Q. How has the stock market decline affected the endowment? How does this decline affect the University budget?
For the first seven months of our fiscal year (beginning July 1), the endowment has lost approximately 19 percent of its market value. Our current forecast is that this will mean a decrease of $6.8 million that we would have had from the endowment in our 2009-10 operating budget. As significant as this decline is, we believe that our endowment fund managers have done well thus far to minimize the impact that we have felt.
Q. Aside from the endowment, what are other factors that will have an impact on the operating budget for 2009-10?
In addition to endowment income, the University’s primary revenue sources are student tuition and fees, gifts to the Annual Fund, interest on short-term investments, distributions from externally held trusts and income from auxiliary enterprises. At this point, we are seeing less income from short-term interest rates and the Annual Fund is running about 8 percent behind its goal after averaging increases of 10 percent in each of the past four years. We have set tuition and fees for 2009-10 at 4 percent higher than this year for undergraduates and 5 percent higher for law students. These figures are both lower than we had projected in our long-range plans. At the same time that we are setting these tuition figures, we are also increasing the financial aid budget by 18 percent to maintain our goal of providing access to qualified students who want to attend.
Q. What will be the impact on salaries and benefits for 2009-10?
Employee salaries and benefits account for around 60 percent of the total annual budget. We have established a salary pool for staff and faculty of 2.9 percent. No full-time employee will receive an increase of less than $1,000. In this environment, we believe it is important to continue pursuing our stated strategic goal with regard to providing compensation competitive with peer institution and to competitors within our market. For faculty, the Lenfest Challenge provides additional funds to supplement salaries. For administrators and staff, a pool of $150,000 has been set aside to address equity issues.
Q. Will employee benefits be affected?
We do not expect any changes in the benefit programs for 2009-10. We remain determined to make progress on the Work-Life Commitment that was announced in the fall. Elements of that commitment include a Wellness Program, which is now underway, and plans for after-school and summer program for children, which are also being pursued. We are moving forward on other elements, including work being done by Mercer consulting and a campus climate survey that will be administered in March. Details on the Work-Life Commitment and Planned Initiatives can be found here.
Q. Will any new positions be funded?
Only positions that have external funding will be added for 2009-10.
Q. What will be the impact on departmental budgets?
Departmental budgets for 2009-10 will not increase over the 2008-09 levels. In fact, we are asking all departments to decrease budget amounts in the following categories: travel (-12 percent), postage (-10 percent), library acquisitions (-15 percent), entertainment (-12 percent), printing (-10 percent), and subscriptions (-15 percent).
Q. How will planning for capital projects be affected?
All internally funded capital projects are being delayed with the exception of those that meet commitments for faculty hires, critical equipment repair and replacement, and safety. We do expect that the Newcomb Hall renovation and restoration project will be able to go forward with external funding support. In addition, the W&L Hillel House will move forward in 2009-10 if we receive the final private gifts to match the project cost. The annual capital budget (the portion underwritten by University operations) will be trimmed by 25% in 2009-10.
Q. How is the economic crisis affecting the admissions and retention of students? Is there any effect projected for current enrollments, applications, and financial aid needs?
We did not experience unusual attrition between the fall and winter semesters. The Office of Financial Aid has worked with some families who will require greater assistance because of changes in their financial circumstances. At the same time that we increased tuition for 2009-10, we also increased the budget for student financial aid by 18 percent which includes a contingency fund to assist families.
The admissions picture looks positive. Early decision applications for the Class of 2013 were about the same, and we have admitted slightly more than half the class (237) through Early Decision. Another extraordinarily strong group of Johnson Scholar candidates will be on campus in March. Regular admissions applications are still being counted, but preliminary estimates suggest that applications are tracking about the same as last year when we had a record number. We will not know the number of students actually matriculating until May, but the number of applications is a good sign of strong enrollments for the Class of 2013.
Q. How is the economic downturn affecting giving to the University?
W&L continues to benefit from the generosity of alumni, parents, and friends. Support of W&L is not immune from economic declines and uncertainty and drops in the stock market. At the very beginning of a new seven-year campaign, the University continues to show increases in new gifts and pledges that tend to benefit the University in the future. We do not anticipate at this time an impact on the ultimate success of the campaign expected to end in 2015.
Donations to the Annual Fund go to the current year operating budget. At present, donations to the Annual Fund are running about 8 percent behind last year, but several major initiatives are underway to reverse that trend, including a special challenge issued by the trustees who will match gifts, dollar for dollar, of new donors or of continuing donors who increase their support.
Q. What can we do as a campus to help the financial situation?
In the current environment, all cost savings help the University avoid the need for some of the measures that we have seen peer institutions adopt, including layoffs, salary freezes, and program reductions.
We are undertaking an audit of all our printed material in efforts to identify potential savings beyond the budget reductions in that area. We waste enormous amounts of paper. Distributing and using documents in electronic form and being more prudent in printing and copying can help to control these costs. In addition, measures that have already been adopted on behalf of our sustainability initiative will be helpful as well. We have altered thermostat settings in buildings where that is possible. Other obvious ways to realize savings are by turning off lights and computers when they are not in use and by installing energy-saving bulbs as replacements.
Q. What are prospects beyond 2009-10 if the downturn continues or gets worse?
The Board of Trustees has asked us to develop planning scenarios going forward, and we have looked carefully at various contingencies. This analysis is ongoing, but decisions that have been made in the recent past have given us some reason for guarded optimism. As President Ruscio has indicated in several of his communications, the emphasis the University placed on building endowments for financial aid and in securing competitive compensation for faculty and staff has played a critically important role in the University’s ability to respond in this environment. We will continue to protect the reserve funds that have been established since 2001 and will also continue to focus on the University’s core mission.
Q. Will it make any difference to the overall budget picture if individual departments can find savings in the 2008-09 budget between now and June 30?
Absolutely. Our message is to spend wisely. If all departments or even most departments were able to find some savings in the current budget cycle, it would have an impact on this year and the future. If we run a deficit this year, funds to cover that shortfall would come from the reserves, and our ability to manage those reserves is a key to future success in this environment.