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Budget Update: Divisions Working with Varied Cost Reduction Goals for '98-'99

Department and division heads preparing budget proposals for the 1998-99 fiscal year have been asked to reduce their expenses by between 2.5 and 7.5 percent, according to chief financial officer Mary Jo Maydew. The reductions are part of the College's effort to trim the next fiscal year's budget by $1.6 million. These reductions, in turn, are one part of the College's overall goal of achieving the $5 million in total cost reductions expected to be needed to reach financial equilibrium by fiscal year 2002-03.

Budget materials were sent to academic and administrative departments in mid-December. Maydew says the budget reduction goals varied by division in recognition that opportunities for cost reduction differ from one division to another. The range of goals represents an effort to "create an equal level of difficulty among the divisions, whether the goal is a 2.5 percent reduction or a 7.5 percent reduction," she said. Areas that have already reduced costs about as far as possible without compromising essential services have lower percentage reduction goals. Maydew noted, "It would be shortsighted to make cost reductions that damage the quality of the programs that make us competitive."

"The only way this kind of cost reduction works--and we do it very successfully at Mount Holyoke--is for departments and divisions to think at the institutional level all the time," said Maydew. "It's got to be 'what's most important to the institution and how can I contribute to that?' " She also noted, "Although it's easier to deliver good service with more resources, just because something has more resources doesn't make it better. For us to direct resources to the College's most strategic areas, we must break the automatic assumption that fewer resources means lower quality. We must continue to find ways to provide excellent programs and services as cost effectively as possible. And this means that there will things we cannot continue to do."

The $1.4 million misprojection in the amount required to meet this year's financial aid needs will not change the cost-reduction goal for the coming fiscal year nor keep the College from meeting the financial goals spelled out in the Plan for 2003, Maydew noted. "Once the budget requests have been returned, we will work with the budget as a whole and get it into as much balance as possible," said Maydew, noting that the Plan for 2003 does not project a balanced bottom line in the 1998-99 fiscal year.

At the same time cost reductions are being taken, the College will also reduce its reliance on endowment funds, increase its net tuition revenue (the partially need-sensitive admission policy begins in 1998), add funds for deferred maintenance and equipment replacement and repair, and create a fund for new initiatives. All of these are elements of reaching overall financial health.

1998-99 Budget Timeline

Budget conferences:
will continue throughout January

Budget requests due
from administrative division heads: January 23

Budgets requests due
from academic division heads:
February 13

Final budget complete:
College budget will be ready in early April for trustees
to review and approve at their May meeting.