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Update on the College Budget

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Endowment investment returns drop 18 percent in first half of fiscal year

The worldwide economic downturn continues to impact Dartmouth. In a Jan. 22 letter to the community, Provost Barry Scherr and Executive Vice President for Finance and Administration Adam Keller reported that investment returns on the College's endowment dropped 18 percent in the six months ending Dec. 31, 2008.

Scherr and Keller outlined the ongoing process to identify savings to bring expenses in line with reduced revenues. They noted that as of the January deadline, more than 70 employees had chosen to participate in the retirement incentive program.

"President Wright has charged us with leading a process to identify budget reductions of $40 million from a $460 million College-only budget," explained Scherr and Keller. "On an institution-wide basis, including our three professional schools, we expect to reduce more than $60 million from a $700 million budget. We have involved the entire Dartmouth community in a process to carefully identify areas where we can cut expenses while protecting our highest priorities."

Those priorities, as stated by President Wright in a Jan. 12 letter introducing his ten-year report, are "to protect the strength of our faculty and the overall educational experience of students, to maintain a full financial aid program that preserves access to Dartmouth regardless of a student's financial means, and to minimize the negative impact on our administration and professional staff."

Scherr and Keller stressed that suggestions from the Dartmouth community-which included the retirement incentive and a reduction-in-hours program-have been essential to the process. They encouraged continued suggestions for savings.

"Employee input and participation have been critical to the success of the retirement incentive," says Traci Nordberg, chief Human Resources officer. "Some retirements will result in posting of some positions that may be filled by others on campus. The process has also given divisions additional opportunities to consider how work will be assigned and operations reorganized in their areas."

"The retirement incentive and reduction-in-hours programs, as well as the freeze on external hiring, are all designed to minimize the potential layoffs needed to reduce compensation expenses," wrote Scherr and Keller. "However, despite our best efforts, we have come to the conclusion that, unfortunately, some staff layoffs are inevitable. We recognize that job loss, and, in some cases, a reduction in hours, will cause economic hardship. We are developing a benefits program for the employees who will be directly affected, to try to ease the difficulty many will face through this transition."

The College Budget Committee is currently reviewing cost-reduction proposals submitted by department and division heads, savings from retirements and deferred building plans, and potential "cross-departmental initiatives" for more efficient operations. The committee will present a preliminary FY 2010 budget to the Board of Trustees at its Feb. 6 and 7 meeting.

"Dartmouth is operating from a position of relative strength in our academic and financial position as we approach tough decisions now," wrote Scherr and Keller. "These are decisions that cannot be put off, and we intend to move forward to announce many of them in February. However, it is important that we be deliberate and strategic as we proceed to make these difficult choices. ... Thank you for your professionalism and your ongoing support while we work together as a community to preserve Dartmouth's academic excellence for future generations."

Resources

News and information on the College budget

An interview about the College's endowment with Adam Keller, executive VP for finance and administration, and David Russ, chief investment officer

The Employee Hardship Loan Program

The Employee Assistance Program (counseling services)

Dartmouth's Endowment

Investment return on the endowment dropped 18 percent from June 30 to Dec. 31, 2008. While the endowment grew by $1.5 billion in the previous five years-a 12 percent annualized increase-it declined by $700 million to $3 billion in the six months ending Dec. 31, 2008. The decline was due to lower investment returns, as well as budgeted spending for operating expenses of the College. Returns declined 18 percent (-$623 million). Spending (-$131 million) was partially offset by new gifts and transfers (+$54 million).

ENDOWMENT

Six months ending Dec. 31, 2008:

Value: $3 billion

Decline: -$700 million (Return: -$623 million, Gifts and transfers: +$54 million, Spending: -$131 million)

 

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Last Updated: 1/29/09