FY12 Budget Summary

04.22.2011 | 0 Comments

Hi Everyone,

 For those who were unable to attend the budget forum yesterday, I thought I would provide a summary of the main points.

  •  While the budget for FY2012 is balanced, it doesn't move us significantly toward our goal of a sustainable financial model.  It is a transitional budget that pretty much maintains the status quo.  Once the strategic plan is more fully developed, we will have a set of institutional priorities and a clearer sense of direction that can inform future years' budgets.
  • Our single biggest challenge is the continued growth of financial aid.  The rapid increase in an already large number is putting significant pressure on our ability to increase revenues and this continues to constrain expenses.
  • The impact of these first two aspects of our financial situation, taken together, is very little that is new on the expense side.  In general, we have provided increases only for areas where the cost of what we already do has gone up.  Examples are food costs and computer software maintenance agreements.  And even those areas have been only partially funded, with the requirement that some added costs be absorbed into the current base budgets.
  • As a result, we are able to do very little to improve salaries for next year.  Employees earning $60,000 or less will receive a 1.5% pay increase as of July 1. 2011.  Those making over $60,000 will not receive an increase. 
  • Fortunately, benefits increases will be modest.  Health insurance premiums are increasing only 4.5% and there are no changes in the College's contribution formula or in plan design.  Employees participating in the long-term disability insurance plan will see reduced premiums.
  • There has  been virtually no change in staff FTE's and a small number of visiting faculty contracts have not been renewed.  We are again budgeting savings from salary lapse (the period when positions are vacant) and some budgeted positions will be kept unfilled for FY2012.
  • Stipends for cell phones and data plans have been eliminated. 
  • The Take the Lead program has been eliminated.
  • Facilities and equipment reserves have not grown, resulting in fewer capital projects and longer replacement cycles for computing equipment.

Looking ahead, developing budgets for FY2013 and beyond  that are more sustainable will require aggressively pursuing the planning priorities that are emerging.  We all need to focus our attention and our creative energy on three areas:  reducing the discount rate; increasing revenues from new sources; and continuing the work of cost reduction.  Progress on these fronts will make us a stronger institution that is more capable of continuing to provide an excellent educational experience for our students.

 So that's where we are for FY2012.  As always, email me if you have questions at mjmaydew@mtholyoke.edu.

 MJ




Update on FY11 Budget

11.23.2010 | 0 Comments

Hi Folks,

 Welcome back to the budget blog.  (The title is outdated, but I'll work on that). 

First, a couple of general comments.  I've been asked why the blog isn't interactive--that is, why you all can't post comments.  The answer is that my schedule is sufficiently frantic that I can't commit to monitoring and responding to the blog on a daily basis.  But I do welcome questions and comments.  Just email me (mjmaydew) and I'll either get back to you directly or respond in a future blog.  Also, the blog is now available as an RSS feed, so you can sign up to receive new blogs automatically.  Just click on the budget2010 entry under Feeds on the left side of the screen.

 Second, an update on where we are with the FY2011  budget.  While we started the year with a balanced budget, we learned as the fall student numbers settled out that the discount rate (financial aid as a percentage of tuition revenues) is projected to be higher than budgeted (by about 1.7 percentage points).  This means that we're now projecting an operating deficit of about $640,000.  We may be able to absorb this during the rest of the year, either through better than budgeted revenue growth or by conserving costs.  If we can't make up the difference, we have some net revenues from FY2010 (that we planned to use to restore cuts in facilities and technology) that can be diverted to balance the budget.  This will make it somewhat more challenging to develop a balanced budget for FY2012.  That budget process has begun and I'll have more to report later on how it's going.

 One question that has surfaced as a result of our experience with the FY2011 budget (and no doubt with earlier budgets as well) is some version of "Why can't you do a better job of budgeting financial aid?".  It's a fair question, particularly since financial aid is one of the biggest numbers in the budget and a small percentage difference is a big absolute dollar amount.  The answer is that we really don't budget financial aid, in the sense that we set a maximum number and then stop spending when we reach that level.  Once a student is accepted, the College commits to meeting her full, demonstrated need.  And we make that commitment  before we know which of the students that we've accepted will actually enroll.  So we work very hard to estimate the total cost of financial aid for the students we think will attend, but it necessarily isn't  very precise.  And it is made more difficult because historical patterns of things like yield rates (percent of admitted students who enroll), number of continuing students who return in an given semester and the average need of students are becoming more  variable.  All of which is to say that financial aid costs are difficult to predict and difficult to control.

Happy Thanksgiving.

