Roelofs Releases Budget Details

Interim President Lyle Roelofs issued the October 2009 Budget Letter on Wednesday, October 28, updating the campus community on Colgate’s financial standing. The letter includes information concerning the endowment value, operating budget and staff hiring practices, among other issues.

Colgate’s endowment investment portfolio declined by $168.7 million, or 23 percent market value, during fiscal 2008-09. Roelofs attributed the significant drop to “investment losses combined with the budgeted ‘withdrawals’ in support of the operating budget.” The investment losses incurred a totaled 17.6 percent as of June 30. Roelofs noted that while Colgate’s losses are significant, they are “less than those of peer liberal arts colleges on average by almost 2.0 percent.”

Recently, the founder of Galleon Group, a hedge fund that Colgate has been investing in since 2005, has been indicted for insider trading. It is not yet clear if this will impact the endowment. Administrators declined to comment for this piece, but in an October 20 Reuters article, University spokesman Anthony Adornato said that Colgate is “actively monitoring the situation.”

In the past, the operating budget has drawn heavily from the endowment by about 22 percent. For fiscal 2011-12, the administration is making a concerted effort to decrease endowment spending by 7.5 million dollars, or roughly 5 percent. The Economic Environment Working Group (EEG) is expected to present options for restructuring the budget to meet this goal by January 2010. EEG Co-Chair and Vice President for Finance and Administration David Hale emphasized that financial aid has not and will not be considered a potential source for cost cutting.

“We are still working to get 40 percent of an incoming class receiving financial aid,” Hale said. “We also recognize that more families might need financial aid, so we augmented our financial aid budget. Colgate is not need-blind, but once a student is enrolled, we are absolutely committed to meeting their needs. This has been a principle tenet around which we have worked.”

EEG is still gathering information from stakeholders around campus to understand the issues surrounding the options that they will present. One of the potential opportunities for revenue enhancement is a “modest increase in student enrollment,” according to Hale.

Additionally, the group is focusing on employee compensation, which currently constitutes about 56 percent of the annual operating budget. The University implemented a staff-hiring freeze in Spring 2009 and eliminated nine staff positions from the current budget. An additional eighteen positions that were voluntarily vacated this year will not be filled.

“In order to reduce compensation spending to a sustainable level, we will need to reduce an additional 20 to 25 staff positions,” Roelofs said.

As a way of avoiding involuntary layoffs, EEG is working to develop an early retirement program for long-serving employees who may be considering a job transition.

“There are approximately 100 staff members who would qualify for early retirement,” Hale said. “It is a voluntary program that we felt was really important to offer to the community, but it’s hard to know right now what will come of it.”

Thus far, the hiring freeze has excluded teaching faculty. Hale said that EEG is looking at the possibility of reducing the number of short-term faculty positions, but “that is very much still a question that needs a significant amount of examination.”

The letter also addressed non-compensation budgets, which the administration hopes to reduce next year by about 3 percent overall. Many of the responses that EEG received from students, faculty and staff through an anonymous online “suggestion box” pointed to unnecessary food at events and excessive printing in the library as potential areas for reducing future budgets.

“It really was pretty interesting how consistent the suggestions were in tenor and content,” said Hale. “We are definitely looking more closely into the cost saving opportunities in programming such as catered events.”

Many of the policy and structural changes aimed at reducing the operating budget will not be revealed until the administration has time to consider the EEG presentation in January.

“We are faced with making a lot of difficult but appropriate choices,” Hale said. “The primary commitment has always been making sure that we can sustain the excellence of Colgate. Our focus is to manage through what has really been an inflection point in terms of the economy and higher education, and emerge better positioned for the future.”