On Jan. 31, Interim President Wagner announced the College’s latest financial steps geared toward budget stability in an all-campus e-mail. Among the measures designed to curb spending and create a more conservative budget are: the reinstatement of loans into financial aid packages beginning with the class of 2015, the continued postponement of the Stetson-Sawyer library and Weston Field construction projects and a continuation of the hiring and salary freeze for faculty and staff, combined with the introduction of retirement incentives. As the College continues to seek ways to cut costs, the administration will also consider altering the current need-blind policy admissions for international students over the next several weeks.
Endowment and budget
College administrators are working to cut back spending in this year’s budget in order to draw less from the endowment, which was $1.4 billion as of June 30, 2009, notably down from its $1.9 billion peak. According to Chief Investment Officer Colette Chilton, the most recent estimate of the endowment, from Dec. 31, was $1.5 billion.
This year’s budgeted endowment spending of $79 million, or 5.6 percent of the endowment, exceeds what administrators consider the responsible amount for the College’s current endowment size. Wagner noted that the last time the endowment was at its current level, the College’s spending from the endowment was approximately $60 million, which represents a spending rate of around 4 percent. The College aims to draw 4.5 to 5 percent of the endowment each year, a spending rate that it considers sustainable. “Given the magnitude of the decline [of the endowment] we have to bring our expenditures down to what the endowment can maintain in the long term,” Wagner said. He added that next year’s amount is slated for $73 million, which will again be more than 5 percent of the endowment.
According to Wagner, part of the difficulty in decreasing spending is the fast rate at which spending has increased in recent years. “Most of what we spend isn’t discretionary – it’s structural,” Wagner said. “Once you build a structure of expenditure as we have, based on the level of resources we had, it’s hard to unwind it and reduce expenditures.” The structure Wagner spoke of includes the increased size of the faculty, which has grown 33 percent over the past ten years.
Wagner noted in his e-mail that the College is in a “strong financial situation by virtually any comparison – except with the Williams of three years ago.” Provost Bill Lenhart added that the College does still have “considerable financial strength,” citing the endowment and generous alumni. “However, that strength is not great enough for the College to continue to operate at pre-financial-crisis levels of expenditures, and the reductions achieved over the past year have not yet gotten those expenditures down to a level that can be sustained over time,” Lenhart said.
As a result, the administration is left looking for places to make cuts. “We have to project the endowment we think we can reasonably expect, added to what we can expect to receive in gifts, tuition and fees, and ask ourselves what size of programs, faculty and staff and services we can afford given the resources we have,” Wagner said. To that end, all College departments are preparing two budgets for next year: one with a 6 percent budget reduction and the other with a 10 percent reduction. Wagner said that the administration is looking for an average 6 percent cut, adding that some departments will be able to cut more than others and will be asked to do so.
In trying to make ends meet, the College recently announced changes to its financial aid policy and will be considering additional changes in coming weeks. Wagner’s Jan. 31 e-mail announced the reinstatement of loans into financial aid packages beginning for the class of 2015. This policy reversal has since been widely publicized in national media.
Financial aid accounted for 21 percent of total College spending for 2009-10. “Spending for financial aid has tripled in the past 10 years, and doubled in the last three years,” said Paul Boyer, director of Financial Aid. “In the last four years, the size of the financial aid population has gone up 22 percent. The average financial aid package has also gone up, in part due to the economy shift in the last two years.”
While financial aid spending is slated to continue its increase, Wagner said in his e-mail that the College has deemed it “prudent” to reintroduce “modest loans.” According to Boyer, the policy change was a straightforward question of dollars and cents. “At the outset of the financial crisis, the College wanted to protect financial aid policy at all costs, but by reintroducing loans, the money saved can be diverted to other areas,” he said. “At the end of four years, we’ll have $2 million to help close the gap between what we can get from the endowment and what we need to meet budgets.”
Despite the policy change, administrators stress the importance of continuing to provide an affordable Williams education. “The College’s commitment to making Williams affordable remains strong,” Lenhart said. “But given the escalating costs of our financial aid program, we’ve had to look at actions we can take that will help moderate the growth of those costs.”
Wagner added that the College continues to prioritize generous aid policies. “The decision to go back to loans was made in the context of the growing financial aid budget, which is one that will continue to grow,” he said. “We look at it not as a decrease in the amount spent on financial aid, but rather as a redistribution of financial aid funds that will continue to make Williams an affordable and accessible place.”
The announcement has been made all the more contentious due to announcements by peer institutions. Yale, Harvard, Princeton, Amherst and Bowdoin have all affirmed that they will maintain no-loans policies. Nonetheless, Boyer believes that the majority of colleges and universities are in similar financial situations and changes to aid policies may be somewhere down the road. Dartmouth, following Williams, announced on Monday that they will reinstate loans into financial packages.
“We’re not expecting the decision to have a huge impact, knowing that only 13 schools were no-loan and that the change we’re proposing, though dramatic in scope, is moderate in size regarding actual student awards,” Boyer said. “We had one of the more generous loan policies to begin with, and 20 to 25 percent of students on aid didn’t have loans at all.”
Dick Nesbitt, director of Admission, conceded that the policy change might cause a slight loss in the College’s competitive advantage, but not significantly. “It may affect a certain range of students in a certain financial aid band, but relative to the size of the entire class, it’s probably a very small portion.”
