College President James Wright has announced plans to cut the College's budget by 5 percent this year, with the goal of reducing the budget by 10 percent -- approximately $40 million -- within the next two years. The plans include a hiring freeze, reducing all College discretionary spending this fiscal year by 5 percent, deferring several construction plans and reviewing new programs. The statement came after the College announced first quarter endowment losses of $220 million, as reported by The Dartmouth on Monday.
"This is a significant number," Wright said in an interview with The Dartmouth. "It will be hard. It will have consequences."
Wright sent a campus wide e-mail Thursday afternoon announcing the College's intention to cut its budget. A joint e-mail from Executive Vice President for Finance and Administration Adam Keller and Provost Barry Scherr followed shortly after, enumerating the extent of the changes. The interim steps of the plan are effective immediately, and the College will begin slowing down spending before permanent changes are adopted, Wright said.
"When we talk about the overall reduction [by] 10 percent there is no way that doesn't involve significant reduction in compensation because Dartmouth is a labor-intensive institution," Wright said.
Wright added that the College will have to reduce staff compensation, and that he hopes to achieve as many of the reductions as possible through attrition, or the natural cycle of employees coming and going.
The hiring freeze will remain in place as long as the College deems necessary, Keller said in an interview with The Dartmouth, because the College must "pause to do some planning." He added that these are "steps that will get us to an end point."
"We want to do everything we can to avoid and reduce the layoffs," Keller said. "We have natural attrition that occurs throughout the year. We don't want to add to our employee base any more than we have to."
Keller added that the freeze will also serve as an opportunity for current Dartmouth employees to advance in their careers and fill jobs they find more interesting.
The College will also delay several construction projects for two to six weeks in order to reevaluate their feasibility under Dartmouth's updated financial situation, according to Keller and Scherr's e-mail. These include the construction of the new Visual Arts Center, the renovation of the west stands at Memorial Field, and Buchanan Hall, which would house faculty and administrative offices for the Tuck School of Business. Construction plans that do not have specified funding, such as the replacement of Thayer dining hall, will be deferred.
"There are a couple projects we will revisit almost immediately over the next couple of months," Keller said. "The Visual Arts Center is a project we are looking at the finances for and for the renovation of the west stands at Memorial Field."
Construction projects where building is sufficiently under way, including the Class of 1978 Life Sciences Complex, the Tuck School Living and Learning Complex and the Michael J. 1979 and Cynthia Ginn 1980 Biondi Ballpark, will be completed, Keller said.
Students will feel the effects of the financial crisis as the budget cuts percolate through the College, Wright said, although not in the near future.
"Longer term there certainly will need to be some cutback in programs and services that could have an impact on students," Wright said. "We are committed to do this in a way that will protect the quality of Dartmouth education."
Wright echoed previous statements that he, the Board of Trustees and the College are committed to protecting financial aid. He added that financial aid is a "crucial part of the Dartmouth experience."
The Student Budget Committee will soon meet with the College's administrative leadership for their opinions on the cuts that will affect student programs and activities, Keller said. Students on the committee will be able to anticipate where reductions will be most effective and have the smallest impact on students, he added.
Students not on the Budget Committee will also have a role in determining where cuts can be made and what programs will remain unaffected, although the decisions will not be made by popular vote, Wright said, to protect programs with smaller membership.
"I think the strength of Dartmouth is our ability to provide a range of support and activities and opportunities for a very rich student body," Wright added. "It would be a real mistake to only look at things where a mass of students are engaged and say these are the only things we'll continue doing."
The College will solicit additional input from "as many people as possible" as decisions for more permanent budget cuts are deliberated, Wright said. In the end, however, the Board will approve the changes following the recommendations that Wright will bring on behalf of the budget committee, he added.
Next year's budget will likely be similar in size to this year's, Wright said, although the final changes remain uncertain. Normally the budget increases from year to year.
"It's not that we have in mind how this will play, it's not that we have in mind where the impact will be," Wright said. "That's why we need to get the consultative process underway that we're intending to start immediately."
The College must reduce the growth of the budget by $40 million, or 10 percent, over the next two years in order to keep the budget in balance, Wright said.
"We expect to be down in endowment returns over the next couple years," Wright said. "This it not something we are going to recover from for a while."
Although the 5 percent budget cut in discretionary spending for this fiscal year is a goal of the College, a 10 percent budget reduction over the next two years is crucial, Wright added.
"There will be some areas that can do this and some that can't," he said. "So much of the budget is built on compensation. We certainly aren't looking at people to terminate positions or compensation in the middle of this year in order to reach the 5 percent goal."
The current endowment projections have been reduced by 10 to 20 percent and the College does not expect any increases in endowment for the next couple of years, Keller said.
Wright added that if the endowment does not rebound he believes the planned changes will alleviate the need for the College to combat similar issues in the coming years.
"I think by looking out at the projection over the next four years and taking this in two-year blocks at a time and being conservative, we are trying to deal with this in one single set of plans," Keller said. "We don't have expectations that we will have to do more."
The College will continue to reevaluate and analyze the endowment and the effect of budget cuts after every fiscal quarter, Keller said, to ensure that the budget is on track.
Dartmouth's budget announcements come after Harvard University President Drew Faust issued a statement on Tuesday about similar potential reductions in spending, programs and compensation as Harvard's endowment also falls, The Boston Globe reported. In the past two weeks, Gov. Arnold Schwarzenegger, R-Calif. and Gov. David Paterson, D-N.Y., also announced cuts to their state-run university systems, according to Inside Higher Ed. Paterson announced $348 million in reductions from the State University of New York and the City University of New York. California will cut $132 million from its public universities and $332.2 million from community colleges, Inside Higher Ed reported.