Skip to:Main Content

Washington and Lee University

Washington and Lee University

Update on Economic Downturn's Impact on W&L

from President Ruscio, January 2009

In the fall I wrote with an overview of the impact of the global economic crisis on Washington and Lee. I indicated that we would be monitoring the situation carefully and developing models to respond to changing circumstances. This historic economic downturn has affected the University. As we plan for the coming year and beyond, I thought it would be helpful to outline the principles that will guide decisions, our current assessment of the impact, and the steps we are taking.

The sources of concern for Washington and Lee are twofold.

First is the decline in our endowment and therefore the decline in anticipated revenues. Thirty percent of our annual operating revenues comes from our endowment. At its peak in June 2008, our endowment (not including trusts held by others) stood at $723 million. It has declined approximately 18%, although the volatility in the market means the precise estimates change daily. In relative terms, it has held up well, and that is testament to the careful management of our investments. Nevertheless, the decline does translate into a drop in anticipated revenues for the coming year of $6.8 million from this one source alone. It is likely to be awhile before the losses are recouped by gains in the market.

The second concern is the impact of the economic downturn on Washington and Lee students and their families. Some will feel the effects immediately and significantly. Others may feel it in the near future. Others are in the fortunate position of being spared the most serious impacts. But all will experience the anxiety that comes with wondering how to ensure our children receive an education that will equip them for the future, especially in light of these dramatic changes.

Our response to the first concern—the institution's fiscal profile—consists of steps that reflect confidence in our long-term strength and prudent steps for the short term. This year, salary increases for faculty and staff will be modest and below those in our recent history. In selected areas of our operating budget, such as travel and printing, there will be cuts, although for the most part departmental budgets will simply remain flat. We will not add new positions, and some elective capital projects (those not necessary for safety and health and those not funded from external sources) will be put on hold.

The good news, however, is that the wisdom of a decision made a few years ago is bearing fruit. The trustees and administration established reserve funds for unanticipated shocks to our budget. We have been building those funds over the past seven years. Next year, we will simply not add to the funds. This step will enable us to make up much of the loss of revenue caused by the endowment decline. The result is that we will be able to maintain our core programs and continue the extraordinary progress we have been making toward our strategic plan goals.

To the second concern—the impact on our families—we will have only a modest tuition increase. That precise figure awaits the approval of the board at its February meeting, but we are able to say that for undergraduates it will be lower than the 5% projected in our long-range planning for the 2009-2010 year. We have also prepared ourselves for increased demands on the financial aid budget. As you know, need-based financial aid is one of our highest strategic planning priorities. Before the economic downturn, we had begun to shore up the resources devoted to ensuring that exceptional students could attend Washington and Lee regardless of their financial circumstances. We remain committed to that principle. Some of the belt-tightening measures we have taken elsewhere are in anticipation of additional demand in the financial aid budget.

We know the year ahead will not be an easy one. But we feel exceptionally fortunate. The generosity and devotion of our alumni, the dedication of our faculty and staff, the careful stewardship of our trustees—those are the most precious resources we have, and we have them in great abundance.