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President Daniel H. Weiss addressed the following message to the College’s faculty, administration, and staff today:
As you know, the national and global economies have suffered significant challenges over the past year with even greater concerns occurring during the past month. The broader stock market indices have fallen approximately 35 percent since October. Every day, it seems that another leading news source publishes an article about the negative effects the economy is having on many sectors of our nation, including higher education. Given the magnitude of this economic downturn, Lafayette is not immune from financial disruptions.
In response to these challenges, some of our peer institutions have initiated hiring freezes and even, in some cases, have retracted outstanding job offers, while others have frozen all new expenditures or announced delays of capital projects.
The impact of this economic downturn on our students and their families has been, in many cases, profound. Reports have indicated that unemployment has increased, household net worth has declined, home values have fallen and reasonable access to credit has become scarce. Industry sources indicate that philanthropic support is forecasted to weaken in the coming months. The College’s endowment is diversified but, as you would expect, the endowment’s returns are generally correlated to the market and are not insulated from broad-based declines.
You may have also learned that the Common Fund’s Short Term Fund, a highly-rated investment vehicle valued at $10 billion and serving more than 900 schools nationally, including the College for many years, recently froze access to a large portion of what was a stable-value short term fund. While there have been no losses to date on invested principal, limitations on the ability to withdraw funds has required internal cash management adjustments.
The College is fortunate to be confronting these challenges from a position of relative strength. Specifically, this past summer, Moody’s Investors Service and Standard & Poor’s both affirmed the College’s long-term ratings at “Aa3” and “AA-” and both indicated a “stable” outlook on these ratings. Further offsetting the troubling economic realities is a management team with strong Board support that had already been considering various financial simulations and budget reviews for the upcoming year. Lafayette’s long history of operating stability is also a benefit, particularly given the current economic landscape. In addition, for generations, extremely generous alumni, foundations and friends have supported the College’s academic mission with sizeable and consistent philanthropic support. Lafayette’s endowment, with oversight from the Board of Trustees, has long permitted the College to expand our support of financial aid and tuition assistance programs while simultaneously expanding our student and academic programs.
The economic turbulence, however, will require academic institutions to refocus their resources on their mission-critical programs. Lafayette College remains committed to the key academic and student components of The Plan for Lafayette. As funds permit, we will continue to implement the components of the strategic plan on a timeframe and in a manner consistent with our ability to do so on a responsible financial basis.
What can we do now? Not surprising, the College cannot realistically influence its endowment returns in the short term nor can we expect ever-increasing levels of philanthropic support given donors’ likely changed financial circumstances. Increases in tuition and fees and other student related revenue (net of financial aid), which account for 61 percent of the College’s total revenues, must remain sensitive to the needs of our students and their families. With these real-world challenges, the College must begin to revisit its expenses and work to reduce those costs that are not mission-critical or those expenditures that can be effectively delayed without diminishing the student’s academic experience or the safety and security of our community.
In that spirit, the College administration is reviewing and assessing a multitude of cost-reducing opportunities. I ask each of you to also consider those opportunities that may permit a reduction in expenses and accordingly incorporate them into your current operations. Please also feel free to make candid and fruitful suggestions to the finance team of the College as we are all in this endeavor together.
I realize that achieving this goal will not be easy and that such an exercise was not among the major activities that any of us have anticipated for this year, but it is necessary for us to maintain fiscal discipline and a balanced budget. Notwithstanding these challenges, I am confident that the College is well positioned for what lies ahead. We will work through this together and I know that we can count on our community to support us in this important work. Please accept my thanks for your participation, understanding and support.