Planning & Steps Taken
Last updated March 2010.
The 2009/10 operating budget
The college has adopted a budget of $153.4 million for the 2009/10 academic year. This figure represents a slight reduction from the approved budget for 2008/09 ($153.9 million), and a reduction of about $6.8 million from what was projected for the 2009/10 expense budget prior to the economic downturn. This initial response to the loss in endowment market value caused by the financial and economic crisis was achieved through a variety of measures:
- a salary freeze in 2009/10 for administrators earning more than $50,000 and for tenured faculty;
- a hiring freeze for many faculty, administrative, and staff positions and a small number of lay-offs and non-renewals of expiring contracts, resulting in a reduction in non-faculty positions of 25 FTE and in faculty of 16 FTE in 2009/10;
- a reduction in overtime for hourly employees;
- a reduction in departmental operating budgets for 2009/10 averaging 10%;
- a sharp decrease in spending on facility renewal and discretionary projects to improve facilities;
- the provision of incentives for voluntary retirements for faculty, administrators, and staff.
Additionally, the college has investigated and enacted changes in several other areas in order to achieve additional savings, including but not limited to the elimination of all non-essential travel, reductions in student employment where it will not compromise financial aid, efforts to reduce energy consumption, and changes in operations or programs on campus to adapt to the slightly lower staffing levels.
These steps, taken in combination, have positioned the college to meet the 2009/10 operating budget of $153.4 million approved by the Board of Trustees.
To support this operating budget, the Trustees approved spending of $50.6 million from the college’s endowment. Expressed as a percentage of the estimated beginning market value of the endowment in 2009, this translates into a spending rate of approximately 7.6%. Normally, the college expects to spend between 4.5% and 5.5% of the market value, based on the average amount of anticipated investment return and the importance of retaining part of that return to offset long-term inflation. This is why the Trustees and the administration say that the rate of endowment use in 2009/10 is clearly unsustainable.
Planning for the future
Over the course of fall, 2009, the college has continued the work of bringing the operating budget in line with the changed financial picture. The focus has been on the 2010/11 budget as well as longer-term goals; the areas that have received the most attention in the planning process have been employment; salaries, wages and benefits; operating expenses; and capital spending on equipment and campus renewal. The 2010/11 budget will not be finalized until later in the spring, so the plans outlined below may change.
Employment and Compensation:
By the deadline for acceptance of the retirement incentives offered to staff, administration and faculty, 45 staff and administrators, 6 tenured faculty members and 4 non-tenure-track faculty members had accepted an incentive for full retirement. In addition 2 tenured faculty entered a phased retirement program. A little more than half of the administrative and staff positions vacated by these retirements will not be replaced.
In the fall of 2009 the college notified 13 employees that their positions were being eliminated. Many of those employees have found work elsewhere in the college or have been successful in finding jobs outside the college.
The net result of the changes in the staff and administration that have been made since the fall of 2008 is a reduction of about 80 full-time equivalents or approximately 10% of the non-faculty work force. 75% of that reduction has been achieved through retirements or resignations, where the positions left vacant have not been filled. About 40% of the reduction has taken place in the administration, 37% in clerical and technical staff, and 23% in service and security staff.
The faculty salary budget for 2010/11 has been reduced through a combination of restricting leave replacements, not replacing some positions vacated by retirements, limiting the number of new tenure-track appointments, and reducing the number of team-taught courses and classes with fewer than 5 students enrolled. In addition 9 non-tenure-track faculty in part- or full-time positions have not had their contracts renewed, bringing the total number of reductions in non-tenure-track faculty contracts since 2008/9 to 19. Although we are still planning the curriculum for 2010/11, we expect that it will be the same size or slightly larger than this year’s curriculum, due to leave patterns and fewer reductions in teaching loads for faculty fulfilling administrative duties. As a result of these measures, the faculty salary budget in 10/11 will be reduced by about $1.5 million from the level we were anticipating before the change in 2008/09 and 2009/10.
Although the planning model includes further reductions in both the faculty and non-faculty salary budgets, we hope to achieve these reductions over the next four years by not replacing positions that are vacated by retirement or resignation or by not renewing contracts that will end during this period.
