Willamette's Financial Health

Nov. 21, 2008

To the Willamette Community:

During the last several days, I have had the opportunity to speak to faculty, students and staff about the impact of the global economic conditions on the University's operating and capital budgets.

In these settings, I have sought to reiterate that the "sky is not falling." We are in a much better position than many of our peer institutions.

We should all have confidence in our future, as Willamette remains fiscally sound. We have strong cash and liquidity positions. And even though the total value of our endowment is smaller today than six months ago, our endowment-spending rate is fixed and will have no near-term adverse impact on our operating budget.

However, we have not been unaffected nor do we expect to be unaffected in the next few years by the economic crisis. 

Thus, as we plan for the future, we do so very much aware of dramatically changed economic realities.

We began the current budget year with a $1.1 million shortfall, the sources of which are threefold: lower than expected interest income on short-term investment funds, fewer College of Liberal Arts (CLA) returning students than forecasted and a larger than usual "summer melt" of admitted CLA students who had indicated that they would enroll this fall.

We anticipate that the combination of declining family incomes, the erosion of home equity and college savings as well as tighter credit markets and low consumer confidence will likely have an adverse impact on the capacity of some current and prospective students to afford a Willamette education without additional assistance.

Increased Financial Aid Assistance for Undergraduate Students

In order to support  - as best as our resources permit us - the needs of current and prospective undergraduates whose financial circumstances have been impacted by current economic conditions, we are taking the following actions:

Beginning fall 2009, Willamette will make available interest-free loans to the undergraduate students in the classes graduating in 2010, 2011, 2012, and 2013 whose financial circumstances have been most severely impacted by the economic crisis. These loans will be forgiven if a student maintains a minimum 3.00 g.p.a. during the year in which he or she receives the loan and if he or she graduates from Willamette in four years or less.

The purpose of the no-interest loan forgiveness program is to provide additional financial assistance to undergraduates and their families during these difficult economic times.

We are, of course, mindful that graduate students and their families have also been adversely affected by the current financial crisis.  However, because federal loan programs generally allow graduate students greater access to educational loans than undergraduates, we have decided to focus our resources on those who we feel have the fewest options.

We will, of course, do our very best to keep next year's tuition and fees increase for all Willamette programs as low as possible without eroding the quality of the education that students and their families expect and enjoy at Willamette.  A tuition announcement will be made as soon as possible after students return from winter break.

2008-09 and 2009-10 University budgets

In order to balance the current year budget and develop a 2009-10 budget that reflects the new economic environment, we will reduce the current year shortfall through conservation, increased operating efficiencies, attrition savings, strategic budget cuts and modest revenue increases.

Towards this end, I have directed the deans of CLA, Atkinson and Law to identify 1% reductions in each of their current year budgets. In addition, I have asked the vice presidents and senior directors to identify 2% reductions in current-year institutional support and auxiliary budgets.

The development of the 2009-10 budget is underway and it will not surprise you to hear me say that we have revised several revenue and expense assumptions that inform next year's operating budget. We anticipate fewer students, increased demand for financial aid and lower tuition increases than originally planned.

No doubt, we will be in a much better position to develop a prudent and realistic 2009-10 budget, if the savings identified in the current year are carried forward.

The following outcomes (in priority order) will shape the budgeting process:

1. Maintain core academic programs and activities.
2. Sustain competitive salaries for faculty and staff.
3. Manage financial aid in order to maintain a diverse and quality student population.
4. Sustain capital and maintenance projects that support our educational mission.

Conservation, Efficiencies and Savings

I have formed a working group to recommend and monitor opportunities for savings through conservation and increased efficiencies: Jim Bauer, Vice President for Administrative Services (chair), Bob Hawkinson, Dean of Campus Life, Gary Grimm, Manager of Maintenance and Operations, Robert Olson, Interim Vice President of Financial Affairs and Professor Nathan Sivers-Boyce, chair, Sustainability Council. I have requested that the working group develop an initial list of savings before December 1, 2008.

The operating and programming efficiencies that result in long-term budget savings will include centralizing certain activities and functions that are currently decentralized.

Beginning immediately, all requests for non-faculty replacement or new positions will be reviewed by Bob Olson and me. It is our intent to identify savings through strategic management and careful consideration, on a case-by-case basis, of all new and replacement hires.

Finally, let me say a word or two about the annual President's Holiday Party. I am happy to report that Bon Appetit and personal gifts from members of the Administrative Council will subsidize substantially the cost of the Holiday Party, so that the members of our community and their families may continue to enjoy the good will and spirit of generosity so evident at this festive occasion.

In my several meetings with faculty, students and staff, I have been impressed and heartened by the quality of those discussions as well as the very palpable sense of a community united in common purpose and resolve.

I am confident that we will emerge from this period of increased conservation, efficiencies and strategic cuts a stronger and more resilient University.

It is during these difficult and turbulent times that our motto, Non Nobis Solum Nati Summus, "Not Unto Ourselves Alone Are We Born," seems especially alive with meaning.

Thank you.

M. Lee Pelton
President