President Glotzbach’s Update on College’s Response to Current Economic Challenges

To:        The Skidmore community
From:   Philip A. Glotzbach, President
Date:    25 November 2008
Re:        Update on our response to current economic challenges
 
As you know from recent community meetings and correspondence, I have been working with members of Cabinet to respond to the challenges resulting from an unprecedented confluence of external events. We now believe we have a sufficiently informed view of the situation to begin taking the steps required to address both the short- and long-term issues relating to the economic downturn.
 
Like our peer colleges, Skidmore relies on four primary sources of revenue: tuition and fees, endowment income, gifts to the Annual Fund, and short-term investments. At this point in time, the last three of these sources are well below projections that have informed both the current operating budget, fiscal year 2009 (FY ’09), and our planning for subsequent annual budgets (beginning with FY ’10).  From January 1, 2008, to September 30, the College's endowment lost 12 percent of its value. October saw additional significant losses across all market sectors, and declines have continued through November. Although our third-quarter investment reports will not be available for some time, it is most likely that the College has experienced further declines in the value of our investments in recent weeks.
 
In addition, gifts to the Annual Fund presently are running well behind projections, and short-term investments are yielding just a fraction of their returns compared to six months ago. Finally, given the economic realities now affecting so many families, it is reasonable to anticipate that the College will receive new requests for financial aid and that some students may need to leave Skidmore for a semester or longer.
 
We now project that these trends will result in a deficit for the current fiscal year (FY ’09) of approximately $1 million (roughly 1 percent of our total budget). We further project that, unless we take the necessary and appropriate actions, the College would see a deficit of $8 million (roughly 6 percent of our total budget) for FY ’10. Given the magnitude of these deficits and the uncertainty of the broader, long-term economic outlook, we must respond quickly and pragmatically, while reaffirming our commitment to sustain Skidmore's mission and its core assets.
 
Responsible stewardship of the College requires that we always develop a balanced budget—and live within the parameters established by that budget—no matter what external circumstances obtain. Within the constraints of this overall requirement, our actions in dealing with the present challenges, and those of the years to follow, will be guided by the following additional principles:
 

• First and foremost, Skidmore must maintain the integrity of the core educational experience we offer our students—both academic and co-curricular—and our commitment to academic excellence.
• Second, to the greatest extent possible, we must be responsive to the economic realities facing our students and their families by minimizing any increase in our comprehensive fee in the coming academic years and by sustaining (and, if possible, increasing) our commitment to need-based financial aid.
• Third, we must do all in our power to minimize negative financial consequences of budget reductions to our regular, full-time employees. This aspiration relates both to benefits (e.g., maintaining the present policy for health insurance cost-sharing) and to wages.
• Fourth, in seeking to increase the efficiency of our operations and reduce costs, we will engage the creative resources of all members of our community and ensure, to the extent possible and consistent with our mission, that the accommodations and sacrifices we implement are shared equitably across the College.
• Fifth, by concentrating and prioritizing the investment of our available financial resources, our time, and our energy, we will make every effort to preserve Skidmore’s forward momentum in advancing the objectives of our Strategic Plan.

With the above principles in mind and following discussions with the President’s Cabinet and the Institutional Policy and Planning Committee (IPPC), I have directed that the College initiate immediately the following cost-reduction measures affecting both the FY ’09 and FY ’10 budgets:
 

