Dartmouth is feeling the impact of America's financial crisis.
"The current economic situation has had an immediate effect on Dartmouth, and will produce longer-term consequences as well," according to Adam Keller, executive vice president for Finance and Administration. "In the day-to-day business of the College, we have taken steps to ensure that we have adequate funds for operating expenses and for faculty and staff salaries."
Downturns in investment markets late in the fiscal year ending June 30 resulted in a FY 2008 endowment return for Dartmouth of +0.5 percent, a significant drop from the College's original projection of a 5 percent return. The drop in endowment return will have a longer-term impact.
Although the three-year total return was +12.8 percent, which compares very favorably with most of its peers, Dartmouth is now reducing its expectations for endowment performance in FY 2009, from an original projection of 10 percent to zero to 5 percent.
"Our goal for the next few years is to achieve a balanced budget, anticipating volatile investment markets and a diminished environment for philanthropy," says Keller. "Both are likely to persist for an extended period of time."
One result: the College plans to cut back on the growth in expenditures in the coming years, according to Keller.
"Endowment earnings and philanthropy have largely fueled our ambitious priorities-including faculty growth, increased financial aid, and new facilities," he says. "In this environment, we have to rethink how to best use our assets."
In order to achieve a balanced budget each year, the College projects that it will need to limit overall spending increases to 4 to 5 percent. With projected annual growth in spending to support the three highest priorities growing more rapidly, other areas of the budget can only grow 1 to 4 percent per year.
Because of an aggressive endowment distribution rate of 6 percent of the beginning market value, Dartmouth's endowment spending will support more than 45 percent of the College's operating budget this year. Other key sources include tuition (roughly 23 percent, net of scholarships); sponsored research (11 percent); the Dartmouth College Fund (10 percent); sales and other revenues (6 percent); and other gifts and bequests (4 percent).
The Campaign for the Dartmouth Experience has generated commitments of $1.1 billion, with a goal to raise another $200 million by December 2009. Much of the money being raised is to support capital projects, such as construction of the new Class of 1978 Life Sciences Building and the Visual Arts Center. When gifts are restricted for building projects, they cannot be used for operating expenses.
"Sometimes we send mixed messages," Keller explains. "The endowment has performed well over the past three years. The Development Office is meeting its fund-raising goals. But, we are forced to cut back on the growth in operating budgets. These are tough economic times."
Keller called on the deans and division and department leaders to take responsibility for effectively managing expenses, to help develop incentives to reward innovation and cost reductions, and to communicate with the Dartmouth community about moving aggressively in order to protect competitive salaries and benefits for existing faculty and staff.
Keller delivered the news to deans, vice presidents, and other administrative leaders in a Sept. 18 presentation to the President's Administrative Forum.
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Last Updated: 12/17/08