Financial Update

The beginning of our new semester represents an appropriate moment to update the Skidmore community regarding our financial situation and address an issue that I know has been very much on all our minds.

As you will recall, last May I announced that we needed to achieve an additional $3.25 million reduction in continuing expenses, and in September I informed the community that there appeared to be no way to realize this budgetary objective without eliminating from 30 to 70 positions (approximately 5% of the College’s overall workforce). At the same time, I indicated our determination to explore all possible alternatives for achieving the necessary savings through reductions to the operating budget that did not require the further elimination of positions.

I am very pleased to report that we now are seeing signs of improvement in the College’s financial condition relative to our earlier projections. This positive result stems from a number of factors:

• While our endowment still has not returned to its level of December 2007 (nearly $300 million), improvements in the external economic climate have enabled a significant recovery in the College’s investment assets—from a low of approximately $220 million in February 2009 to approximately $270 million as of December 31. (As always, we have benefited from the superb management of our portfolio by the College’s Investment Committee.)
• We are seeing hopeful signs of increased financial support by alumni, parents, and friends—particularly in the Annual Fund.
• The campus community as a whole has done admirable work in reducing and controlling expenses.
• We now are planning a smaller increase in the financial aid budget (tuition discounting) in FY ’11 than we previously had modeled. (Financial aid remains the College’s second-largest expenditure category after compensation and benefits.)
• Student retention has exceeded predictions, though this situation remains volatile.
• The strategic hiring freeze and restrictions in overtime, in place since October 2008, have yielded savings in personnel costs equivalent to approximately 30 positions.
• The voluntary Early Retirement Incentive Program (ERIP) has yielded savings in personnel costs equivalent to approximately 25 positions, far exceeding our expectations.

These and other factors—most notably the absence of a general salary adjustment (GSA) for the current year with no GSA planned for the following year, and the cost-containment efforts and sacrifices of the entire Skidmore community—have combined to create a stronger financial outlook than could reasonably have been predicted even six months ago.

After reviewing these and other developments with the IPPC and the Budget and Finance Committee of the Board of Trustees, we have determined that it is no longer necessary to seek additional non-voluntary reductions in force (RIFs) from among our full-time employees as part of the FY ’11 budget planning process.

We will, however, continue to see changes within our workforce. We will maintain both the strategic hiring freeze and restrictions on overtime for at least one additional year. We also will continue to limit the use of part-time and temporary employees. Furthermore, some positions will be restructured (through reorganizations, work reassignments, changes in positions, union “bumping,” etc.), and other positions will have their hours reduced. Those employees who are directly affected will feel these developments acutely, and all of us need to understand that these persons will see reductions in their take-home pay and, in some cases, significant changes in their work. At the same time, these measures will place additional demands on other employees. And the entire community will experience some discomfort as services we came to expect in the past are reduced or eliminated. In short, none of these changes is simple or easy. But we must make them in order to avoid additional cuts to our workforce.

Much work remains to be accomplished as we finalize the FY ’11 Operating Budget, which will be presented to the Board of Trustees for approval in May. Some of the challenges we still face include achieving our enrollment targets for fall 2010, while controlling the growth in the financial aid budget and limiting increases to our comprehensive fee in future years in order to bring our “price” and our perceived value into better alignment.

Overall, and I cannot overemphasize this point, we must remain disciplined in continuing to control and reduce expenses across the College. Each of us must understand that we cannot return to a “business-as-usual” mentality. The changes we have made in our operations—and, most importantly, in the way we approach our work—that were prompted by the economic downturn must remain in force, if we are to continue our progress toward reestablishing a sustainable budget that includes appropriate investments in personnel, programs, and our physical plant, as well as in financial aid.

Going forward, the time has come to shift our attention from budget reduction to making the strategic choices required to meet the needs of our students while addressing the primary challenge before us: improving our ability to continue recruiting well-prepared and diverse entering classes in the face of changing demographics, the economic obstacle represented by our high comprehensive fee, and increasing competition for students from schools that are older, better funded, and historically more prestigious. I ask for your support as we continue our work to ensure the strength and quality of our academic and cocurricular programs, access for our students, and affordability for their families.

We will share additional information about the Operating Budget for FY ’11 and answer any questions that you may have at community meetings on February 3 and 4 and at the Faculty Meeting on February 5. But I wanted everyone to have the information presented above immediately.

Finally, let me take this opportunity to thank all members of the Skidmore community for your important contributions throughout this period of adjustment. Our sense of community, our creative problem-solving, and our understanding that we must place the good of the College ahead of our individual interests and desires truly make us the special institution that we are.

Thank you for your attention and your good work on behalf of Skidmore.

Philip A. Glotzbach
President