The e-mail below went out yesterday from Provost Barry Scherr and Executive VP for Finance and Administration Adam Keller. Your AoA Executive Committee renews its call for all alumni/ae to unite behind the College and its administration as they work their way through these very challenging times. Let's help in every way we can.
January 22, 2009
Dear Members of the Dartmouth Community,
Our intent in writing to you today is to update you on the economic situation of the College, as well as the status of our process to reduce expenses while we protect our highest priorities.
Just last week, President Jim Wright reminded us while "the state of the College is strong," we are engaged in the challenge of significantly curtailing expenses to compensate for a decline in endowment income due to the worldwide economic crisis. In a Jan. 12 letter accompanying President Wright's 10-year report, he outlined our priorities: "We are taking pains to protect the strength of our faculty and the overall educational experience of students, to maintain a full financial aid program that preserves access to Dartmouth regardless of a student's financial means, and to minimize the negative impact on our administration and professional staff."
When we last wrote to you in November, our first-quarter decline through September was 6 percent. We now estimate that the investment return on the Dartmouth endowment will show a loss of 18 percent (excluding a current valuation of the private equity portfolio) since the start of our fiscal year in July through December 2008. The market value of the Dartmouth endowment was $3 billion (down by $700 million) at the end of that time period. We continue to fund approximately 35 percent of the College-only operating budget through endowment distributions, and we do not have additional revenue sources that can replace this level of support. Our three professional schools are affected too, with varying degrees of dependence on distributions from the endowment to support their operating budgets.
We anticipate that some of our endowment investments will continue to show losses and that many of our generous donors will be unable to give at the same levels for some time to come. For more detail on the performance of the Dartmouth endowment, please read the interview with David Russ, our chief investment officer, posted at our new Budget Communications website (
http://budget.dartmouth.edu).
President Wright has charged us with leading a process to identify budget reductions of $40 million from a $460 million College-only budget. On an institution-wide basis, including our three professional schools, we expect to reduce more than $60 million from a $700 million budget. We have involved the entire Dartmouth community in a process to carefully identify areas where we can cut expenses while protecting our highest priorities.
We have acted on a number of suggestions for savings submitted by the Dartmouth community (
http://www.dartmouth.edu/~finance/communications/finance_budget/submissions/index.html). Employees suggested that we offer a retirement incentive program, and that we ask employees to consider reducing hours in areas where we may decide to reduce levels of service. We recognize that this is not always feasible for a department or for an employee.
By the deadline last week, more than 70 employees had chosen to participate in the new retirement incentive program. Although we will regret the loss of these long-time employees and their institutional knowledge, these retirements will help us meet our budgetary goals, to the extent that some of these open positions will not be filled, or will become available to internal candidates.
Some employees have spoken with their managers about their own desire for a reduction in hours. The College will help employees who do reduce hours to adjust to the increased health insurance costs associated with that change.
The retirement incentive and reduction-in-hours programs, as well as the freeze on external hiring, are all designed to minimize the potential layoffs needed to reduce compensation expenses. However, despite our best efforts, we have come to the conclusion that, unfortunately, some staff layoffs are inevitable. We recognize that job loss, and, in some cases, a reduction in hours, will cause economic hardship. We are developing a benefits program for the employees who will be directly affected, to try to ease the difficulty many will face through this transition. We also recognize that as a major employer in this region, we have a responsibility to consider the impact our plans may have on surrounding communities.
As we prepare our plans for budget reductions, we continue to work closely with the College Budget Committee, which includes our vice presidents, as well as the Faculty Committee on Priorities, and the Student Budget Advisory Committee. We are now engaged in analyzing the impacts of proposed reductions made by division and department heads. We are tallying the savings from retirements and deferred building plans. We also are evaluating the size of our salary pool and whether or not we will be able to increase compensation.
In response to community suggestions, we plan to select six to eight "cross-departmental initiatives" that might present opportunities for even more efficient operations. We intend to name ad hoc groups composed of people working in these areas to develop comprehensive plans that can be evaluated and reviewed for cost-savings.
We want to keep you informed through this difficult process, and we welcome additional suggestions. Please check the College Budget website (
http://budget.dartmouth.edu) for updates and feel free to use our anonymous form (
http://www.dartmouth.edu/~finance/suggestions/cost-savings-form.html) to submit cost-saving ideas.
Dartmouth is operating from a position of relative strength in our academic and financial position as we approach tough decisions now. These are decisions that cannot be put off, and we intend to move forward to announce many of them in February. However, it is important that we be deliberate and strategic as we proceed to make these difficult choices. Our Board of Trustees will be briefed on the steps we plan to take and will be asked to approve a preliminary FY 2010 budget at its Feb. 6-7 meeting.
We understand that not only is this a challenging time for the College, it is also a time when some of you face difficult personal economic decisions. In order to respond to those most in need, we have expanded the employee hardship loan program (
http://www.dartmouth.edu/~hrs/benefits/loans/index.html). The Employee Assistance Program (
http://www.dartmouth.edu/~eap/) also is available for counseling.
Thank you for your professionalism and your ongoing support while we work together as a community to preserve Dartmouth's academic excellence for future generations.
Sincerely,
Barry Scherr, Provost
Adam Keller, Executive Vice President for Finance and Administration
