Letter to the Union Community
November 5, 2009
Dear Members of the Union Community,
I am writing to update you on our ongoing efforts to resolve shortfalls in the College's operating budget brought on by the downturn in our nation's economy. Our challenge remains significant, since the weakened economy has not only affected our endowment's performance, but has posed challenges to our fundraising and admissions efforts.
Final results from the fiscal year ended June 30, 2009 show that our endowment was down approximately 24%, which is favorable relative to the 30% decline we had assumed for budget planning purposes. This decline will impact our operating budgets for the foreseeable future. Given the magnitude of this loss and the uncertain nature of the current economic recovery, we do not expect the endowment to return to its record level any time soon.
Despite the fact that our budget model was conservative in estimating total enrollment, the size of the incoming class and upper-class transfers fell short of our expectations. At the same time, the financial aid of our families increased and appeals for aid increased 20% from the previous year. Additionally, while we witnessed a late-year rally last spring in giving, we nevertheless ended the year below our annual fund target.
As we develop future budgets, our deliberations will focus largely on predicting how the above mentioned major budget drivers: endowment, enrollment, financial aid discount rate and annual fund will fare in the current environment.
I should add that as we plan ahead, we must be cautious in relying too heavily on tuition increases as a way of solving our budgetary challenges. Our comprehensive fee surpassed $50,000 for the first time, as it did at a number of our peers. In light of the weak economy, there is no question that the price of a private college education has become a significant issue for many families.
All of these factors prompt us to continue to seek cost-savings as we balance budgets for the coming years. As I indicated in my last letter regarding the economy, we have already instituted savings that will help us achieve this goal. However, we have more to do and we seek cost-savings without turning to layoffs as many other institutions have done.
After discussions with my senior staff, and after further consultation with the Planning and Priorities Committee and the Benefits Committee, we have decided to reduce the employee benefits budget by approximately $385,000. The Benefits Committee initially was asked to identify $500,000 in potential cost reduction measures. Because we have decided to leave the tuition remission benefit unchanged, pending a thorough review of the benefit, only $385,000 of the possible reductions identified by the committee are being implemented.
A portion of this reduction, in the amount of $100,000, will be absorbed by the College through increasing the deductible for our large claim secondary medical insurance plan, also known as stop loss insurance. In addition, we will be implementing a three-year cliff vesting requirement, which means that new hires will not benefit from our retirement plan until they have completed three years of employment with the college, at which point they will retroactively receive retirement benefits for their second and third years of service. The remaining cuts will be in the form of a decrease in the College's contribution to medical costs as well as elimination of the dental opt-out credit, a required 5% contribution for basic dental coverage, and a 5% decrease in our contribution for retiree health insurance. Lastly, we will be requiring that all maintenance medications, whether generic or brand name, be filled through the use of a mail-order or CVS pharmacy.
Though all of us wish that such measures were unnecessary, I assure you that they were given very serious thought by the Benefits Committee, the Planning and Priorities Committee, and the senior staff. The potential effect of these cuts on employees with household income below $67,731 will be mitigated through our medical premium rebate program. More complete information about these changes will be forthcoming from the Human Resources office.
The Planning and Priorities Committee will soon ask the Benefits Committee to study and report on our tuition remission benefit. We all understand the importance of this benefit to employees and want to take great care before considering any changes. The Benefits Committee's analysis is expected to be completed late spring term, at which point it will be reviewed and discussed with the Planning and Priorities Committee.
In addition to the reduction in the benefits budget, effective next fiscal year, the Athletics Department will reduce its budget by $105,000 through measures ranging from the elimination of part-time assistant coach positions where vacancies are anticipated, to the implementation of savings in our student athlete insurance plan, to reductions in cell phone usage and printed publications.
Dining Services will close the Starbucks venue every weekend, which will save approximately $20,000. This change has been discussed with the student dining committee and will come from labor savings that will not result in any job losses. Further, after a successful transition which began on August 15, our night cleaning shift has been eliminated, resulting in a savings of $61,000. Elimination of the third shift (without any job losses) has enabled us to take advantage of a team approach to cleaning, as well as improving the safety of our employees who often worked alone in buildings late at night.
Working with the Planning and Priorities Committee, we expect to identify more than one million in cost savings before the close of this fiscal year. To assist us in this process, we will be examining the budget reductions that each vice president has identified but not yet implemented, as well as the reports of the nine "study groups" that have been working over the past few months to analyze certain expenditure areas identified as possible cost savings opportunities.
Throughout this process, we are fortunate to have a strategic plan to guide us, and in accordance with that plan, we remain committed to maintaining the quality of our academic programs and student life on campus. I will continue to update you on our progress as the year unfolds. We will be holding two open meetings in February, including a panel discussion with the vice presidents, to explain the full nature of our challenge and to answer any questions that may arise.
I am deeply grateful to the Union community for its understanding and for helping us work through these troubled economic times without losing sight of the values and priorities that make this institution special.
Stephen C. Ainlay, Ph.D.