April 23, 2010

Dear Members of the HWS Community:

Over the past year many alumni, alumnae and parents have thoughtfully asked how the Colleges are weathering the recession. This letter serves to provide some background and an update on our efforts to navigate the current economic challenges.

Like every sector of our economy, higher education has been significantly affected by the economic turbulence of this complex period in our nation’s history. Hobart and William Smith Colleges have not been immune to these events and we have worked hard to adhere to our mission of providing a liberal arts education grounded in the values of equity and service preparing our students with rich curricular opportunities and significant co-curricular experiences.

Thanks to the steady, expert stewardship of our Board of Trustees, we entered this recession from a position of relative strength with a history of balanced budgets, low debt and good philanthropic support. But the impact of these fiscal times has been evident on our finances and I offer the following background on three major drivers that shape our budget: the endowment, philanthropy and financial aid.


The endowment is vital in providing critical support of scholarships and the operating budget. As a result of the generosity of our alums and parents over many years, the Colleges’ endowment peaked at $180 million in mid-2008. Fluctuations in the market caused the endowment to suffer a loss dipping to $146 million in mid-2009. Through prudent management by our Trustees Investment Committee, the endowment has recovered to $158 million in early 2010. Nevertheless, our diminished endowment proceeds combined with New York state law that prevents spending the earnings from any endowed funds whose market value has fallen below its original book value has posed significant stress on our budget.


In the past decade, the support of the Annual Fund and Campaign for the Colleges has been integral to our momentum. After several record-breaking years of philanthropy, the past fiscal year has been very challenging. While the rate of participation increased modestly in the Annual Fund, the amount of most individual contributions remained flat or decreased. Given our rising costs and expectations, this result puts added pressure on our budget. As we close in on the final quarter in this fund year, we are able to report that we have added nearly $11.5M to Campaign for the Colleges as we seek to reach the newly established historic $200M goal. Increased philanthropy is critical in this period of budget uncertainty.

Financial Aid

The recession has had a dramatic impact on the financial lives of our students and their families. In the current academic year, we have seen a 14% increase in our financial aid budget resulting in a $2.5 million increase required to assist students attending the Colleges.

The result of this recession, then, is a series of sustained pressures on our budget that have created deficits for the first time in many years. Like many of our peer institutions, we have taken immediate actions to curb spending across all divisions and departments. Recognizing the strain on students and families, last year the Board of Trustees approved the lowest tuition increase in 44 years and, in an effort to provide relief to our operating budget, froze salaries for one-half of the year while also limiting faculty and staff hiring.

Last fall I created a Budget Advisory Task Force comprised of faculty, staff, students and a Trustee to enlist their counsel on steps that could be taken in the near term to substantially reduce or eliminate projected deficits that had the potential to reach as high as $5 million. We placed a priority on measures with immediate effects and those that are reversible once economic circumstances improve. Overall, we sought to minimize the impact of potential cuts on our students’ educational experience.

Later this month I will present the Board of Trustees with a plan for a balanced budget going forward. I am grateful to members of the Task Force who provided helpful perspective on how we can achieve the financial equilibrium essential for our long term future. These are challenging times for all organizations in the non-profit sector as well as the private sector. We are all required to demonstrate responsible actions to address the effects of this recession and chart a financial plan that addresses this impact. At HWS, we have a strategy that involves budget limitations as well as aggressive admissions and advancement work.

While the budget deficits have required considerable focus, we have also launched a strategic planning process during this calendar year to consider our long term aspirations. Previous strategic planning efforts at HWS have been essential in guiding the Colleges and adding to our momentum. Already, groups of faculty, staff, students and trustees are meeting weekly to create a roadmap for innovation and continued advancement over the next five years.

In all of this work – both in deficit reduction and strategic planning – I am bolstered by the knowledge that the Colleges have successfully persevered and, indeed, thrived in the face of past economic and societal changes. Hobart and William Smith have endured world wars, economic droughts and perilous financial times with fortitude and sustained momentum. In these critical periods, the Colleges entered into unique partnerships with other institutions, expanded or changed the curriculum, and instituted fiscally prudent measures. No idea was considered too ambitious, no innovation too bold.

Our ability to navigate these challenging times will be enhanced by a determined focus, aggressive expenditure restraint, a collective level-headedness, compassion and civility in our dealings, and a sustained commitment to our students.

The history of the Colleges demonstrates that challenging times have always seemed to forge a stronger institution, stronger loyalties and a deeper sense of commitment.

With every best wish, I remain


Mark D. Gearan