President’s Update on Budget Issues
February 3, 2009
I want to report on the recent meeting of the trustees, who are wrestling with the impact of economic changes on the College, much as we all have been. They were grateful to have their own deliberations informed by the range of recent conversations with faculty, students, staff and alumni. We all appreciate that none of us is immune from the current financial crisis, but that we are all strengthened by working through these challenges together, as we will continue to do.The board remains strong in its belief in the mission and values of the College, and appreciative of the collaborative efforts of all of us to safeguard Amherst’s qualities. Despite the challenges we face, the board is eager to ensure that we continue to build on our core strengths. The trustees were encouraged by administrative plans to reduce the College’s projected budget for next year by roughly ten percent, and by the expectation that we can find ways to do this without diminishing the quality of our faculty’s teaching and research, the quality and diversity of our student body and the quality of our staff.
At this time in our planning, we anticipate that the most significant means of adjusting our budget for next year will come from a salary freeze, a reduction in the number of visiting faculty, and additional revenue from 100 more students (over four years). Planning for these changes now will give us time to check our progress and assess further options as the situation develops. The board remains acutely aware that a freeze of the salary pool will not be easy for anyone. We will return to this issue at the board’s April and May meetings, and I promise to keep you all updated on the progress of these conversations.
In the meantime, the trustees are eager to further bolster the strengths of our faculty. They are loath to completely forgo the opportunity to hire new faculty, particularly at a time when many other peer institutions may not be competing with us for those hires. The board is therefore encouraging us to plan for growth in the faculty above replacements. And because trustees believe that faculty should pursue scholarship and creative work at the highest level, and understands that many have made plans based on expectations of the new sabbatical policy, they have agreed that Amherst will guarantee 100 percent sabbatical pay for all eligible faculty, including senior faculty, for 2009-2010.
The trustees are also mindful, as are we all, that we need to ensure a longer term planning process that can help us think about the options and choices we are facing. There is a real possibility that the economic conditions may not soon improve, though of course no one knows for sure. Even with the above cost savings, the College would see a markedly increased rate of spending from a smaller endowment. In the near term, the board believes that such an increase in our spending rate is appropriate. However, the trustees aim to set parameters for how quickly we need to ensure that the spending from our endowment returns to levels that sustain the value of the endowment for future generations. Some trustees will come to meet with campus committees in mid-February to help flesh out those planning goals. In the meantime, Greg and I are meeting with the Committee of Six, CPR, CEP, FCAFA, the ACPP, students and others to begin to think about a planning process that weighs our options. This planning process will integrate the views of these committees. And in this process we will need to put "everything on the table," and to have some very hard and honest conversations about trade-offs we would prefer not to make.
Please understand my and the board’s commitment to not make choices that could do fundamental harm to our work or to our community. That said, we must prepare ourselves for even more difficult circumstances than we now face, so we have an outline of priorities that we can apply to unfolding economic realities. This preparation will put us in the best position to make informed decisions, if and as those prove necessary, while retaining our core commitments to our students and to the quality of the education we provide, testing all of our choices against that metric.
The trustees also discussed the likelihood that Amherst will issue taxable debt to help ensure the cash liquidity we need in coming months, as peer institutions have done. Our expected major capital projects remain under review while planning continues, with the understanding that addressing the inadequacies of the Merrill science center remains most pressing. The College will need to issue additional tax-exempt debt to cover the cost of these projects, as we have always done for sizable capital improvements.
These remain difficult times and I know we are all concerned. But I also see a great spirit of community—a coming together to engage with these issues at Amherst. The College entered the current economic climate in a stronger position than almost anyone else, and we will return to better economic days also stronger. I remain grateful for your advice and wisdom and spirit of collaboration as we work our way through the current difficulties.