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Board of Trustees Requests Plan to Address Budget Gap

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The Board of Trustees asked President Jim Yong Kim for a detailed budget plan to address structural deficits, as well as a five-year investment plan, at its November 6 and 7 meeting.

The board set targets for potential reductions of $50 million in fiscal 2011, and an additional $50 million in fiscal 2012.

“We face an immediate and pressing financial challenge,” said President Kim. “Like other institutions, we are not immune from the impact of the severe and prolonged economic downturn.”

For the fiscal year ending June 30, 2009, Dartmouth’s audited financial report shows operating revenues of $701 million and operating expenses of $735 million. The gap of $34 million was caused primarily by losses on investments. Financial projections show that this $34 million gap could widen in coming years unless measures are taken to reduce expenses and increase revenues.

The budget planning process will be collaborative, involving the entire community. The College must make “strategic choices to enhance operating efficiency, while Dartmouth continues to offer superb teaching and scholarship by world-class faculty,” said President Kim. “And we will stake out leadership positions in new and emerging fields that will advance our mission and build on Dartmouth’s position as a world-class institution.”

He acknowledged 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.”

The value of Dartmouth’s endowment dropped $835 million, to $2.8 billion, through June 30. The 23 percent endowment decline was primarily due to a 19.6 percent drop in investment performance, with the balance due to additional spending, somewhat offset by new gifts. The trustees have asked that the administration’s plan be based on an endowment distribution rate closer to the historic rate of 5 to 5.5 percent, down from 6.3 percent in fiscal 2009.

Decisions made over the past five years to increase the level of endowment spending enabled Dartmouth to achieve many critical priorities, said Board Chair Ed Haldeman ’70. “We enhanced financial aid to attract the best students, hired more faculty in key areas, and started construction of a range of critical new facilities. We will continue to invest strategically in Dartmouth’s future while recognizing that, as is the case across institutions similar to ours, the current economic environment has an impact on the revenues generated by our endowment.”

President Kim emphasized the need to focus on the future of the College during the process. “As we head toward Dartmouth’s 250th anniversary in 2019, we must continue to be bold and ambitious in our vision for the College,” he said. “Eliminating the deficit will require some difficult choices, but I am confident that with the entire community working together we can address this challenge while protecting and strengthening the Dartmouth experience for our students.”

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Last Updated: 1/12/10