Current Economic climate and Bates: A letter from President Hansen
To the Bates community,
As most of you know, the Bates Board of Trustees gathered on campus this past weekend for our regular October meeting. One of the important topics of discussion was the current state of the global economy and the impact on Bates College and its students, faculty, and staff members.
We are all grateful that Bates has not yet experienced any of the immediate disruptions that some of our peers have felt. But we know that we are not immune to declining markets, higher costs of borrowing, the potential impact on giving, and the economic effects on our students and employees and their families.
While so much remains unknown about the extent and duration of the situation today, I want to let you know how the Trustees and the administration of the College are working to monitor and respond as appropriate to the various challenges we may confront.
In this year’s budget of $87.7 million, $12.5 million in revenue came from the investment earnings of our endowment. The amount we spend annually from the endowment is a percentage of its total value (which varies with market fluctuations). To smooth out the effect of market variations, we calculate our spending based on a 13-quarter average value. This means that the effect of the recent downturn for all investment categories will have only moderate implications for this year’s budget, but may have more significant and lasting consequences going forward. We will be taking this factor into account in our budgeting for next year and in our multi-year financial plan, which is revised annually at about this time.
Our endowment is managed by an active trustee Investment Committee composed of financial and investment experts whose strategies have ensured excellent earnings in recent years. In the current situation, as always, the Committee has been working closely with the Treasurer’s office and with our financial consultants, meeting frequently and taking careful steps to balance competing objectives: protecting our current revenues and protecting the value of the endowment for future generations.
Budgeting and multi-year financial planning
We continue to gather information in this volatile period so that we can identify all the possible ways in which the economic situation will affect our budget planning through two processes that have already begun: building the budget for next year and updating our 10-year financial modeling. Areas to monitor include the financial resources of our students and their families, which can certainly have an impact on our financial aid budget and planning. We consider this issue a top priority and will make every effort to preserve our ability to meet the demonstrated need of all admitted students. Gifts and grants to the College, another important source of revenue, may be reduced in both number and amount. We will monitor the gift and grant opportunities, but we will also redouble our efforts to ask everyone who can to help us. We will be particularly interested in support of the Bates Fund, which provides the annual, spendable gifts that currently support roughly 5 percent of our operating budget.
We can use the time we have now to examine all aspects of the organization and to consider where services, programs, and structures could be modified, if necessary, to maximize efficiency, so that we can focus on our most important priorities.
The timing of our multiple on-campus planning processes should serve us well. In the coming weeks, as we continue our routine financial planning with the goal of preparing updates for the Board in January, more information about many factors will become available. Our special planning efforts—through the campus-wide process launched last year and through the campus facilities master planning work ongoing since 2003—are also very important both as ways of widely discussing our priorities and as sources of exciting ideas for robust fund-raising efforts in the near future.
We will continue to communicate with the campus when we have new information and periodically during the planning processes, with a goal of promoting as much transparency and inclusiveness as possible. Faculty, staff and students who serve on the Budget and Finance Advisory Committee will be involved, as usual, in discussions about the budget for fiscal year 2010 as well as the 10-year financial plan, and I will urge the Committee and its members to seek additional ways of reporting to and hearing from the campus community.
Priorities and principles
As I have said in previous messages, a few high-level principles, consistent with our practice and policy to date, will continue to inform us during this time of heightened financial concern for both the College and its constituents:
- Providing our students with the best educational experience is our most important priority, and we are committed to using our resources wisely and strategically to sustain our leadership and reputation for academic excellence.
- To this end, and in accord with our founding mission of expanding educational opportunities, we seek to attract and retain the most talented students regardless of financial need, and we believe that all students learn best in a richly diverse and inclusive community. Access and affordability, therefore, continue to be vital College priorities.
- We have good management strategies and policies in place. Bates has a proud history of prudent financial stewardship, overseen by the dedicated Trustees who have exercised their fiduciary responsibilities through many financial downturns and our highly professional administrative staff. We have always worked hard to use resources wisely and avoid extravagance or risk. The current environment for higher education is extremely complicated and rapidly changing, so we will not make any policy changes without our characteristic concern for due deliberation, careful analysis, and informed consideration of options and consequences.
I recognize that these are times of stress and concern for all, but I want you to know that the Trustees and I have every confidence in the strength and perseverance of this institution and the entire Bates community.