Kim’s Letter on Budget

President Kim just sent this out to the campus:

Dear Members of the Dartmouth College Community,

Over the past four months we have been engaged in an intensive effort to address the College’s pressing financial challenges. This effort has involved hundreds of people across the Dartmouth community, and I would like to thank everyone who participated for their energy, creativity, and commitment to the College.

This weekend, I presented to the Board of Trustees a proposal, based on this work, to ensure that the College remains on solid financial footing for the years ahead. I am writing to let you know where we stand after this weekend’s Board meeting.

Endowments for Dartmouth and other schools have declined as a result of the global economic downturn. The investment return on our endowment fell 19.6 percent in the fiscal year ending June 30, 2009, and as a result our projected revenues are down sharply. Although our budget is balanced this year, we anticipate a budget gap reaching $100 million by fiscal 2012. The scale of this challenge requires us to act boldly, and with urgency, to ensure that our budget is in balance for the next two years. The sooner we act, the sooner we can return to focusing all of our attention on advancing our mission.

As we do so, our decisions will be guided by our vision for Dartmouth: to build on its unique approach to educating leaders who will shape the future. Our budget plan is strategic and invests in our academic priorities and commitment to attracting and retaining world-class faculty and staff. It also leverages close collaboration between our undergraduate and our graduate and professional programs. Our goal is not just to achieve cost savings, but to build an administrative culture of continuous improvement and provide support for our academic mission more efficiently.

Despite the challenges we face, we are committed to maintaining our need-blind admissions policy. We are guided as well by the principle of treating the entire community with fairness and compassion. Through thoughtful and strategic actions, we identified ways to achieve approximately 95 percent of our savings before making layoffs. We have been able to keep layoffs to 38 non-teaching positions, with a comparable number expected in April.

* Budget Actions *

Work on the budget will continue through April, but the savings and revenue targets we have developed for fiscal 2011 and 2012 fall into the following categories:

Administrative reorganization and restructuring: $ 25 million
Benefits and compensation: $ 13
Professional schools: $ 14
Program reductions: $ 14
Financial aid: $ 5
Other savings and revenues: $ 29
Total: $100 million

* Administrative Reorganization and Restructuring*

We have launched over two dozen cross-institutional projects to produce a more effective Administration at the College, initiating best practices in facilities management, construction, procurement, information technology, research administration and finance. We are rethinking how student services are organized to improve the student experience and will be sharing more details in the coming weeks. We also are taking additional steps to create a more efficient and greener Dartmouth by enhancing waste management and recycling programs, improving energy efficiency and adjusting maintenance service levels. Additional recommendations for restructuring are under development.

* Benefits and Compensation *

In keeping with our core mission, we are committed to maintaining a high level of competitiveness in recruiting and retaining top faculty and staff.

We believe we can remain competitive while adjusting our benefits, which are more generous than those offered by many of our peers. The Council on Benefits is looking at a number of different ways to achieve our budget-reduction goal. Further details on benefits and compensation plans will be announced in April.

Separately, I have joined Carol Folt, Acting Provost and Dean of the Faculty of Arts & Sciences, and Steven Kadish, Senior Vice President, in donating 10 percent of our salaries to be split between the Dartmouth College Fund and a hardship fund. The hardship fund will assist those with financial difficulties not met through our other programs such as layoff packages or our staff loan program.

* Undergraduate Tuition and Financial Aid *

The Board has approved an increase in undergraduate tuition, room and board, and mandatory fees of 4.6 percent, to $52,275. This is the smallest increase in the past five years and will be partially offset by a 10 percent increase to the financial aid budget, as we are very mindful that the economic downturn has imposed a challenge on most families as well as on the College. (Tuition alone is up 4 percent, to $39,978; the new mandatory fee for health services is $75 per term, with financial aid for the health fee available as needed.)

We have reaffirmed our commitment to enable the most talented students to attend Dartmouth through need-blind admissions and have continued to steadily increase the number of scholarship recipients in the incoming classes, which has risen from 39.5 percent in the Class of 2004 to over 52 percent in the Class of 2013.

We will continue to provide free tuition and no loan expectations for students with family incomes of $75,000 a year or less. For financial-aid recipients from families with incomes above $75,000, we will be re-instituting a loan requirement of approximately $2,500-$5,500 a year beginning with the Class of 2015, whose members will enter in fall 2011. This is necessary in the context of our efforts to address the budget gap while minimizing layoffs. Current students on financial aid and applicants to the Class of 2014 will not be affected by the change in the no-loan policy.

* Workforce *

We have taken a number of measures to avoid layoffs, including offering voluntary retirement, reducing hours, eliminating unfilled positions and freezing salaries. To date, more than 105 non-teaching employees have accepted the College’s retirement incentive, and we have reduced unfilled positions by 43. These actions come on top of 158 positions that were eliminated last year.

While these steps and the other actions noted in this letter have made a significant impact, they unfortunately did not fully eliminate the need for layoffs. We have had to make 38 layoffs now, and expect a comparable number in April. Approximately 60 percent of these layoffs involve professional and managerial employees. We are deeply grateful for the work of these employees, and for the contributions they have made to Dartmouth College.

Combined, these layoffs will represent approximately 2 percent of our non-teaching workforce of 3,400. The layoffs are at all levels and include union and non-union jobs. Another 33 non-teaching employees will be asked to work reduced hours as a result of operational changes.

We have developed an enhanced layoff package for those who will receive notifications beginning on Tuesday. This package includes four weeks of working notice, a lump-sum payment equivalent to between four and 52 weeks of pay, depending on length of service, as well as a health-care subsidy. These individuals will maintain internal status when applying for jobs that become available. (For more information about the package, go to http://www.dartmouth.edu/~hrs/empsupport/)

* Other Revenues *

We have plans in place for a variety of efforts to increase our revenues. For example, among other measures, we are raising our goals for gifts through the Dartmouth College Fund (DCF), which helps to support annual operating expenses. In fiscal 2009, donors to the DCF provided $38 million towards Dartmouth’s operating expenses. We also plan to raise revenue through the sale of property that is not core to the College’s mission or strategic plan.

We are also pleased that we are meeting our goals for research funding through existing programs as well as The Amer
ican Recovery and Reinvestment Act (ARRA) program. We are continuing to see increases in federal research grants that put us approximately 45 percent ahead of where we were last year at this time.

* Longer-Term Planning *

We expect the intensive phase of our budget-reduction process to be completed by the end of April, at which point we will focus more on implementation. We will continue to take measured, thoughtful steps to ensure that the College remains financially sound. I am particularly appreciative of the enormous support we’ve received from alumni, parents and friends in the recent completion of the $1.3 billion Campaign for the Dartmouth Experience; we will continue to rely on their support in the years to come as we seek to rebuild our endowment and continue to invest in Dartmouth’s future.

In April, we will be launching a Strategic Planning Process, with a high level of faculty, staff and student participation across the institution, to ensure that Dartmouth is well positioned to maintain its unique standing at the forefront of higher education and ensure its students have the capacity to tackle the most difficult challenges of our time.

By managing our resources wisely, and working collaboratively, I am confident that our students will continue to have an extraordinary experience — and that we can also re-imagine Dartmouth College for a new generation, so that our graduates can have an even more powerful impact in the world.

In my seven months here, I have been inspired every day by the character and spirit of the Dartmouth community, which will continue to flourish now and for many years to come.

Sincerely,

Jim Yong Kim
President
Dartmouth College

I haven’t had a chance to read it yet, but I will after class.