Managing the Economic Downturn
November 19, 2008
Dear Friends,
Last month I reported to our campus community how the global economic downturn was affecting Franklin & Marshall College and how we planned to respond. As the volatility of the credit and stock markets persists, I want to bring you up to date on our plans and recent actions.
First and foremost, I assure you that Franklin & Marshall is financially sound and well-managed, and that the significant progress we've made over recent years will continue.
You are likely aware that the College has three primary sources of revenue: tuition; endowment income; and donations to the Franklin & Marshall Fund. Please know that we have already made the decision to moderate increases in tuition next year. Our endowment will be impacted negatively by the stock market, and we anticipate that Franklin & Marshall Fund will be affected, although we do not know to what extent. To date, gifts to the College have been very strong, and we are deeply grateful for this generous and timely support.
In light of these circumstances, we have developed a contingency plan for reducing our operating expenses and maximizing our ancillary services' revenues. Our Vice President for Finance Helen Bowman proposed that we reduce the College's operating expenses in the current fiscal year by $1.3 million, a number predicated on a credible scenario for disruptions in our fundraising and enrollment performance. We agreed that there are certain commitments that must be protected, among them the quality of the academic experience, financial aid, our employees' jobs and benefits, the continued development of the College House system, and campus and neighborhood safety.
An interesting phenomenon occurs when leaner times force organizations to cut back. Inevitably managers at all levels discover that they can often do just as well with less; organizations become better managed and their resources better stewarded after a period of belt-tightening.
Franklin & Marshall is a case in point. A number of the reductions we are implementing have the benefit of reducing our energy consumption or otherwise contributing to our institutional goal of a more sustainable environment. Let me give a few examples. We will alter the temperature setting by two degrees in buildings that are heated and air-conditioned centrally. During winter break, we will lower the temperature in unused academic buildings to 50 degrees, and we will implement energy-saving initiatives in all College Houses. Together these actions will save the College $250,000. We will also modify the quantity and variety of food offered at events, saving $85,000, and will cease printing operating reports available online, saving $25,000.
In the realm of process improvement, we are transforming our computer store into a procurement and repair center, which will save about $280,000.
We will also consider delaying or modifying certain capital projects, if needed, in order to conserve our cash.
On the revenue side, we will ensure appropriate charges for the use of our facilities and will enhance our summer program offerings, yielding potential income of $300,000.
As a result of these measures, and actions taken last year, we will be able to set aside a fund specifically to meet the increased demonstrated financial need of students whose families have been severely affected by the economy. This fund will provide a bridge of support to the 2009-2010 academic year for families who suddenly find themselves in immediate need of financial assistance to keep their students enrolled at the College. This fund will bring peace of mind to Franklin & Marshall families, while ensuring the stability of our student body during a time of economic uncertainty.
On Oct. 25, we presented to the Board of Trustees our plan for reducing expenses. The Trustees agreed not only with the substance of our recommendations, but also with our timing -- to reduce expenses now, rather than at the end of the fiscal year. We are all committed to the successful implementation of these initiatives.
As our economy moves into a recession, we are prepared to make deeper cuts for the fiscal year beginning July 1, 2009, and for several years thereafter, as necessary. We have solicited suggestions from the campus community to help ensure that we focus first on cutting waste rather than things of value. For now, the $1.3 million in expenses already identified will cushion us against potential shortfalls for the remainder of this academic year.
If you have any questions or concerns, please contact me. Thank you for your support during these challenging times.
Sincerely,
John Fry