MJ

 




Final FY11 Budget Summary

04.22.2010 | 0 Comments

Hi Everyone,

Thanks to all of you who were able to attend the budget forum on April 20.  You asked great questions and I'll attempt to reflect some of that information in this post as well as summarizing the presentation.

We have completed the budget process for FY2011 and will be taking a balanced budget to the Board of Trustees for their approval on May 8.  The operating budget for next year totals about $105 million, roughly the same as this year's budget and lower than the FY2009 budget.

FY2011 Revenues

The College has three major sources of operating revenue:  net student charges (tuition, room and board revenues less financial aid) provide 63%; investment income provides 22% and gifts and grants provide 15%.  Both student charges and gifts and grants are continuing to feel the impact of the recession, with financial aid continuing to exert significant pressure on revenues.  Investment income has increased by 5% over the current year's level in accordance with the endowment spending rule.  Although the endowment has not fully recovered from the drop in the financial markets, our endowment draw continues to be well within the approved range.

 FY2011 Expenses

 We have been able to provide modest salary increases for next year.  The FY2011 budget includes 2% salary pools for faculty and staff plus additional equity pools for each.  Employees making $60,000 or less on an annualized basis will receive their increases on July 1; other employees will receive the increases September 1.  Health insurance costs are increasing by nearly 19%, despite aggressive review and negotiation by Human Resources.  There will no change in the College's contribution formula.  The full early retirement plan and the first mortgage assistance program will continue for one more year and both will be phased out as of July 1, 2011.  The phased retirement program and the shared appreciation mortgage program in South Hadley will continue.  Several other  benefits are being reviewed, but major changes are not being considered.

There have been reorganizations in several departments that have resulted in an overall reduction in staff positions of 5.5 (3 of these represent layoffs that have not previously been announced).  We have also reduced 7 visiting faculty positions.  In addition, there have been  reductions in overtime and in a number of non-compensation costs.

 Summary

This was a challenging budget process, but not as difficult as we imagined a year ago.  The improving economy helped to stabilize revenues for FY2011 and should permit revenues to continue improving.  One area of ongoing concern is that financial aid costs are still estimates, based on what we know about the need of the admitted class.  If we see a significant change in expected financial aid levels between now and fall, we may need to do some additional work on next year's budget.  We also need to continue to work on strengthening revenue growth, which will be an important part of our upcoming strategic planning process.

 Postscript

I'm happy to share the slides from the budget forum with members of the Mount Holyoke community--just email me and I'll send them out to you.  Also please let me know if you have questions.

 Barring the need to go back into the FY2011 budget, this will probably be my last entry for the semester.  Thanks again to all of you who have sent suggestions, asked questions, shared cost savings or revenue generating ideas and followed my experiment with blogging. 

 MJ

 




FY2011 Budget Update

04.06.2010 | 0 Comments

Hi All,

 It's April and we're now in the final week or two of work to bring the FY2011 operating budget into balance.  While I don't have specifics quite yet, I write with two quick updates.

 First, as you may have seen, a budget forum is scheduled for Tuesday, April 20 at 2:00 pm in Gamble Auditorium B.  That will be my opportunity to talk in more detail about the budget and to answer your questions.  For those of you who aren't able to attend, I'll summarize my comments in a blog entry following the forum.

 Second, I want to talk a bit about why we set tuition, room and board rates in February when we don't submit the budget for approval until May.  In a perfect world, we'd wait until May to set the fee increases so that we could know as precisely as possible the impact that the change would have on the operating budget.  Unfortunately, we can't wait.  Students (particularly prospective students) and their families need the information in order to make decisions about matriculation and Student Financial Services needs the information in order to evaluate financial aid awards. 

The alternative would be to develop the budget on an earlier cycle and finish by February.  While this is certainly possible, it would mean that we were setting next year's budget with very little information about the current year's actual experience.  Those ten additional weeks are critically important in allowing us to develop the most accurate possible budget.

In addition, the consequences of setting fees before the budget is final are less significant than you might think.  While student charges are a large percentage of the College's revenues, the degree to which increases can vary is constrained by a number of factors, including the College's relative position within its peer group, the overall level of inflation and the dampening influence of the increased financial aid associated with an increase in fees.  As a result, tuition increases can never be the variable that balances the budget.  So, setting fees out of sync with the overall budget process is more workable than it at first appears.

 I'll hope to see many of you at the budget forum later this month. 

 MJ


Some Reflections on Administrative Cost Reduction

02.01.2010 | 0 Comments

Hi All,

Budget planning work is continuing and we should have a first look at the draft budget for FY2011 within the next few days.  There will still be several more weeks of work to do before the budget is completed, but this will give us an early indication of how the real numbers are developing.  This post will be devoted to responding to some of the questions I've been hearing about administrative budgets and budget planning.  Following are some reflections on administrative cost reduction.

