A Message to Members of the Dartmouth Community from President Jim Yong Kim

October 9, 2009

Dear Members of the Dartmouth Community,

As we settle into the new academic year, I want to express appreciation for the warm welcome you have extended to my family and to me. With the celebration of Convocation and Inauguration on September 22, many of us had the chance to reaffirm our commitment to each other as members of the Dartmouth community, and to the pursuit of excellence in education.

In less challenging economic times, you might expect that my first letter to you as president would focus largely on our aspirations for the coming year. But these are not normal times. I am writing today to update you on Dartmouth’s financial picture, and the difficult work we face in continuing to bring the College’s finances into balance.

The global economic crisis has created significant challenges for every institution of higher learning, but Dartmouth remains committed to providing the finest education in the world. Our priorities are clear: to enable the best students to attend Dartmouth, regardless of their financial means; to continue to attract superb faculty who are both great scholars and great teachers; and to build on our reputation as an exceptional place that offers a personalized educational experience for leaders who will shape the future.

Generous friends, parents, and alumni have once again enabled Dartmouth to act according to its priorities. The level of giving held up extraordinarily well over the past year, despite the recession. However, unprecedented volatility in global financial markets caused substantial losses in virtually every part of our endowment in the fiscal year ending June 30, 2009.

Here is an overview of key financial metrics for fiscal year 2009:

Endowment Losses

• Dartmouth’s endowment fell 23 percent to $2.8 billion (a decline of 19.6 percent due to investment performance, with the balance as a result of spending from the endowment, somewhat offset by new gifts to the endowment).
• This loss of $835 million equates to approximately a $50 million reduction in annual operating revenue available to the College.
• Long-term endowment performance, however, has been excellent. Dartmouth achieved an 8 percent annual return over the past decade, when the performance of the broader stock market was flat, placing it in the top 5 percent of all endowments and foundations.

Endowment Spending

• Dartmouth increased its rate of endowment spending several years ago to support key initiatives including enhanced financial aid, additions to the faculty, and critical facilities projects.
• Endowment spending of $227 million represented 32 percent of Dartmouth’s revenue last year (total revenue of $701 million) and, after tuition, was the largest source of revenue for the institution.
• We are making conservative projections about future endowment performance. Given these projections and the decline in the value of our endowment, contributions to Dartmouth’s budget from the endowment will be flat or will decline over the next several years relative to fiscal year 2009 – further reducing revenue to fund operations.

Prospects for Recovery in the Endowment

• While the stock market has recovered somewhat in recent months, college and university endowments, because of their asset allocations, generally have not rebounded as quickly. Dartmouth’s endowment, with only 26 percent of assets invested in public equities, is no exception.
• We do not expect our endowment to return to its fiscal year 2008 level of $3.66 billion for quite some time.

Fundraising Progress and Goals

• The Dartmouth College Fund raised $38.1 million in fiscal year 2009, down from the record $42.2 million raised in the previous year. Alumni participation remained high at 46 percent, off just one percentage point. The Fund provides unrestricted dollars which directly support financial aid, faculty and academic programs, athletics, the arts, and service opportunities for students around the world.
• Volunteers are hard at work to meet our $40 million goal for the fiscal 2010 Dartmouth College Fund.
• The Campaign for the Dartmouth Experience is now raising the final $60 million necessary to meet its $1.3 billion goal, which we anticipate achieving by December 31. These gifts are generally restricted to specific priorities, and are not available to fund general operating expenses.

Efforts announced last February to cut the operating budget have affected all parts of the institution. These efforts have included reducing the work force and holding compensation flat for most employees. These were not easy actions for the campus community. While these actions produced meaningful savings and helped address the immediate shortfall in the budget, they are not enough to cover the gap we face.

No single path will be sufficient to address these serious financial challenges. We will proceed on three fronts:

• First, we will reduce expenses. This must be done thoughtfully. We will work collaboratively and creatively to arrive at innovative solutions. We will be called upon to make some difficult choices.
• Second, we will aim to increase philanthropic giving to Dartmouth, in part by continuing to demonstrate to donors that we are using our resources efficiently and effectively.
• Third, we will pursue new initiatives that build upon the strengths of Dartmouth and produce revenue while addressing the evolving needs and potential of our students and of society.

As we address these challenges, we will seek campus input widely, through meetings and forums, and will continue to communicate with you in the weeks and months ahead. Meetings are already underway with the Arts & Sciences’ faculty Committee on Priorities and with the institution-wide Budget Committee.

In my Inaugural address, I spoke of pursuing our most cherished goals not only with passion, but also with a tough-minded practicality that will allow us to deliver on those goals. I am confident that we will overcome these financial challenges and realize our aspirations, and that the character of this community will not just sustain this institution, but enable Dartmouth to continue to thrive.

Sincerely,

Jim Yong Kim
President
Dartmouth College