| |
Over the last three
months, the senior staff and I have focused on developing
a financial plan for the college that will restore equilibrium
to the budget and support a strategic vision for Smith in
the decade ahead. Throughout these discussions, I have maintained
several core values: the preeminence of the academic program,
a continuing investment in initiatives that not only sustain
but advance Smith’s academic excellence, and a strong
commitment to access and affordability.
Following is a summary
of that plan, which we are presenting to the campus for discussion
across the college in the course of the spring semester.
Let me emphasize at the outset that this is a preliminary
plan, not a finished product. It represents our best thinking
after carefully weighing competing priorities both among
ourselves and in consultation with the Advisory Committee
on Resource Allocation (ACRA) and the Committee on Mission
and Priorities (CMP).
The plan seeks to achieve two
things: it restores financial equilibrium to the budget,
and it provides
for a number of
critical investments in Smith’s future. These include
competitive salary increases for faculty and staff, a financial
aid budget that continues to meet the full demonstrated need
of all enrolled students, and a bond issue that will finance
capital improvements, including part of the cost of a new
science and engineering building.
As you will recall, I have
written twice before -- in
March and in September of 2003 -- to provide information
about budget matters and to alert you to the seriousness
of the fiscal challenges we are facing. Although we have
made several important adjustments to our planning assumptions
since September, reflecting the improved financial markets
and revised projections of the financial need of our students,
we still project significant deficits emerging in the near
future, of about $3 million in 2004-05 and rising to about
$7 million in 2006-07. In the absence of appropriate action,
the deficits would continue to increase by more than 10 percent
thereafter.
The projected operating deficits
stem largely from pressures on the college’s three
primary revenue sources -- net
comprehensive fee income, endowment income, and current unrestricted
gifts. Significant increases in the proportion of students
receiving grant aid coupled with larger than expected average
grants have decreased our net revenue from comprehensive
fees. While the recent strengthening in the financial markets
has softened the downturn in endowment income, income from
that source will still fail to keep up with the projected
growth in expenditures. Under these changed circumstances,
the college cannot sustain its current level of expenditure,
much less identify funds for new needs.
I am committed to
restoring financial equilibrium to the college’s budget.
Such equilibrium means more than balancing the budget. It
involves ensuring that spending
and revenues will not grow at disparate rates over the next
several years, creating future deficits. It also means investing
adequately in the physical plant to avoid the greater cost
of deferred maintenance. Finally, it requires that the college
maintain a competitive level of compensation for faculty
and staff and continue to invest in initiatives that will
strengthen the institution.
The financial plan that we are
presenting for discussion achieves the following:
 |
It
gives priority to financial aid, projecting a budget
that continues to meet the full demonstrated need of
our students while moderating its rate of growth.
|
 |
|
|
|
|
It
builds in salary increases for faculty and staff that
will keep our compensation competitive in the years
ahead.
|
|
|
|
|
|
It allocates
expenditure cuts disproportionately across college
operations from 11.9% for administrative services to
5.3% for academic programs and 6.1% for student services.
It thus seeks to minimize cuts to academic and student
service areas relative to reductions in other areas
of the college’s expenditure, with the exception
of the reduction in faculty positions that we propose
to achieve through the faculty retirement plan. The
reduction in faculty positions will return the faculty
to its size of the late 1990s.
|
|
|
|
|
|
It allocates
approximately $1.2 million for new initiatives, in
order to fund current or new priority needs. Among
the proposals currently under consideration are funding
for classroom technology, a retirement health plan
for faculty and staff, and an increase in the level
of academic support for departments. The curriculum
review now under way will certainly be a source of
other new and creative ideas. Decisions about any of
these initiatives would occur only after general discussions
and after consultation with the appropriate campus
committees.
|
|
|
|
|
|
It allows
$2.5 million for debt service in order to support a
bond issue to fund renewal and replacement needs as
well as a portion of the cost of construction of a
new science and engineering building. A bond will allow
us both to build the teaching and research laboratories
necessary for our programs in chemistry, biology, computer
science and engineering as well as to fund other critical
capital needs, including, among others, renovation
of student houses, the replacement of the mechanical
system in the library (which, in its current condition,
is compromising our ability to preserve our collections
adequately), and efficiency upgrades in our heating
plant that will allow us to realize energy savings.
|
|
|
|
|
|
It reserves
$1.1 million to apply to one of two purposes: either
to increase funding for the renovation of facilities
(to further close our funding gap in this area) or
to make the transition to an endowment spending rate
formula that would result in less volatility in the
annual contribution from this source to the operating
budget.
|
|
|
|
|
|
It makes
permanent the funding for a portion of our current
campaign budget in order to maintain our overall gift
levels at $45 million annually. (The campaign is currently
supported by one-time funding sufficient only for expenses
through December 31, 2004.)
|
|
|
|
|
The financial plan achieves
the objectives described above by the following reductions
in expenditure:
|
It
reduces operating budgets across the college, through
differentially allocated cuts. These cuts decrease
non-faculty staffing levels by 8.6%, for a net reduction
of 81.5 FTE. Through the enhanced severance plan, elimination
of vacant positions, and lay-offs that have already
occurred, we have achieved about half of this reduction.
The proposed plan involves the elimination of 37.2
additional FTE, affecting 54 positions. We hope to
place some of these people in the positions
we have banked this year.
|
|
|
|
|
|
It
eliminates 25 faculty positions over the course of
five years, through the retirement program, for a savings
of $2.8 million by 2006-2007. This represents a reduction
of 8.7% to the current size of the faculty.
|
|
|
|
|
|
It proposes
changes in the dining system, reducing the number of
kitchens and dining rooms, while expanding meal options,
for a savings of approximately $800,000 per year.
|
|
|
|
|
|
It moves
student loan levels over two years to amounts consistent
with those of our closest peers, increasing revenues
by approximately $1.1 million. (Loan levels will remain
the same for entering students, but they will increase
by $300 for sophomores, $1,000 for juniors, and $600
for seniors by 2006.)
|
|
|
|
|
|
It achieves
approximately $1.6 million in savings by eliminating
the general contingency fund and structural surpluses,
reducing discretionary funds managed by senior staff,
and shifting some expenses from unrestricted funds
to restricted endowments.
|
|
|
|
|
|
It achieves
approximately $550,000 in savings from conservation
measures, including new utility contracts and a paper
reduction initiative that would move a significant
number of paper publications to the Web.
|
|
|
|
|
|
It identifies
other revenue enhancements of about $600,000.
|
|
|
|
|
The
plan is meant as the starting point for campus discussion.
ACRA and CMP, the two committees charged with responsibility
for advising me, respectively, about resource allocation
and about the college’s mission and priorities, have
already begun intensive discussion of the detailed plan.
Members of the senior staff and I will be meeting with various
constituencies over the course of the spring semester to
hear their responses to elements of the plan. When I have
gathered advice from all of these quarters, I will make a
recommendation to the Board of Trustees in May, which will
vote upon it at that time.
We know that these changes and
reductions will be difficult not only for the individuals
involved but also for the community
as a whole. For the future health of the college, however,
we must develop and implement a financial plan that restores
fiscal stability to the budget, sustains funding for the
most important priorities of the college, and invests in
the resources to respond to current and new needs. We must
not only balance the budget; we must make strategic investments
that will keep Smith strong in the future.
Sincerely,
Carol T. Christ |
|
Speeches & Writings
Letters
to the
Community
Senior
Staff
Office
Staff & Hours
Biography
Community Advisory Board
|
