College President James Wright announced last week that Dartmouth will make budget cuts in response to a significant shortfall in investment return suffered during the 2002 fiscal year.
The College -- which joins numerous other institutions nationwide in posting losses on its endowment during a weak economic period -- will trim more than a $1 million from next year's budget, making changes that will affect areas from new jobs to construction projects.
Though the possibility of layoffs exists, Provost Barry Scherr said financial aid will not be touched, nor is the College likely to reduce faculty and staff salaries.
"We want to protect the core academic programs," he said, but added that pay raises for faculty and others "might not be as high as in certain other years."
According to a statement from Wright, Dartmouth "experienced a net investment loss of 5.7 percent on our endowment for the 2002 fiscal year, which will lead to projected deficits for 2003 and 2004."
To account for prior losses, the College had already cut $3.3 million -- or 1.4 percent -- from the budget during Spring term. With the continued weak performance of the economy, however, Wright said additional cuts of $1.6 million would be necessary, with further cuts of $5.7 million planned for next year.
Areas that will be most affected under the cuts include the hiring of new non-faculty employees and planned construction projects.
Scherr explained that "any non-faculty replacement position" will now be subject to review from the College Budget Committee, though grant-funded positions will be less affected.
Additionally, any construction or renovation project "that isn't physically underway" will be delayed by the cuts, Scherr said.
"We will probably do projects more slowly, but that doesn't mean we're not doing them," he said. "We need to make sure that the budget can handle existing costs."
Tuition will likely not be among the areas facing major change. According to Scherr, the College is not expecting next year's announced rise in tuition to "be especially sharp," though he admitted it remains too early to be certain.
An upcoming capital campaign will have little effect on making up this year's losses, as money raised will go directly toward the initiatives outlined in the College's strategic plan, such as expansion of the faculty and of Dartmouth's physical plant.
Despite the poor performance of Dartmouth's investments -- the College had anticipated a loss of only 3 percent for 2002, but was confronted will a 5.7 percent drop -- Wright said that the overall financial picture is "fundamentally sound."
Dartmouth's investment office "has done a superb job in a difficult market," Wright wrote. "Our performance was better than benchmarks would have predicted."
In fact, relative to most market indicators, Dartmouth has fared well during an economic downturn that has hit college endowments harder than any time in the recent past.
Damon Manetta, manager of external affairs at the National Association of College and University Business Officers, said the past fiscal year marked the first time since 1984 that colleges across the country have averaged negative returns. With no economic recovery in the immediate forecast, Manetta said that colleges and universities could be facing the first consecutive annual losses in almost 30 years.
"There is the possibility there could be a slight positive return" during the coming year, he said, "but from what we know now it should be negative."
Nor will Dartmouth's own $2.4 billion endowment be the only fund subject to reductions. The College's graduate schools -- including the Thayer School of Engineering, the Tuck School of Business and the Dartmouth Medical School -- will also face cuts.
Though the schools are less dependent on the College, Scherr said they rely in part on Dartmouth's earnings and will take into account this year's losses when preparing their own separate budgets.
