A Letter from President Jim Yong Kim
November 7, 2009
Dear Members of the Community,
The Board of Trustees just finished meeting to discuss strategic priorities, the scope of the financial challenges the College faces, and our approach for investing in Dartmouth's future. I wanted to provide you with an update on these issues and the principles that will guide us as we move forward.
Dartmouth is a world-class institution with an unparalleled educational formula. During my four months at the College, I have heard many wonderful ideas from you on how we can enrich the Dartmouth experience even further. As we head toward Dartmouth's 250th Anniversary in 2019, we must continue to be bold and ambitious in our vision for the College.
At the same time, we face an immediate and pressing financial challenge. Like other institutions, we are not immune from the impact of the severe and prolonged economic downturn. For the fiscal year that ended in June 2009, the College had an operating budget deficit of $34 million caused primarily by financial losses on investments. Financial projections show that this annual budget gap could widen to more than $50 million in fiscal 2011 and by an additional $50 million in fiscal 2012 as growth of expenses continues to outpace revenues.
To achieve our current and future aspirations, and maintain our commitment to excellence, we need to take immediate action to address this structural deficit. The sooner and more effectively we act, the sooner we will be back on a sound footing and in a position to invest strategically in Dartmouth's future.
During the past five years, spending and investment decisions helped the College achieve critical priorities: enhancing financial aid to attract the best students; hiring more faculty in key areas; and starting construction on critical new facilities. The change in the worldwide economic outlook, however, has led us to alter our assumptions. We can no longer sustain our current level of endowment spending.
The Trustees have asked us to plan on an endowment distribution rate that is more sustainable in the current environment and closer to the College's historic rate of 5 to 5.5 percent, down from 6.3 percent in fiscal 2009. The lower endowment distribution rate will take effect in fiscal 2011.
To close the budget gap, we must look to reduce our expenses thoughtfully and improve the efficiency and effectiveness of our administrative operations. I regret that this process will unavoidably result in a smaller workforce at Dartmouth. We will pursue every possible alternative and treat any affected employees with respect and dignity.
Our goal will be not just to cut costs, but to improve the way we operate the College in pursuit of its mission. We will protect the "Dartmouth Experience" and make necessary investments to continue to enhance it, and we will preserve the College's commitment to leadership in higher education.
We must continue to offer superb teaching and scholarship by world-class faculty, while achieving leadership positions in new and emerging fields that make the most of Dartmouth's unique strengths. We will also aim to increase philanthropic giving and strategically pursue initiatives that provide new sources of revenue.
While we look to reduce expenditures, the Board has also asked that we work on plans for new strategic investments that will ensure Dartmouth continues to advance its mission and maintains an educational experience that is the best in the world.
We are going to approach this process with a five-year time horizon, and we will be submitting a detailed fiscal 2011 budget plan as well as a five-year investment plan to the Trustees, in stages, for approval next spring.
I have asked Carol Folt and Steven Kadish to partner with me in leading the budget process. Carol, Dean of the Faculty of Arts & Sciences, is also acting Provost. Steve is Senior Vice President and Strategic Advisor. The Committee on Priorities of the Faculty of Arts & Sciences, the institution-wide Budget Steering Committee, and the Student Budget Advisory Committee, will be fully engaged in the process as well.
Throughout the process, we will seek input from across the College community, and we will be meeting with and reviewing all departments and divisions. Regular updates will also be posted to Dartmouth's budget website, where we invite you to submit questions and suggestions.
This undertaking will not be easy. It will involve difficult choices. I am confident that together we can overcome the financial challenges we face. With a sense of common purpose, guided by passion and practicality, I know that we will make the right decisions not only to sustain but to advance Dartmouth and its enduring mission.
Jim Yong Kim