Staying on course in a challenging economy
Many of you received my February communication regarding the effects of the economic downturn on Union. Because this is such a critical time for the College, as for all institutions of higher education, I wanted to reiterate several key points from that message. It is important to me that all members of the Union family are fully informed about the challenges we face and the steps we are taking to address them.
As I have indicated, the finances of Union College have not been spared from the effects of the economic downturn. Best estimates indicate that the value of our endowment has declined by approximately 27 percent fiscal year-to-date (that is, since June 30, 2008.) Approximately 15 percent of our operating budget comes from income generated by the endowment. It is almost certain that the value of the endowment will be down markedly on June 30, 2009, the date when we value the endowment for purposes of establishing the income that subsidizes that budget in future years.
Like many institutions, we use a three-year average of our endowment value to determine the endowment income that helps support all that we do at the College. Thus, we will only feel minor effects from the current economic downturn in next year’s budget. Looking beyond the next fiscal year, however, our operating budget is likely to be significantly affected by the current economic turmoil into 2013. We are setting aside contingency funds now to address decreased revenues and possible increased expenditures resulting from the economic downturn.
Our admissions numbers continue to provide mixed cues. Early decision applications for the Class of 2013 increased by 7 percent over last year’s record-setting figures, and these applicants continued to represent our typical outstanding academic caliber. Applications for regular admission are down by approximately 9 percent. While this compares favorably with what is happening at other highly ranked schools—some of whom have seen declines approaching 40 percent—we remain watchful.
We also anticipate that the overall financial need of families will increase due to job losses, declining asset values, and other impacts of the economic downturn. While the full implications for Union families are not clear, we certainly expect more requests for financial aid. Budget cuts proposed at the state level will have a bearing on Union and Union families. We will continue to monitor discussions in the state capital and voice our concerns.
Despite this climate, many of our alumni and friends have stepped forward with pledges of support that are truly inspiring in these difficult times. Some of you have increased your level of annual giving over past years or reached out to me personally with offers to help the College. For this loyalty and assistance, we are all deeply grateful. Now more than ever, annual giving is vital to Union’s future. Our overall level of annual giving continues to lag behind previous years, a trend which will have a direct bearing on next year’s operating budget if it continues. In this economy, supporting Union’s foundation through annual giving to the Union Fund becomes even more critical to advancing our core mission.
Fortunately, it is unlikely that we will have to make drastic cuts in spending to get through the current fiscal year, as has been necessary at some other institutions. Our planning focuses on fiscal years to come. We will continue to control and cut expenditures and seek opportunities for both immediate and future cost savings. We have already identified a number of administrative positions, currently vacant, that will remain unfilled at this point. We will carefully evaluate any other positions that become open and are taking action to control other institutional costs without damaging the educational experience of our students or the safety of our community.
We remain mindful of the situation of those who work at and contribute so much to Union, as well as the situation of families who send their sons and daughters to the College. Thus, we will seek to avoid layoffs, modestly adjust salaries to deal with equity issues, increase our comprehensive fee by a lower percentage than we have in recent years, aim to retain our policy of meeting full financial need, and develop budget models that allow us to move ahead with important building projects and address deferred maintenance needs of the campus.
The economy poses difficulties for all of us. But I am heartened by the expressions of support I continue to receive from so many of you, which speaks volumes about our strength as a community and the College’s importance in all of our lives. Know that everyone here will be working tirelessly on Union’s behalf to ensure that we emerge from this difficult period stronger than ever and protect the value of a Union degree.
I will continue to communicate with you at regular intervals regarding our challenges and our plans to address them. With the backing of our alumni, families, and friends, I have no doubt that we can continue to move Union ahead. Thank you so much for your continued support.