 Administrative budgets require a different process than the faculty budget.

Administrative divisions are organized differently from the faculty and therefore budget review requires a different approach.  Departments themselves need to be deeply involved in making priority decisions and bringing recommendations forward for review at the divisional and Senior Staff levels.  As a result, the process is more decentralized and takes longer to resolve than the faculty budget.

 Significant cost reduction almost always directly affects people.

 This is true for two reasons.  First, the College's operating budget is 70% compensation (salaries and benefits).  Second, there has already been much general expense reduction in earlier budget cycles.

It is almost always better for the institution to reduce positions rather than eliminating raises or reducing salaries and wages.

While eliminating raises or reducing salaries may feel less painful than reducing positions, it results in long-term problems.  In order for the College to recruit and retain highly capable staff, we need to pay generally competitive salaries.  Once in a great while, the entire market shifts (as it has recently due to the economic downturn) and small raises or no raises are possible without negatively affecting Mount Holyoke's overall competitive position, but systematically underpaying employees doesn't work over time.

Reducing some full positions, rather than shaving hours from many positions, is almost always better for the institution.

Like not giving raises, reducing the number of hours worked by many people can feel less painful than eliminating full positions.  And it can sometimes work to move a full-time position to part-time.  But a widespread reduction in hours doesn't match the balance of skills and abilities required to do the College's work.  In a hypothetical example, if the College needs more plumbers and fewer accountants, reducing the hours of both groups makes the plumbing shortage worse and doesn't sufficiently address the need for fewer accountants.  One apparent exception to this general point is overtime pay.  While reductions in overtime can result in reducing hours worked by a number of people, overtime is also work over and above our regular work schedule and we should seek ways to limit overtime costs wherever reasonable.

 

One last comment--while I didn't explicitly mention the possibility of further layoffs during the budget forum in December, that possibility continues to be real.  While I am not expecting significant numbers (at least based on what I know right now), I do expect that we will see further position reductions, some of which may take the form of layoffs. As has been true in the past, affected individuals will be given as much notice as possible.

 As always, if you have questions, please be in touch with me.

MJ




Budget Forums Redux

01.14.2010 | 0 Comments

Happy New Year Everyone.

At the end of last semester, there were two forums on the budget--on December 2 and December 7.  Since many of you were unable to attend, I'll use this post to talk a bit about the open forums and what I think are the main points. 

 Both of the December forums addressed the same issues, but took different approaches.  On December 2, I tried to provide a basic understanding of the College's operating revenues and how they were each negatively affected by last year's financial downturn.  I then described the impact on spending for both facilities and equipment projects and for operating expenses.  This led to the punchline--that we need to find about $4 million to balance the FY11 budget and some general discussion of where we're looking for those savings.  Several areas of possible reduction were listed, including:

  • lower level of capital projects
  • developing more efficient practices
  • generating additional revenue
  • more Five College collaboration
  • pre-purchasing fuel farther into the future
  • low or no salary increases
  • changes to benefits
  • changes to January term
  • extending the daily class schedule
  • reduce visiting faculty lines
  • reduce overtime

Many other ideas are being evaluated as well and in the coming months I'll be able to report in more detail on the budget as it unfolds.  By early February, we will have a first draft of the overall budget, including a better sense of how revenues are developing.  That will become the working document to be modified over successive weeks and finally brought into balance.  In addition to more blog entries, I expect to have at least one more budget forum later this spring.

Barbara Byrne's forum on December 7 also focused on the primary components of the College's budget and how they have varied over time.  This presentation provided more detail on the College's operating revenues and, particularly, expenses.  Perhaps most importantly, it provided a different point of view. Barbara spends much of her time advising large corporate clients on  fiancial matters and brought that lens to her presentation.  She talked about the key drivers of the institutional budget (things like compensation and financial aid) and how changes in these drivers impacts the operating budget.  She also emphasized that institutions of higher education--and particularly selective private colleges like Mount Holyoke--are at an inflection point, with our costs of attendance increasingly acting as a disincentive for families with the ability to pay. 

 Both presentations arrive at the same basic conclusion:  Mount Holyoke has a budget problem, the root of which is revenues that are not growing sufficiently to support our operations.  The short term solution is to keep the budgets balanced with a combination of expense reduction and incremental revenue growth.  The longer term solution is to strengthen our revenues in more significant ways, the planning work of the next couple of years.

I'm happy to share the slides from both presentations with members of the Mount Holyoke community.  Just drop me an email and I'll send them to you.