Continuing discussions of changing financial aid policy have entered the realm of need-blind admission for international students. This discussion comes on the heels of a decrease in the number of international students for the class of 2013, which has 31 international students, approximately 6 percent of 549 current first-years. This represents a decrease from previous classes, of which 8 or 9 percent of students were international. “There was a conscious decision made last year, without changing the need-blind policy, to slightly reduce the number of international students,” Nesbitt said, confirming that the decision had been handed down by upper-level administration.
Wagner stressed that while need-blind policy for international students is being reconsidered, altering the need-blind policy for domestic students is “not even on the table.” “For international students, we have to look at what the impact of need-awareness would be on the number of international students at the College,” he said, emphasizing the importance of international students to the diversity and robustness of the student body. “It seems that we’d be able to introduce some need-awareness into the admissions process.” Wagner added that while there is still some time before the decision will be made, a policy change could feasibly affect the class of 2015.
According to Lenhart, the College expects to spend approximately $6.5 million this year in aid for international students. Boyer added that the average international student’s financial aid package is $10,000 more than that of the average domestic financial aid student.
Boyer said that introducing an element of need-awareness would slightly shift the way the Admission Office recruited international students. “The policy can be tweaked so that we can try to attract qualified international students who can pay, and admit fewer needy international students – not fewer internationals, but a different make-up of students, knowing that internationals have greater need on average than the average domestic financial aid student,” he said.
Nesbitt agreed that introducing need-awareness would not jeopardize the strength of the international student population, saying that such a policy would allow the Admission Office to take finances into consideration in situations with “all other things being equal.” However, he admitted that such a policy change could have an impact on the students who consider Williams when applying to college. “Since we went need-blind for international students for the class of 2006, applications from international students have increased from around 450 to a peak of 1500,” he said. “We could see a little bit of a reduction in applications.”
Wagner’s e-mail also announced the continued delay of the Stetson-Sawyer and Weston Field construction projects. According to Steve Klass, vice-president for operations, delaying major construction projects requires asking questions about the conditions of the current facilities, as well as their ability to sustain operations during the delay. “While neither the library nor Weston Field is capable of meeting evolving programmatic goals in their respective futures, each is in acceptable condition to serve us well until the projects are complete,” Klass said. “One additional year of delay won’t change that.”
For the library staff, the delay means both a longer time in crowded Sawyer and an opportunity to take a closer look at the plans for the new library. David Pilachowski, Stetson-Sawyer Project Building Committee co-chair and College librarian, highlighted the problem of continued storage of the Chapin collection, 90 percent of which was moved to the off-site Library Shelving Facility. The remaining 10 percent is housed on Southworth Street in College-owned apartments. “At this point, we’ve been in Southworth long enough to understand the impact of having 90 percent of our collection not easily accessible,” Pilachowski said, noting that the brisk pace of evacuating Stetson precluded a box-level inventory, making it extremely difficult to find archived and Chapin Library materials researchers. “It’s frustrating for the library staff to not provide the level of service they’re used to providing,” he said. The College recently approved the use of an additional apartment in the Southworth facility, which will allow for the ability to process materials with greater ease.
Pilachowski added that another drawback of the delay was the deferment of the space and features planned for the new library, which will house both library and the Office of Information Technology (OIT) staff. Nonetheless, he added that the delay allows those involved with the project to explore sustainability and fundraising opportunities. In revisiting the plans, he noted that one of the goals of the new library is to “ensure that the new building has a long life to support a hybrid collection of both digital and traditional materials,” mentioning looking into various mechanical systems and also photovoltaic panels for the roof.
Finally, Pilachowski plans to explore fundraising for the massive project. “At no one point was anything close to the entire cost of the library covered or built into the capital campaign [which concluded last year], so we always knew that we were going to have to borrow money or find other ways to fund the project,” he said. “At this point, the College is understandably uncomfortable assuming a greater debt load to borrow money. We will use the extra time to explore alternative funding means, particularly project-specific fundraising.”
Faculty and staff
The final item mentioned in Wagner’s e-mail was spending on faculty and staff. Compensation accounts for 62.5 percent of spending outside of financial aid. Wagner noted that the College will continue to leave many open positions vacant. “We’re not going to reduce nearly the size we’ve expanded in the last few years, but we will pull back, which means somewhat fewer faculty, somewhat fewer courses and a redistributive effect of more students in fewer classes.”
Wagner acknowledged that not replacing departing faculty members may put a strain on some programming. “We’ll need to manage restriction in a way that continues to assure that programs are sustained, which perhaps means not hiring as many visitors and not granting as many requests for positions,” he said. “We want to make sure that constriction is achieved in a strategic way so that there is redistribution as we downsize.”
In addition, the College is developing a program of retirement incentives for faculty and staff. Lenhart explained that several aspects of the program are still under discussion, but that the incentive plan “will be available to any employee whose age and years of experience exceed particular thresholds.”
According to Wagner, reducing faculty and staff numbers is part of the general program designed to bring the size of College operations to a level that can allow for a return to forward movement. Lenhart stressed that managing spending means “asking what the College needs to do to ensure that it can continue to successfully carry out its mission with an endowment which, while still large, is much less large than it used to be.” He added that current projections suggest it might take a decade or more, depending on the state of the markets, for the endowment to reach its peak value of approximately two years ago.