President Daniel H. Weiss addressed the following message to faculty, staff, and students this week via campus email and to alumni and friends of Lafayette today in a special edition of the Marquis Mailer electronic newsletter:
To The Lafayette Community:
Last Fall I wrote to you about the significant downturn in the state of the economy and the impact it was having on our nation, on higher education and on Lafayette in particular. I reported on our need to reduce costs and refocus available resources on our academic mission and the student experience. Since that time, the economy has not improved and according to many measures has become worse; for example, a number of the country’s most visible public and private companies are under significant stress, unemployment has risen substantially and is likely to continue to rise and equity valuations have declined even more. The value of the College’s Endowment and Similar Funds has declined nearly 30% from the reported high value in June 2007.
Lafayette is not alone in facing this challenge. In the recent past, many other leading colleges and universities have announced plans for dramatic reprioritizations and cost reductions. In order to maintain the quality of our academic programs, we must stay ahead of the challenges we face and make necessary cost adjustments over a three- to four-year budgeting horizon. Over the next four fiscal years, the College plans to decrease its operating budget by roughly 10%, or approximately $11 million, originally projected for FY2012 in March 2008. This cost reduction is caused primarily, although not exclusively, by the reduced amount the endowment can provide to support annual operations. Specifically, Lafayette will need to reduce the dollar amount of the annual draw by approximately $7.5 million from the endowment over the next three years.
In making these cost reductions, the College must be guided by our clear commitment to the core academic mission. The distinctive, faculty-led educational experience provided to our talented students is what sets Lafayette apart from many other institutions of higher education. This experience is the primary source of our enduring value to our students and to society. Our funding allocations in the coming year must therefore be geared towards maintaining this educational foundation by sharpening our focus on where we can add the most value.
The College has already started down the path of cost reductions. During the past year, we have taken the following actions:
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significant reductions in capital projects and expenditures related to the deferral of projects and/or the reduction in scope of others;
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in FY 2010, effectively holding the overall increase in base compensation to approximately 1%, in the aggregate, with a salary freeze planned for all faculty and staff except those with lower relative incomes, along with a 2% reduction in the base salary for each of the Vice Presidents and a 5% reduction for me;
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an across-the-board 1% decrease in departmental budgets in FY2009 and a planned 5% decrease in departmental budgets in FY2010;
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reductions in various on-campus services;
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market-based adjustments in fringe benefits while maintaining a highly-competitive benefit package compared to our peers and the nation as a whole;
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reductions in expenses for selected Development publications and in the number and scope of Development-related events;
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planned reductions in the projected expenditures in athletics related to travel, recruitment, and certain other operating costs; and,
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a limited deferral of expenses related to computer replacement.
As we look to the future, two important facts will undoubtedly be true: 1) the College will be unable to maintain all of the programs and services it now currently offers, and 2) while respecting our institution’s history and traditions, we will need to think carefully and creatively about our priorities in providing an outstanding educational experience for our students.
Revenues
In addition to cost reductions, the College is also evaluating opportunities to secure new revenues as we continue to be sensitive to holding tuition and fee increases to competitive levels. Whereas the College remains fully committed to continued improvement in the student:faculty ratio, one option that must remain under consideration is modest growth in annual student enrollment, on the order of 10-20 students per year. With the additional faculty hires that have been planned, and for which funding has already been secured, the student:faculty ratio will continue to be reduced through this period.
The College has also implemented a few modest tactics that will also bring new, non-student based revenue to the institution. This process will continue apace as each new dollar raised can offset the need for additional cost-reductions.
Cost Reductions
As we conclude our planning for FY 2010 and continue with our multi-year projections, it is clear that significant increased efficiencies and cost reductions are necessary. We will need to work together in supporting the following goals for the next three to four years:
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It will be necessary to achieve a reduction in non-faculty wages compared to projections prepared last year through a combination of attrition, non-compensated leaves of absence, voluntary furloughs, retirement incentives, and, as applicable, a hiring freeze. Other strategies may be necessary if these tactics produce insufficient cost reductions. Yet, at the same time we must continue to reward employees who perform well. I ask you to consider options for doing things differently within your department so that each of us is less reliant on historic organizational structures that may be less efficient.
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In order to remain a strong and viable academic institution, the College must maintain faculty compensation rates at competitive levels. While continuing to focus on our strategic goals for faculty salaries, I ask you to do all that you can to moderate the rate of compensation expense in other ways, including reduced visitor costs and other strategies you may suggest.
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We will cap the rate of growth in fringe benefit expenses at between 3% and 5% per annum. In the past couple of years, increases in fringe benefits have averaged over 5%. We will maintain an attractive benefit packages for current faculty and staff. Controlling our fringe benefit expenses at this cap might dictate introducing a competitive waiting or vesting period for retirement contributions for future colleagues who have not yet been hired. There may also be other modifications to the benefits package for current employees and/or retirees.
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Where appropriate, I ask you to consider appropriately partnering with neighboring schools and others in ways that both enhance and expand each institution’s capabilities while simultaneously containing costs. Further, coordinated and efficient purchasing is available and additional policies will be implemented to assist the campus with this objective.
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Manage energy and facility improvements that have a definitive payback. We need to do all that we can to reduce energy expenses, as we did by executing a contract to lock-in fuel costs at current low rates for the next winter season. Small but important steps such as prudently turning off lights and computers, reducing water usage and strictly adhering to our new Energy Policy is both a smart financial decision and an indication of our commitment to sustainability. We also need to accelerate our campus-wide energy efficiency plans in preparation for the effects of electricity deregulation which is expected to affect Lafayette by FY2011.
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Eliminate expenses that are not related to the core mission of each department. We ask that you consider everything from the seemingly trivial, such as expensing meals for internal-only meetings or events, attending training sessions via electronic means and webinars in order to reduce travel-related time and costs, to the more substantive decisions about how the goals of your department can be attained more efficiently than they had been in the past. Similarly, Plant Operations support of the College’s non-critical activities or certain campus functions will be reviewed and may be reduced.
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Increase the use of technology by increasing the training, implementation, and utilization of existing systems and capabilities. We need to maximize productivity, administrative efficiency and service without increasing expenditures.
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Reduce capital expenses by 5% in FY2011 and then maintain the planned expenditures at the FY 2011 level through FY2013. This reduction follows a budgeted decrease of approximately 38% for FY2010 compared to FY 2009. We will likely not be able to consider many non-essential capital projects nor projects not focused on our core educational mission over the next few years unless funding is provided through new grants or gifts.
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Reduce all non-academic departmental expenses by 3% each year over the succeeding three fiscal years. During this period the College intends to hold all academic department expenses flat at the FY 2010 budget level over this same time period. We know that this will take effort and creativity. This process will necessitate figuring out how to attain strategic goals using different methods and eliminating or significantly reducing all non-critical expenditures.
Notwithstanding the impact of the economic downturn, these steps will help us to advance our academic goals and provide an outstanding experience for our students while balancing our budgets and ensuring a strong financial future for the College. I have every confidence that we can work together to chart the right course during this period and emerge from the process a stronger more effective institution. We are well positioned for the work ahead.
Thank you for your continued support and your partnership as we work on our shared mission.