MJ



How Are Budget Ideas Being Used?

11.24.2009 | 0 Comments

Hi All,

 Since last spring, we have been accumulating your budget ideas and the list is now several pages long.  It contains some very big ideas and many small ones, some of which are overlapping or contradictory.  So the first thing I want to point out is that this is not the administration's list of things under active consideration, but rather a pretty unfiltered list of all of the ideas members of the community have contributed. 

 In my last entry I promised to return to the list and provide some information about how it is being used.  One important way is as a stimulus for further discussion and idea generation in meetings like the Staff Council Coffee Break and the Finance and Administration divisional supervisors' meeting.  These discussions can result in more ideas and are also helpful in continuing to refine and modify existing ideas.

 But the basic purpose of idea generation is to feed the budget process.  The ideas list has been widely shared with managers, who can then consider them as they develop their FY2011 budgets.  At this stage of budget development, some of the ideas have been adopted, some are being actively considered and are likely to  be adopted in some form, and some have been considered and are unlikely to be adopted.  Here are some examples:

Ideas That Have Been Adopted:

  • Don't fill vacant positions.  While the College has not had a hiring freeze per se, several vacant positions have remained unfilled and most of those have been eliminated from the budget.
  • Make greater use of occupancy sensors.  This is an excellent way to save electricity and there is an active program underway to put occupancy sensors in common spaces, classrooms and labs, and individual offices.
  • Slow down capital projects.  We reduced the amount spent on capital projects by half (about $5 million) in the current year and expect to remain at that level for FY2011 as well.  Our primary areas of focus for capital spending in the near term are deferred maintenance, energy conservation projects and space renovations that provide budget savings.

 Ideas Under Active Consideration and Likely To Be Adopted in Some Form:

  • Provide smaller salary increases.  We don't yet know whether we will be able to increase salaries for next year.  If we are able to provide salary increases, they will be modest.
  • Reduce the use of overtime.  We are actively reviewing how overtime is used and expect to achieve some savings.
  • Delay all computer equipment purchases for one year.  LITS is actively reviewing the frequency with which all computing equipment is being replaced and extending some of those intervals.

Ideas Considered and Unlikely To Be Adopted:

  • Increase the standard work week with no increase in pay.  This is basically a salary reduction for everyone who has a standard work week.  While this may seem preferable to eliminating some positions, it results in widespread damage to our overall ability to pay employees at competitive rates and creates pressure on future years to make up the difference.
  • Switch the calendar to trimesters.  This would be an enormous change for every part of the campus and would take years to plan and implement.  While longer term, we need to think about this kind of change, we're not considering it in the short term.
  • Eliminate air conditioning.  While eliminating air conditioning would certainly save electricity, the increasing use of the campus during the summer makes it virtually impossible to stop using air conditioning entirely.  We have adjusted our heating and cooling set points to insure that air conditioning is used in responsible ways.
There are many other examples in each of the categories.  If you have questions about a particular idea, please be in touch and I'll be happy to give you more specific information.

 Questions and Rumors

How do I sign up for an RSS feed of the blog?

 Go the the following website:  https://pub.mtholyoke.edu/journal/finance/feed/entries/atom

 MJ

Why Are We Doing It This Way?

10.22.2009 | 0 Comments

In the past few months, there has been a barrage of communications from various colleges and universities describing their responses to the financial crisis and their strategies for bringing their budgets back into balance.  While institutions have taken a variety of approaches, a number of prominent schools have made highly publicized announcements of their two or three year plans to return to financial health along with a listing of all of the changes that will require.  At Mount Holyoke, we have taken a very different approach--working year by year and identifying and communicating the changes that will be needed at each stage.  So why are we doing it this way?

Let me begin by stating the obvious.  There is no easy way to reduce budgets; it's difficult, anxiety-producing work whatever the process.  And while the process that Mount Holyoke is using may seem to prolong the anxiety unnecessarily, here are the reasons why I think it is better than the "one big announcement" approach. 

First, we don't have perfect information--about the depth or duration of an evolving financial crisis, about the timing or severity of the impact on the College, or about how effective our rebalancing decisions will be.  In order to have reasonable confidence that the financial problem has actually been solved, the "one big announcement" approach requires that more reductions are planned than will likely be necessary.  This might be fine in an institution where there are other reasons to reduce programs and services, but in an institution that is lean to begin with, reductions beyond those needed to balance the budget only serve to weaken it further.  It is, of course, possible to rescind some reductions later if they are unneeded, but this results in having put the community (and particularly the affected areas) through needless anxiety.