Benefits: The Benefits Committee was charged by the President and the Board of Trustees to make recommendations about changes in benefits that would yield a permanent reduction in annual benefit costs for faculty and administrators of about a million dollars. The Benefits Committee examined the distribution of college spending for benefits and determined that changes to health insurance and retirement plan contributions were necessary to achieve the significant long-term savings expected.. The Committee took its assignment to be to ensure that the resulting program would still be a strong benefit program, serving faculty and administrators well and playing an important role in recruitment and retention.
Initial ideas developed in the spring of 2009 were shared in a memorandum sent to faculty and administrators in October; two open meetings were held that month primarily to discuss the substitution of a Blue Cross/Blue Shield network option, the EPO, for the MVP HMO. In January, 2010 the committee sent a memorandum and held a third open meeting to discuss in greater detail two recommendations being considered for the 2010/11 budget. The first recommendation is to calculate the college’s contribution to an employee’s health insurance plan as a percentage of the premium cost of the Empire Blue Cross/Blue Shield EPO plan (85% for single plans, 70% for employee plus dependents.) Those who wish to purchase the more expensive PPO plan would therefore have a greater out-of-pocket expense for premium cost than those who choose the EPO. This change would save the college about $400K annually. The second recommendation is to lower the college’s contribution to retirement plans for faculty and administrators over 40 from 14% of salary to 12% of salary. This change would save the college about $700K annually.
The Benefits Committee is also considering the way the college purchases post-retirement health insurance for current retirees and the design of the tuition benefit for faculty and administrators. No change in the tuition benefit is expected in the short run, given the need for advance notice and planning.
The elimination of positions in many areas of the college has required a certain amount of reorganization and prioritizing of the work we do. These changes have been motivated not only by changes in staffing but also by the need to reduce operating costs. Many offices in the college have been affected, some in very noticeable ways and others in marginal ways with little impact on the community, but with meaningful savings achieved. Hours of service, office procedures, and staffing levels have been under review in Buildings and Grounds, Health Services, the Library, the Post Office, Dining Services, Computing and Information Services, Accounting Services, Purchasing, Student Employment and various academic and administrative offices. Energy costs are being reduced through control over consumption and through careful bidding and negotiation of purchase contracts. AAVC, Development and College Relations are working to better align and integrate their services, reducing redundancy and improving coordination. Athletics has reviewed the scope of its programming, and recommended the movement of a varsity sport to club level. These are some of the examples, but there are many other smaller changes underway to conserve college resources. We ask for openness to change that attempts to conserve college resources for our highest priorities in academic, residential, and support operations.
In the 2009/10 budget we reduced discretionary operating budgets in many departments by as much as 10%We are budgeting another reduction in operating costs in the 2010/11 budget, and we project further reductions in 2011/12 and 2012/13.
Although in 2008/09 and 2009/10 we reduced capital spending to those that are necessary for safety and health or to completion of donor-funded projects, it is clear that we cannot responsibly continue to restrict the funds we put into the renewal of the physical plant. The 2010/11 budget has an allocation of only $2.7 million to support the long term renewal of the plant. In order to be able to carry out necessary projects in a timely fashion, the trustees have asked the financial staff to prepare for a tax exempt bond issue which will be spent over the next three years and repaid by the college over the next 30 or more years. At the moment we are expecting to spend about $15 million from the bond during the 2010/11 fiscal year on projects that involve necessary repairs and upkeep of existing buildings.
The challenges we face in the longer-term involve balancing the various needs of the college within the limitations of our resources. The following are some of the considerations that enter our longer-term planning:
- As we reduce the workforce further through leaving positions vacant or through expiring contracts, what programs or services should we consider transforming or eliminating in order to make sure that we do well those things which are essential to our educational mission?
- What are the capital projects that we must accomplish in the next ten years and how can we be sure we have the funding to do them?
- Was the sudden rise to 60% of the incoming class a sudden reaction to the economy or a permanent shift? If more than 60% of the incoming class qualifies for financial aid in the future, can we afford to maintain our need-blind admissions policy?
- How will we meet the challenge of the increasing costs of health insurance, both for continuing and retired members of the community?
- How do we balance the desire to continue the things we currently do and the desire to launch new initiatives like the science project?
- What steps must we take, in a changing financial situation, to make sure that Vassar remains a place where students, faculty, administrators and staff feel both challenged to do their best work and valued in the work they do?