College looks to cut costs in face of slowing economy

MIDDLEBURY — Faced with the most serious global economic slowdown in recent years, Middlebury College is tightening its belt and searching out ways to cut operating costs.
In a memo e-mailed to faculty and staff earlier this month, Middlebury College President Ronald D. Liebowitz expressed the need to prepare for “what appears will be a prolonged period of low or no growth” with plans that will “extend beyond the current fiscal year.”
The memo initiated the first community-wide discussion of plans to trim operating costs, though according to Vice President for Administration and Chief Financial Officer Patrick Norton, college officials have been having internal discussions about financial challenges for “about six months, ever since we saw the downtown in the market.”
“This is going to be a very transparent and open process,” Norton said. “The president’s memo set the tone for that.”
These conversations took on additional urgency last week, when major financial institutions like Lehman Brothers and AIG stumbled on Wall Street. (Richard Fuld, who heads Lehman Brothers, a 157-year-old investment bank that declared bankruptcy on Sept. 15, also sits on the college’s board of trustees.)
Norton said that the college’s endowment had very little exposure to either institution, but that Lehman’s bankruptcy and the federal government’s bailout of AIG “really validate what our path needs to be.”
The global economic downturn affects the college’s budget in terms of two major parts of the institution’s revenue stream —  the endowment (valued at $885 million at the end of June, down from $936 million a year earlier), and fund-raising. In the face of what Liebowitz termed a “declining or stagnant stock market,” the endowment’s investments are expected to generate less income. Additionally, when the economy as a whole slows, the college’s supporters are less likely to be as generous as predicted in their donations to the school.
The third major component of the college’s revenue is the comprehensive fee paid by students, but Norton said that the college can’t raise the comprehensive fee enough to make up for the expected revenue shortfalls, and plans to keep the fee as reasonable as possible for students and their families.
The predicted revenue shortfall is “a moving target,” Norton said, that college officials are working to quantify now.
So far, plans to address that shortfall call for a slowdown on construction and renovation projects (though current renovations to McCullough and Proctor halls will be completed). Any new construction projects will need to be fully funded by donors, and include additional endowment support, before the college commits to building.
Norton and Liebowitz expressed the college’s continued financial commitment to certain priorities, which include competitive compensation for faculty and staff, a need-blind financial aid program and high standards in student services.
Norton also said that the college currently has no plans for layoffs or a reduction in staff, though administrators will be taking a hard look at positions that open up during the course comings and goings of employees to determine whether or not those jobs’ duties can be fulfilled in different ways.
Norton said that the college has experienced economic slowdowns before, pointing to 2000 as the most recent example.
“We’ve been through this before. The college did tighten its belts, and then emerged stronger for it,” Norton said. “I think we’re going to see that happening here as well. It’s going to require creativity from all of us to get through these challenging times. We will be stronger for it and better positioned for the long term.”
In his letter to faculty and staff, Liebowitz was similarly optimistic.
“We will address these financial challenges from a position of strength,” he wrote. “Our institutional reputation is excellent, applications and selectivity are at record levels, and fund-raising has reached all-time highs.”
Norton said he’s certain that similar conversations are happening at the college’s peer institutions — and that if they weren’t happening previously, events on Wall Street last week would have prompted serious consideration.
“This has been quite a week so far, and it’s not over yet,” he said last Thursday. 
Middlebury officials are turning to members of the college community for ideas to solve the budget crunch, and plan to explore ways to cut operating costs over the course of the next 18 months. Norton said that he’s working with vice presidents and senior managers to identify areas where money can be saved, and that open meetings with faculty, staff and students are slated for the future.
“It’s going to be a community effort to get through these challenging times,” Norton said.

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