 On the other hand, sometimes even conservative plans turn out to be insufficient.  What happens then is that the community, having been led to believe that all of the reductions were over, has to be told that there is more work to do.   The anxiety that was temporarily relieved then comes roaring back.  Given Mount Holyoke's narrow financial margins,  making the statement that we've solved our financial problems for the foreseeable future is very likely to be false reassurance.

Consequently, it seems to me both more reasonable and more honest to approach the needed work of budget reduction gradually and carefully.  This allows us to calibrate reductions to need more precisely and to see the impact of one set of changes before deciding on what additional changes would be the least damaging.  This does not relieve us of our responsibility to continue finding more effective ways to work or to evaluate critically the programs and services we are providing, but it does mean that we are taking it one step at a time.  This does take longer, but I would argue that the results justify the possible prolonging of anxiety.

Questions and Rumors

What happened with all of the ideas and suggestions people have been sending in for the past few months?

We're paying attention to them.  In my next post, I'll talk about how they're being considered in our budget planning work.

 

MJ

What Position Reduction Numbers Mean

09.30.2009 | 0 Comments

Hi,

 Since my last post, I've gotten some questions and heard about some confusion over what constitutes a layoff.  So, I'll use the first part of this post to talk about position reductions in more detail.  There are several ways that positions get reduced:

  • A position becomes vacant (because the incumbent retires, resigns or takes another job at the College) and all or part of the position doesn't get filled.  This is typically what we mean when we talk about "attrition".
  • A contract position (these are largely visiting faculty positions, although we occasionally have staff in contract positions) expires and is not renewed.  While this is not technically a layoff (and isn't included in my count, which focuses on College staff only), it can certainly feel like a layoff to individuals who have seen these contracts renewed in the past.
  • A filled position is eliminated, but we are able to find the incumbent another position on campus.  This also does not count as a layoff (because the person still has a job at the College), but is clearly disruptive for the person involved.
  • A filled position's hours are reduced.  Again, not a layoff, since the person is still employed, but a negative impact all the same.
  • A filled position is eliminated and the person leaves the College. This is a layoff and when I said in my last post that there have been three layoffs in the past few months, this is what I mean.

Now a word on timing.  I do not include a position layoff in my count until the affected person has left the College.  At any point in time there may  be discussions underway, and individuals who are affected may even have been notified, but while they remain at the College, I do not include them in my numbers.  I do this for two reasons.  First and most important, the person involved deserves to complete his or her time at the institution in the manner that seems best to him or her, with as much attention or privacy as desired.  Second, I may well not be aware of conversations taking place in areas other than my own and need to establish a method for reporting layoffs that is internally consistent.

 I hope this has been more helpful than tedious and I will continue to update you all on changes as we proceed.

 Questions and Rumors

If financial aid costs are going up, why don't we reduce tuition levels so we could give less financial aid?

This sounds like it should work, but when we've analyzed it, the result is not positive.  It would reduce the amount of financial aid we give to aided students.  But about 35% of our students pay full tuition.  If we reduced the tuition level, those students would pay us less.  Unless reduced tuition resulted in a larger group of full-pay students, our net tuition revenue would be less, not more.  And while it's possible that lower tuition would attract more full-pay students, this has not historically been the case at schools like Mount Holyoke.  It's been called the "Chivas Regal" effect--higher prices indicate higher quality.    Maybe the current economic climate has changed that perception, but it would be a very risky approach.  The only schools that have successfully accomplished this (reducing tuition and increasing revenue) have had a population of aided students in the 85-90% range.

 If we're paying too much in financial aid, why don't we reduce the number of students?

Every student pays at least part of her tuition, room and board costs--through family contributions, federal and state financial aid (like Pell Grants), loans and student jobs.  So even if a student receives significant financial aid, she provides the College with some additional revenue.  Reducing the number of students would eliminate that additional revenue and make us worse off.  Because of this, any meaningful reduction in the number of students would require reductions in other parts of the budget.

 Then why not keep adding students?

To some extent, we have been doing this over the past decade and it has helped the College balance its budget.  However, there are limits to growth.  We  can only continue to grow if we can absorb the larger numbers of students.  Once we begin to need more faculty, more classrooms, more residence halls, etc., we would quickly find ourselves spending more than the additional income.  We are currently close to having as large a student body as we can support without significant new costs.


Please continue to share ideas, questions, comments and rumors.  Within the next few weeks, I'll transition from my focus on the FY2010 budget (except for periodic updates) and spend more time talking about the budget planning for FY2011.

