November 14, 2008
I write today to provide an update on the Fall meeting of the Board of Trustees held this past weekend in Geneva. As you would anticipate, a considerable portion of the Board discussions centered on the global economic crisis and its effect on the Colleges.
Since the Trustees meeting was held in conjunction with the Centennial celebration of William Smith College, there were many reminders of our proud past during the weekend. Indeed, in his history of the Colleges, Warren Hunting Smith noted that Hobart and William Smith survived world wars and perilous economic times with “tenacity.” For decades, the dedicated members of the Board of Trustees have demonstrated careful and prudent stewardship of the institution and this conservative approach has served us well.
In many ways, the Colleges today are in an enhanced position with several years of balanced budgets, a strong balance sheet and a recent Standard and Poor’s “A” rating reaffirming our economic position. But we also know that the current economic downturn and related uncertainties will impose severe strains on colleges and universities and Hobart and William Smith will not be immune to these harsh realities.
In their deliberations, the Board of Trustees were clear in the imperative for us to remain true to our mission of providing a world class liberal arts education to talented students. We will continue to steward our resources carefully and honor the trust reposed to us by parents in sending their sons and/or daughters to Hobart and William Smith.
The Colleges operate on three sources of revenue that are all likely to be affected by the economic crisis:
Endowment. An endowment spending formula of 5% provided $6 million to last year’s budget (8% of our total budget). While our endowment outperformed the S & P 500, we suffered a decline of 15% for the calendar year as of September 30, 2008.
Student Charges. Revenues from tuition, room and board comprise 78% of our annual budget. With current economic uncertainties and anticipated job losses nationwide, we need to prepare for the challenges families will face in financing education and plan accordingly.
Philanthropy. The contributions from donors and foundations are a critical component of our operating budget. Last year $2.9 million was given to the Colleges’ Annual Fund. We are hopeful that our loyal alumni and alumnae will continue to support our efforts. We also recognize that foundations and state governments are experiencing economic strains as well that may have an impact on their contributions to higher education.
At the Board meeting, I outlined several steps the Administration has taken to slow expenditures and scrutinize budgets given new economic realities. Measures undertaken to control spending include steps that will affect both this year’s budget and beyond. We believe that these measures will not negatively affect the student experience, but result in critical savings in these uncertain times:
We will continue to actively fundraise for the remaining priorities of the Campaign for the Colleges – namely, the athletics project and performing arts initiative. However, given the uncertainties that exist regarding the extent of this economic downturn, it seems prudent to pause and ensure that funding commitments are more extensive before construction begins. Fortunately, we have been able to significantly enhance our campus facilities in recent years thanks to the generosity of our alums.
Over the course of this past weekend, I was impressed and grateful for many things.
I am confident that Hobart and William Smith will endure these challenging times with the tenacity exhibited by past generations. Like our predecessors, we will rise to the task and advance the institution we love. We will be responsive to the economic realities while keeping the welfare of our present and future students foremost in mind.
As always, I trust you will not hesitate to contact me if you have any questions on this or any other matter of concern.
With every best wish, I am
Mark D. Gearan