Are you the Record reporter assigned to write this week’s story on the College’s financial troubles? How come you haven’t contacted me (or someone else knowledgeable) so that your article is more sophisticated than similar coverage in the The Greylock Echo? Just asking!

Anyway, after you finish with this overview, here are the key data/documents/answers you need to gather.

The article must feature a table with the key elements of the College’s revenues and costs. Although more detail is nice, the critical feature is reasonable estimates for fiscal years 2009 (ending June 30, 2009) and 2010. Start with these financial statements. The 2008 numbers are not public, but the accountants are done so someone knows the details. You can use the last few years data to provide a forecast for 2009 and 2010 spending. Assuming 6% increases each year is probably consistent with experience this decade.

On the spending side, you don’t need anything beyond the overall number. Later articles can break that up into categories. A key distinction is between total employee compensation (salary, benefits, retirement, etc) and all other costs. HWC notes that employee costs were 55% of the total at Swarthmore. I bet that Williams is similar. Since Morty has promised no cuts (even in the rate of growth?!) in these expenses at Williams, it means that cuts in other areas need to be even larger.

On the revenue side, you should provide the breakdown for the three categories that Morty mentioned in his e-mail: student payments, annual giving and endowment spending. Get these numbers for the last few years (if you contact HWC, he will help you out with the details). You could then forecast the student money out into 2009 and 2010. Find out what the value of the endowment is now. (Assume that it is $1.4 billion if the Investment Office won’t tell you.) Endowment spending would then be $70 million (assuming the historical 5% spending rate — anything higher is eating the seed corn). For alumni giving, assume a decrease by 20% for 2009 and then constant in 2010.

Put all that together, and you know how many dollars need to be cut out of the College’s baseline budget. My guess would be somewhere between $5 and $20 million, but you should be able to narrow that down.

Other comments:

1) Without a fairly detailed knowledge of the College’s revenue and expenses, it is hard to have a sensible opinion as to the College’s current plight. Maybe things are bad. Maybe they aren’t. (Like any good college president, Morty has a (small?) incentive to make the financial situation seem worse than it is now so that when he proposed the next budget everyone is pleasantly surprised to see cuts smaller than they expected.) I just want to be sure that the College lives within its means. Everyone at Williams today has a reason to spend the endowment rather than make necessary cuts. They won’t be around in 100 years. The Trustees (and Morty!) need to ensure that everyone takes the long view. Spending more than 5% of the endowment in any given year is a mistake.

2) I thought that the conversation in this thread was less useful than normal because there was too much focus on my idea for freezing salary for faculty/staff making more than $100,000 a year. This is an idea, something that I have thrown out for discussion. We still don’t have a good sense of the magnitude of the trouble that the College is facing. (Again, I was shocked by the tone of Morty’s e-mail.) We don’t have enough details on the line items in the College’s budget. We don’t have a good sense of likely future revenue. Depending on how these facts come out, I could imagine changing my mind. Perhaps things are not that bad at all and no cuts are necessary!

In the meantime, anyone who puts 50%+ of an organizations spending off-limits in a time of recession and financial market crisis isn’t engaging with the problem in a professional fashion.

Facebooktwitter
Print  •  Email