MJ


Update on the FY2010 Budget

09.08.2009 | 0 Comments

Hi Folks,

 With the academic year about to begin, I'm bringing back my periodic blog on all things budget.  Initially, I'll focus on how the current year's budget (FY2010) is shaping up, but as the semester progresses will begin to shift the discussion to the budget development process for FY2011.

You may recall that last May, after the FY2010 budget had been completed, we learned that the incoming first year class would be both larger and needier than we had  budgeted.  The likely impact is a $1-2 million deficit and over the summer we have developed contingency plans to find those additional savings.  It will be a few weeks before we have truly accurate numbers, but currently the first year class continues to be both larger and needier than budget.  As a result, we have begun to implement some of the changes and you have already heard some of them announced.  Examples are  the cessation of community lunch at the Willits-Hallowell Center, increasing student parking fees, moving to direct deposit for faculty and staff paychecks, and a number of reductions in general expenses throughout the College. 

It has also meant that there are beginning to be some staff layoffs.  To date, three College staff members have been laid off. (This compares with 11.5 FTE's that have captured through attrition for FY2010). We continue to work very hard to minimize layoffs, both by capturing as many vacant positions as possible and by trying to find other jobs for staff whose positions are eliminated.  However, despite our best efforts, I expect that there will be some additional layoffs in the next year or two as we struggle to keep our  budgets balanced.  We will do our best to give the affected staff members as much notice as possible and to work with them to ease their transition.

Rumor Control

I am hearing all kinds of rumors about things that are being considered or about to happen.  So, an ongoing part of this and future posts will be devoted to addressing some of these rumors and questions.  If you hear rumors, whether they sound plausible or preposterous, please share them with me (mjmaydew).

Does the College plan to reduce or eliminate its contribution to TIAA-CREF?

We are planning to review several benefit programs--including the mortgage program, tuition benefits and the full retirement program--during the current year.  We have discussed the possibility of reducing the College's contribution to TIAA-CREF by 0.5% (from 10.5% to 10%) for FY2011, but this needs to be discussed further and no decision has been made. 

Are tenured faculty at risk of losing their jobs?

No. Visiting faculty positions have been reduced and are likely to be reduced further, but tenured faculty will not be affected.

Will the College's financial situation get worse before it gets better?

Almost certainly.  Although there are signs that the economy is beginning to improve, the College's revenues will likely continue to be hurt in two important areas. First, although the endowment returns for last year are better than anticipated, they are still deeply negative. Those lower market values will roll into the moving average of market values that defines what we can spend from the endowment and will keep endowment spending from growing, possibly for several years.  And second, unemployment is still rising and when it does begin to decline is expected to decline slowly.  This very directly impacts our families and the level of financial aid they require, and consequently, financial aid levels will continue to be a significant challenge.

More later,

 MJ



Recent Staffing Changes

06.12.2009 | 0 Comments

Hi Everyone,

 Since my last post, I've been asked by members of the community to provide some additional information about the anticipated FY2010 budget shortfall and its impact on staffing.  I'm happy to do that, but will only be able to talk in general terms; it is too early to know with precision what the impact is likely to be.  I will have more reliable information in the fall and will provide updates as things become clearer.  In the meantime, this entry will  address the various reasons why changes in staffing are necessary.

The first kind of change is the one we've all been focused on recently--budget related reductions of positions to achieve necessary cost savings.  We have been carefully reviewing vacant positions with an eye toward eliminating them where it is feasible operationally.  While we have, in fact, been able to capture some vacant positions through attrition, there are times when more savings are required.  In the past, when we have had to reduce or eliminate positions that were filled, we have worked with the affected staff members to try to find other jobs on campus for which they would be qualified and in which they had interest.  We are, however, not always successful in doing this.  Currently, I expect that we will have a small number of this kind of reduction in positions.  Some of these will take the form of reduced hours and others may result in the elimination of positions altogether.

There is another kind of change that isn't particularly correlated with the need to reduce the budget.  These are changes in the operational needs of a department.  Technology is the most frequent reason that this happens, but it is not the only reason.  An old example is the change a number of years ago from terminals to desktop computers, which required that employees had or acquired different skills.  A more contemporary example is the massive and comparatively rapid movement from print to electronic and web-based applications.  While often employees are able to adapt to new needs, there are occasions when the changing needs of the department are so significant that a restructuring of staff positions and other resources is necessary.  The resulting restructuring may not result in budget savings, but does make it possible for the department involved to accomplish its purpose more effectively.  As with budget related staffing changes, we try to minimize the impact on individual staff members, but aren't always successful in doing so.  This is the kind of restructuring that is currently underway in the Career Development Center, the Office of Communications and LITS.

