College endowment takes big hit, but loss not as bad as expected

MIDDLEBURY — It’s a strange turn of events when a nearly 16 percent hit on endowment returns is viewed as good news at any institution.
But that’s the case, relatively speaking, at Middlebury College, where administrators report that the current fiscal year kicked off with a balanced budget.
And that 15.9 percent drop in endowment returns for fiscal year 2009? While a staggering blow (particularly considering the college was expecting the endowment to grown by 9 percent each year rather than shrink), the return is better than the anticipated 25 percent hit, and it will likely put the college within the top 20 percent among college and university endowments in terms of returns.
Still, the endowment lost more than $190 million in value over the course of the fiscal year that ended July 1, a figure that includes not just the loss, but also the amount the college pulled from the endowment to fund its operating budget. The endowment has lost nearly $250 million from its all-time high of $952 million, college President Ronald Liebowitz said in a September memo.
That leaves the school with 2005 levels of wealth, said Vice President for Administration and Treasurer Patrick Norton, to support a 2009-2010 cost structure.
“By all measures, we’ve emerged in pretty good shape in the short term,” Norton said. “But when you look at our business model in the long term, there are some systemic issues that we need to deal with.”
Those issues include that 9 percent expected annual increase in the endowment and roughly 5 percent annual increases in the comprehensive fee students pay.
“Some of those assumptions need to be revised and possibly taken down,” Norton said.
As the college begins to tackle these long-term, “systemic” problems, administrators, faculty and staff are also still looking for ways to trim costs from a budget that will be balanced for 2010 and 2011, but that’s expected to dip into a deficit in 2012.
Norton, who chairs the Budget Oversight Committee, said the group will be recommending another set of cuts to the college’s board of trustees this month, which will likely be unveiled later in the fall to the school community.
Some of the bigger cuts, he said, have already been made. The school has decided to freeze salaries for employees making more than $50,000 for 2010 and 2011. Employees who make less than $50,000 will be eligible for 2 percent raises each year.
Since last summer, the school has also eliminated roughly 100 positions on the college staff, according to Dean of the College Tim Spears, who chairs the Staff Resources Committee reporting to the BOC. The cuts were achieved entirely through voluntary means, by offering staff early retirement programs, “voluntary separation offers” and by choosing not to fill positions that were already open.
The college currently employs 922 people.
“We’re doing everything we can to avoid layoffs,” Spears said.
This fall, Spears said, the college will offer another round of voluntary separation offers. After growing significantly over the last 10 or 15 years, he said, the college staff has seen a roughly 10 percent cut since last summer. Now the school is looking for ways for fewer hands to keep the institution running. Some departments, like Library and Information Services, and the facilities team, are particularly strapped.
“We understand absolutely that it’s not fair to staff to ask them with fewer numbers to do the same amount of work they did when numbers were larger,” Spears said. “I’ve certainly heard from some staff that they’re feeling stress. They’re trying to maintain same level of excellence (with) fewer resources.”

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