Update: Economic Climate and Bates
In a second letter to the Bates community, President Elaine Tuttle Hansen provides more insight on the College’s financial management and planning strategies, and the “people, structures, habits and values already in place to guide us.”
Dear Colleagues and Friends of Bates,
As the unprecedented economic upheaval and uncertainty of the world today continues, I know that we are all anxious about the future, for individuals and the institutions within which we live and work. Although no one can foresee the outcome of the current situation, I want you to know that the College is making every effort possible to manage our budget and finances so that Bates sustains its strong position. We are focused on protecting our most important resource: our faculty and staff, together with our current, former, and prospective students and their families. Fortunately we have Bates people, structures, habits and values already in place to guide us successfully through good times and bad.
In the weeks since I last wrote to the campus, members of the senior administration and the Treasurer’s office have begun working intensely and collaboratively on both the budget for next year and our multi-year budget plan. As many of you know, we had already decided to adjust our annual budgeting cycle so that we begin to prepare for the next fiscal year (in this instance, FY 2010) in the fall. This decision is timely, as it allows us more opportunity to understand and then adjust, thoughtfully and strategically, to the current and anticipated effects on our revenues.
Like all of our peer institutions, we know our endowment revenues will be down next year and, we expect, in at least the next few years to come. Our endowment spending policy, as I have explained, is designed to spread the effect of both positive and negative market conditions across several years, which will help us to navigate the immediate situation and also give us more time to prepare for changing conditions whose effects are as yet unknown.
Fundraising is another key source of revenue for the College. While these are unprecedented times, research and experience indicate that there is very little correlation between economic downturns and decreased giving. With that in mind, I have asked our development staff to keep apace with their efforts to meet our core constituents and move toward goals that were set prior to the current global crisis. In addition, we are asking our alumni, parents, and friends to consider, if at all possible, increasing their commitment to the Bates Fund. At a time of under-performance in our endowment, it is increasingly critical that we meet or surpass our goals, so that we can support our budget with the expendable dollars realized through the Fund.
Even as we redouble efforts on the revenue side, we must also take a hard look at expenses. In a recent memo calling for budget requests for next year, we have underscored the four high-level and closely inter-connected priorities I outlined when I wrote to you a month ago: Within the resources available, we must work to support as strongly as possible the quality and innovation of our academic programs, the availability of financial aid to promote our goals of access and affordability, faculty and staff compensation, and annual recurring capital maintenance. To ensure all these priorities in a time of uncertain revenues, next year’s operating budgets, in the aggregate, must at least remain flat. Since we must also plan for uncontrollable potential increases in costs such as essential travel, food, utilities, and insurance, we have also asked all areas to reduce their operating budgets where possible, seeking further efficiencies and thinking about what can be deferred. We welcome all of your good ideas, no matter how small they seem, about immediate savings. The short-term, practical, local, and seemingly small steps we take now, together with continued investment in the most important things we do, will cumulatively ensure our stability and productivity.
We have already heard good ideas from some areas of the College for containing or reducing expenditures, and I encourage all of you to share any suggestions for potential efficiencies with Doug Ginevan. We have been able to take advantage of a few opportunities that have recently arisen; with lower interest rates available, for example, we have changed all our remaining variable debt to a fixed rate of 4.7 percent, and with lower energy prices, we have locked in favorable gas rates for the next two years. We will continue to seek other such opportunities as they may arise.
Looking at the longer term, in the face of greater uncertainty about future revenues and costs, Senior Staff has been considering a range of possibilities. We are currently testing a variety of assumptions about how different situations might affect us and looking at options we may wish to exercise in the future. Our goal is to remain flexible and resilient, prepared for multiple contingencies.
We will be discussing both the FY10 budget planning and this longer-term contingency planning with the campus Budget and Finance Advisory Committee. We are grateful to have established this committee five years ago, so that we have a dedicated group of faculty, staff, and students charged with the sharing of information and advice. The committee is in the process of preparing an initial communication to the campus about its work and will be discussing plans for further conversation, including the likelihood of meetings with various constituencies at the beginning of next semester.
We are also fortunate to have an informed, active, and concerned Board of Trustees. Both the Investment Committee and the Budget and Finance Committee continue to monitor the situation and oversee our processes and plans. The economic situation will be an important focus of our January Board meeting.
I am also pleased to report that the three campus-wide planning initiatives announced this fall, under the leadership of faculty and staff teams, are already enthusiastically pursuing the possibilities of emerging opportunities, both short and long term. This work is only more important in a time of economic uncertainty. If we agree on priorities, look forward, understand our distinctiveness, and invest in the things that will keep Bates strong and growing, we will all benefit.
At a time like this, I am especially mindful of how often colleagues and friends outside of Bates look to us to see how we have managed to become and remain a top-tier college with a distinguished reputation for academics and forward-looking educational values, despite the fact that we are less wealthy than our peers. Our over-performance is undoubtedly fueled by our high levels of creativity and aspiration, our dissatisfaction with reductive answers, our lack of complacency, and our preference for self-questioning rather than self-congratulating.
With this in mind, let me reiterate that our people are our greatest resource. Bates faculty, staff, students, trustees, alumni and other supporters are characteristically restless innovators, striving to take any pursuit to the highest possible level. We share a predisposition to live with the uncomfortable sense that we haven’t done enough, haven’t pushed hard enough, haven’t arrived at our dreamed-of destination. We are and are known to be what some have called a “learning organization”—one that welcomes and leverages the forces of uncertainty and challenge. Particularly as we look forward to the changes in higher education looming large in the present and future, our creative response to change, new ideas and new ways of doing things, will be critical.
Thank you for all you do. We are in this together, and I am confident we can meet these challenges as we have met many others over the course of many years.
Elaine Tuttle Hansen