1. We will institute a strategic hiring freeze. The President’s Cabinet will review all open positions and will authorize hiring only for those positions deemed to be of critical, immediate, and strategic importance.
2. We will implement an initial reduction of 2 percent in all non-compensation discretionary budgets (services and supplies) for FY ’09. This target will be set for each of the divisions of the College, allowing administrators and managers to make trade-offs within their areas.
3. We will initiate planning for the FY ’10 budget to achieve additional targeted reductions of 10 percent (for a total of 12 percent relative to the approved FY ’09 budget) in all non-compensation discretionary budgets. An exception will be made in the case of budgets directly supporting the delivery of the academic curriculum; in these cases, we will seek an additional targeted reduction of 5 percent (for a total of 7 percent relative to the approved FY ’09 budget).
4. We will limit the use of overtime at the College; all overtime must now be approved in advance by the relevant Vice President or Dean.
5. We will reduce travel, entertainment, and related expenses pertaining to College business.
6. We will limit—and, where possible, eliminate—the use of outside consultants and contractors.
7. We will examine every capital project currently planned but not yet started to determine which can be postponed or eliminated.
8. We will place a hold on all new programmatic initiatives pending a review by President’s Cabinet in the context of our new financial circumstances.

With regard to the current year’s budget, I have asked Cabinet members to work with their respective staffs to implement the aforementioned budgetary steps as quickly as possible. Any questions regarding these processes should be directed to the appropriate vice president or dean. At the same time, the Cabinet and IPPC will work toward finalizing recommendations for the FY ’10 budget in time for discussion and review at the Board of Trustees’ Budget Workshop meeting in January, in anticipation of the next scheduled Board meeting in February. Beginning this work in earnest now will enable the College both to minimize the deficit for the current fiscal year and to lay the groundwork for balanced budgets for the following years. Indeed, we already are beginning to plan for the FY ’11 budget, where further difficult choices will likely confront us.
 
I should note that the measures described above purposefully exclude the use of the temporary revenues generated by our current over-enrollment that, as I have explained in previous campus conversations, generally must be reserved for one-time expenditures. It is possible that we may call upon these funds in a limited way to achieve specific strategic objectives within our budgetary constraints. But such actions can be taken only after we have completed the targeted reductions. Above all, the College must be disciplined in using these funds only as a bridge to a more permanent solution to our budgetary issues, not as providing a solution in themselves.
 
All of us need to be engaged in this work. To that end, I encourage everyone to think about ways in which the College can reduce costs and operate more efficiently. In the vast majority of cases, the best ideas will arise directly out of one’s personal experience in one’s own area of responsibility. Such ideas should be communicated to one’s immediate supervisor or division head (the appropriate dean or vice president). This is the most effective way for all of us to make our ideas known. However, upon the advice of the IPPC and Cabinet, we also will be establishing other ways for people to share their good suggestions. More information regarding this process will be forthcoming in the near term.
 
In the coming weeks and months, I will continue to report to you in a timely fashion as new information becomes available. Community Meetings have been scheduled on December 4 at 8:30–9:30 a.m. and 1–2 p.m., and I encourage you to attend one of those meetings. I also will provide an update on our situation and take questions at the regular Faculty Meeting on December 5.
 
In conclusion, we indeed continue to face significant challenges, and yet the College has never been better prepared to meet them. Over the past decade, through wise investments, sound financial practices, and the generosity of thousands of alumni, parents, and friends, we have greatly strengthened our financial foundation, which, in turn, has allowed us to significantly enhance the experience of our students. Similarly, the rapid expansion of our financial aid program has allowed us to make a Skidmore education more accessible to more students than ever before. We now must work prudently and with all due speed to ensure that we can maintain that strength in the years ahead.
 
In the meantime, let me acknowledge that our nation’s difficult economic situation affects each of us in a very personal way—as members of communities facing budget reductions in public services, as members of families with relatives who may be dealing with job cutbacks or layoffs, as friends of persons who have fallen upon hard times, and as individuals experiencing the economic uncertainty we all feel. This is a time to remember that the U.S. economy has recovered from downturns many times in the past. It is also a time to reaffirm the bond of community that joins all of us within the Skidmore family. We need to depend upon one another for support and understanding, even as we make the necessary adjustments to the College budget. It is also a time, once again, for me to thank you for your hard work, for your commitment to Skidmore and its mission, and for your creativity as we join together to continue our progress through these turbulent times.