Economic Response Group Announces Budget Priorities

Last spring, American International Group reported fourth quarter loses of $62 billion, the Dow Jones Industrial Average fell below 7,000 points for the first time since 1997 and the unemployment rate skyrocketed to 8.1 percent, a trend that has yet to reverse.

At this point, it seems that even the academic bubbles surrounding higher education were not spared. According to a joint statement released by then-President Rebecca Chopp and current Interim President Lyle Roelofs on April 2, 2009, “The Colgate endowment has sustained losses of 22 percent for the nine months ending February 28, 2009. We anticipate that the Colgate market value, after write-downs for illiquid investments are recognized, will be approximately $520 million or almost $210 million lower than its May 31, 2008 value.”

In this economic climate, Harold Orville Whitnall Professor of Geology Bruce Selleck and Vice President for Finance and Administration David Hale ’84, co-chaired the Economic Environmental Working Group (EEG), which was charged with finding “restructuring opportunities for the upcoming immediate year budget and beyond that [which] would put us back in financial equilibrium,” according to Selleck.

The recommendations the EEG made to the Board of Trustees last month and will make at the next full board meeting in March are best broken down into three categories: increased revenue, non-compensation budgets and lowering the number of non-teaching faculty staff. Ideally, this will lead to at least $3 million in savings over the next year.

The 10-member EEG committee, composed of Colgate alumni, faculty and administrators, went to work researching what the community believed were unnecessary excesses in resource allocation. Through a number of open meetings and extensive conversations with members of the Colgate community, several potential areas for savings became clear.

“We did hear a lot about programming. Is there too much? Is it inefficient? Is there too much going on all at once?” Selleck said.

Utilizing campus facilities during the summer, distribution of paper goods and the “use it or lose it syndrome” were all issues that came to the attention of the committee. By “use it or lose it,” the EEG was referring to the mentality that a student group must spend all the funds in a given budget since certain funds within the community have a year-end expiration date at which point whatever is left over will not be at their disposal in the coming year.

“We tried to work with the campus governance system to develop options that fit in with a regular budget in campus governance processes,” Hale said. “The good thing that happened here is there were ideas that merged together [between Colgate governance and community consultations] that we could drop right into the budget process for next year.”

Due to the fact that Colgate’s primary form of revenue generation is student charges, amounting to nearly 65 percent of the annual operating budget, “We are working to modestly increase student enrollment; the target student enrollment is 2,760 for this year and we are recommending that the university look at increasing [enrollment] to 2,830,” Hale said.

The change will be made in phases, with roughly 20 more students in each class than the year before, starting with the Class of 2014. As a result, the EEG hopes to “take Colgate to capacity in terms of housing and course availability,” according to Hale.

Within the realm of non-compensation budgets, the EEG “asked the community to reduce spending by five percent this year and then an additional three percent next year,” Hale said.

To date, these measures have saved the university some $2 million and the hope is that an additional $1 million will be saved from non-compensation budgets next year.

“The response has been incredible; we have made significant progress on that front,” Hale said.

As for the final category of interest, the EEG “implemented a hiring freeze for staff last February and [has been] able to eliminate roughly 18 positions,” Hale said, adding that the EEG also “rolled out an early retirement program for long-serving employees.”

At this point the EEG has made no recommendations for cutbacks within Colgate’s athletic program.

“Athletics is an area that the committee believes must be studied further,” Selleck said. “It’s clear from our analysis and it’s really clear from what we heard from the community that [athletics] is a concern, that we have a lot of intercollegiate programs. But, there are no recommendations for cuts in that area.”

With regard to other notable Colgate expenditures, Selleck joked he was “deeply saddened” by the news that Snoop Dogg would no longer be able to perform at Spring Party Weekend for the controversial price tag of $120,000.

Another major expenditure by the university would come in the form of the purchase of the former Delta Kappa Epsilon (DKE) house on Broad Street.

“We have been working steadily with the leadership of the DKE alumni since last spring, and are in negotiations to purchase the chapter house,” Hale said.

However, Hale assured the expenditure would not directly weigh on the operating budget as the move would be more of a “way to move forward with the relationship between the university and the DKE alumni association.”

“A progress report of the EEG may be released as early as the end of this week. [However,] the final report of the EEG needs to coincide with the approval of the budget in the last weekend in March,” Hale said. “After that time we will have a more detailed disclosure.”

Until then, the Colgate community can rest assured that the recommendations the EEG is making to the Board of Trustees will not include “major changes to the way we do business or major cuts in one specific area; it has really been about asking folks to find efficiencies and savings,” according to Hale.

“We do not see ourselves as a continuing group at all and that’s good,” Selleck said, when asked whether the Economic Environmental Working Group will continue its work after the Board of Trustees approves the 2010-11 budget in March. “I think it has been a good process and we communicated with the community, heard them and it’s a job we are looking forward to having done.”

Contact Ryan Smith at [email protected].