A Message from President Creighton on Budget Planning
Dear Members of the Mount Holyoke Community,
I would like to take this opportunity to update you on the status of our budget planning. I am heartened by the constructive spirit and the many suggestions we have received from members of the community.
Our revenue comes primarily from three sources: about 63% from tuition, room and board (minus financial aid), 17% from annual fund gifts and grants, and 20% from endowment income. This year, primarily because of increased financial aid costs and decreased gift giving, we are projecting a budget deficit of $2 million, a gap we will work to close thorough a variety of measures. While it is too early to know any definitive numbers for 2009-2010, we do have some “leading indicators.”
- In admission, our application total to date is slightly lower than last year’s, but still well over 3000. This is a positive sign in light of the uncertain economy and the sudden declines a number of peer institutions have experienced. Still, we won’t have a sense of what the Class of 2013 will look like until April or May. We do know that families are feeling great financial pressure, which we anticipate will affect requests for financial aid and our ultimate enrollment.
- More immediately, we are delighted to welcome 80 new first-year, transfer, and Frances Perkins students who just entered the College this semester. While spring enrollment numbers may yet evolve, we have not seen sizeable attrition to date: another positive sign.
- In development, this year’s Annual Fund is currently 14% behind last year’s record-setting performance, and we are likely to fall considerably short of our $8.8 million goal. We are redoubling our effort to reach out to alumnae who have supported us so generously over the years. The Development Committee of the Board of Trustees recently held a special meeting and reviewed a number of special solicitations that will be sent early in the spring term.
- The endowment performed very well in FY2008 and reached a level of almost $660 million. Since that time, it has dropped to just over $500 million as of December 31, 2008. While this reduction will have a significant impact on the budget over time, the 2009-2010 budget will not be negatively affected since our spending policy uses a three-year average market value.
So while each of our revenue streams is adversely affected, the resourceful and tireless work of our dedicated corps of staff and volunteers is making a positive difference.
The Budget Process
We will follow our normal process over the coming months to develop our budget for 2009-2010. This means that the Senior Staff and I, in close consultation with divisions and departments, will be forecasting, reviewing, and adjusting institutional expenses while doing our best to anticipate revenues. With so many variables on both the expense and revenue sides (for instance, fall 2009 enrollment, health insurance rates, energy costs, just to name a few), it is too soon to know how much of a budget deficit we will need to close, let alone the specific steps we will take to do so. This will be an iterative process that will last into April when we must submit a budget to the Board of Trustees for their review and ultimate approval in May.
Let me articulate what I believe must be our guiding principles as we proceed through the budgeting process:
- We must maintain the academic strength of Mount Holyoke College, now and for future generations.
- We must be sensitive to the needs of all members of our community, but particularly of those who may be the most financially vulnerable in the current economic climate.
- We must look for efficiencies through greater cooperation and restructuring of our work including eliminating nonessential work.
- We must understand that these are unusual times, and we may employ temporary, unusual actions that might not be sustainable in the long run.
- We must, if the financial situation worsens over the course of the next year, take an even harder look at cost-cutting and revenue-enhancing opportunities for subsequent years.
Community Engagement and Communication
We welcome your creative and constructive ideas to help our planning, particularly in areas you know well within your own departments and divisions. We are encouraging heads of units to engage their colleagues in thinking these matters through. The faculty and student planning and budget committees will meet regularly with Vice President Mary Jo Maydew. Please continue to send along your ideas–which we will carefully consider as well as post on the Web. We, in turn, will keep you updated on how the budget development is progressing. To these ends, let me note the following:
- On Wednesday, February 11, the budget will be the central item of discussion at the faculty and OPC regularly scheduled meetings.
- On Thursday, February 12, at 2:00 Mary Jo Maydew and Jan Albano will hold a second open forum on the budget in Blanchard Great Room.
- Community members may send suggestions to firstname.lastname@example.org. Submissions will be compiled on the Web and will be updated regularly on the Budget 2010 page.
- Mary Jo Maydew will provide regular updates on the Financial Services blog about the budget process. She will be posting new entries at least every other week to review our progress toward a final budget and to address issues of community interest.
Of course, the buck stops with the senior administration who will finalize the budget in mid-April and with the Board of Trustees who will be asked to approve the fiscal 2010 budget at their May meeting and who have ultimate responsibility for the fiscal welfare of the institution.
Our Current Thinking on the Budget
While it is still too early to make firm decisions about items in the budget, here is a summary of our thinking on several key areas.
- Financial Aid. We will maintain our financial aid commitments to current students, and we will do all we can to provide comparable aid packages to incoming students.
- Salary. It seems likely that salary increases this year will need to be minimal or nonexistent. We have received many compelling ideas from faculty, staff, and trustees alike about how to weight any salary increases toward lower-paid employees. We hope to avoid salary reductions, since we do need to consider the long-term competitiveness of our salary structures.
- Benefits. Our hope is to maintain the plan designs and level of College contribution for our benefit programs. We are in the midst of a complete review of our employee health care program, in conjunction with the other private colleges in Five Colleges, Inc. While the outcome may reduce the size of increase in costs, some increase is expected.
- Positions. Our goal is to minimize layoffs, although we are not confident that they can be avoided entirely. We are working diligently to make the most of every position vacancy, including those that might occur through voluntary retirements or reductions in schedule. At the same time, we are trying carefully to ensure that individuals who may be in positions that could be reduced have the best opportunity to be placed elsewhere in the College in a vacant position that must be filled.
- General spending. From the many communications to me and other College leaders there is clearly a desire on the part of the community to be careful and frugal in our expenditures: fewer entertainment events, fewer paid-for meals, less paper, more electronic communication, etc.
- Revenue enhancement. We are also looking for opportunities for improving revenues, as we have with the recent expansion of our post-baccalaureate program. These include the active exploration of Five College certificate programs, more outside use of our conference center and other Five College initiatives.
Again, I want to thank all of you for your many contributions to our College and community. As I have said before, I have enormous confidence in our ability to work together through difficult times to sustain this wonderful institution.
Joanne V. Creighton