Other reasons for changes in staffing include occasions when staff request reductions or other modifications in the hours that they are scheduled to work and occasions where the work performance of a staff member is not acceptable.  In the latter example, a staff member should expect to have been given prior notice to improve performance before it came to the point where his or her job was in jeopardy.  Theses types of  voluntary and involuntary changes are relatively straightforward, and I won't spend time on them here.

Without providing more detail than is appropriate, I will try to keep you informed of the steps we take to keep our  budget in balance.  Anyone directly involved in any position reductions will be informed before any information is provided more generally.  If you have questions, please send them to ideas@mtholyoke.edu or email me directly (mjmaydew).

 MJ


Update on FY2010 Budget

05.20.2009 | 0 Comments

Hi Everyone,

 You've now all seen the letter from Joanne and Leslie Miller about the outcome of the recent Board of Trustees meeting and I write to provide a bit more background on the budget situation.  As that letter explained, we are expecting a larger than budgeted first year class, but one that is on average needier than expected.  The likely result is our needing to find additional revenues or cost savings to bring the FY2010 budget back into balance.  Since it is too early to know with any degree of precision what the impact might be, we will be developing plans to address a range of possible deficits up to $2 million. 

 Because it's almost certain that there will be a gap to fill in next year's budget, there will be changes throughout the upcoming year as  additional revenues and cost savings are identified and put in place.  One of those changes has recently been announced, the consolidation of the Smith, Hampshire and Mount Holyoke Public Safety Departments and the move to a regional dispatch center located at Mount Holyoke, which will become effective July 1, 2009.  Like the library acquisition, cataloging and materials processing integration described in my last post, this represents the next stage in a Five College collaboration that already exists. There are several other active discussions about increased Five College collaboration, and we will share news as the discussions mature.

 I will use the blog over the course of the next year to provide updates on our thinking about the budgets for next year and for FY2011.  Please continue to use ideas@mtholyoke.edu to share your thoughts and proposals.  Making the best choices about how to keep our budget balanced will require all of our creative thinking.

 MJ



Library Collaboration and Five Colleges

04.14.2009 | 0 Comments

Hi,

First, I want to share with you a message from the Five College Directors (the Presidents and Chancellor) announcing a proposed consolidation in parts of the libraries.  The message follows:

"The Librarians and their staffs at the Five Colleges institutions (Amherst, Hampshire, Mount Holyoke, Smith, UMass-Amherst) have worked effectively together over the years to provide students and faculty with stronger collections and services than any one institution would be able to provide on its own. Through a shared library catalog, a rapid book delivery system, and a shared storage facility our libraries have demonstrated the power of Five College collaboration.


"In response to the March 11, 2009 call from the Presidents/Chancellor of the Five Colleges encouraging a higher level of integration and greater collaboration among our institutions, the Librarians of the Five Colleges have responded with two new initiatives:  they propose integrating our book collections more fully; and they propose centralizing acquisitions, cataloging, and materials processing operations to the greatest degree possible.

"In these difficult economic times leveraging our resources to expand the breadth of our library resources is essential. Further coordination of our multiple book collections will ensure the strength of all of them and sustain our current purchasing power. Ordering additional copies only when they are clearly required to support teaching, learning, and research will avoid unnecessary duplication.

"In looking to centralize appropriate areas of acquisition, cataloging and materials processing operations, they seek to find the most effective and efficient ways for all five institutions to process the large volume of material we purchase each year.

"The Presidents/Chancellor believe these efforts represent the creativity and initiative that is essential for the Five Colleges during these economically challenging times, they recognize that realizing these projects entails much effort and will present significant challenges, to succeed the Librarians and their staff will need Five Colleges community support, and the Presidents/Chancellor ask that you join them in encouraging these efforts."

This effort represents one of what I expect to be a number of new or expanded collaborations among the schools of the Five Colleges that will roll out over the next months and years.  None of these are reflected in next year's budget, although some may be implemented (or at least begun) during the next academic year.  Some will affect staffing levels at one or more of the institutions, and sometimes Mount Holyoke positions will be affected.  In all cases, we will do our best to find the necessary position savings without layoffs, but I can't promise that this will always be successful. 

I will keep you posted as other collaborations come to fruition (which will always be after the individual departments involved have been informed).  Five College collaboration is difficult and fraught with complexities, but it also represents some of our best opportunities to find more cost effective ways to support our institutions.  So, I expect that we'll see more activity on this front than we have in the past.

 

MJ

 



Update on the FY2010 Budget

03.12.2009 | 0 Comments

Hi,

 We are close to balancing the FY2010 budget and I expect our work to be completed by early April.  Our approach, as we've said previously, has been to use mostly short-term fixes to get us through next year and to provide the planning time we need to deal with the challenging years ahead.

 First, a summary of our revenues:

  • Student Charges.  Tuition, room and board rates will increase by 3.9%.  We are budgeting a 2% reduction in student numbers and a higher level of student financial aid.
  • Annual Giving.  Our annual fund budget is 10% below the FY2008 level of gifts received.  The Trustee Finance Committee has given us permission to use up to $1.1 million of unrestricted bequests (which usually are added to the endowment) to support the shortfall in annual giving for FY2010.
  • Endowment Spending.  Because we use an average endowment market value for determining endowment spending, for FY2010 we will see a 5% increase in the amount available from the endowment to the operating budget.  This represents 4.5% of the average market value, the low end of our permitted spending range.

Major changes on the expense side are:

  • Salaries.  Employees earning up to $60,000 will receive a 2% salary increase.  There will be no regular salary increases for employees earning over $60,000.  Faculty and staff promotions will be appropriately compensated.
  • Benefits.  There will be no changes in the College's contribution to the various employee benefits for next year.
  • Faculty Leave Replacements.  There will be a greater use of per course replacements for faculty on leave.
  • Positions.  For FY2010, reductions will occur through attrition only.  There are no layoffs in next year's budget.

It is important for everyone to understand that the upcoming budget years of FY2011 and FY2012 will be more difficult than what we have experienced so far.  The three major areas of short-term fixes (the increased use of per course leave replacements, the use of unrestricted bequests, and the salary freeze for most employees) are not sustainable over the longer term.  Together they total $3.5 million that we will have to find for FY2011.  In addition, it is likely that the endowment spending distribution will reach 5.5% of the average market value in FY2011 or FY2012.  When that happens, the level of spending from the endowment will not increase.  We also believe that families' ability to pay will erode further as the economic downturn persists. 

In order to balance our budgets in future years, we will need to make bigger, more structural changes in both revenues and expenses.  The thinking and planning we have already been doing will continue throughout the next year in preparation for the FY2011 budget.  Also, because there is so much economic uncertainty, we will need to do some contingency planning in case we need to make mid-year adjustments.

 We're working on scheduling a budget forum in early April at which I'll provide more detail about FY2010 and we can talk more about longer-term financial projections.  All of the ideas that have been submitted are still in the hopper; please keep them coming.

My original commitment was to produce this blog during the FY2010 budget process.  However, since financial and budget matters will continue to be huge issues well into the future, I plan to continue to use the blog throughout the next year.  So stay tuned.

 MJ

 



Mount Holyoke and the Depression

03.04.2009 | 0 Comments

Hi,

 First, we are making considerable progress in balancing the FY2010 budget and I expect to have more information for you within the next couple of weeks. 

Thanks to a suggestion from Martha Hoopes and through the great research of the Archives, I've been reviewing materials from the decade of the Great Depression.  While I've only had time to skim the surface, it's fascinating stuff!  Here are a few highlights:

  • During FY1930 and FY1931, Mount Holyoke experienced small operating deficits ($11,000 to $14,000 on a budget of about $1 million).  For the next three years, and with great effort, the College had small operating surpluses.  Then from FY1935 through Fy1939, there were larger operating deficits (in the 4.5 to 5% of budget range).  It was not until FY1940 that the College was able to bring its budget back into balance.  Unrestricted bequests were an important source of gifts and were treated as current income.  The operating deficits were funded from unrestricted funds transferred from investments.
  • Some of the ways the College worked to balance the budget included: purchasing in more cost effective ways; "centralizing and...efficient methods all along the line of operating and maintenance" (which I would call administrative restructuring); and cutting appropriations to academic departments.  Later changes included reducing faculty salaries and increasing teaching loads.
  • Student numbers in FY1931 were 1048.  By FY1935 they had dropped to 958, but then rebounded to 1020 by FY1938.  The College continued to provide financial aid, increasing it when possible, and also increased the number of student jobs available.
  • The College also continued to invest in its physical facilities, both maintenance and capital improvements.  Projects completed during this decade included a new heating plant; additions to "the new Physics-Chemistry building", the library and Abbey Chapel; a regular program of dormitory renovation; reconstruction of the Lower Lake dam; and the construction of the Mary Lyon garden.

In an eerily familiar statement, President Mary Woolley, writing in 1936 says:

 "The most desperate need of Mount Holyoke is that of larger endowment.  Since the beginning of the depression, the  balancing of the budget has been increasingly difficult; within the last two years, impossible...the academic strength of the College has outdistanced its financial strength, and the latter must be increased if the former is to be maintained and developed."

More later,

 MJ



 

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