Morty started off with the presentation he made to the staff and faculty chairs (paraphrased, quotes are verbatim):

The magic number to target, spending wise, is to draw on 5% of the endowment each year. This allows the endowment not to get behind inflation, as long as its being well managed. The idea is to balance the needs of current students against those of future students.

Last year, the investment return was a negative 1%, but the additional draw of 5% caused an over drop around 100 million dollars. This year, the best guess is that the endowment is down about 25%. In the past year and half, then, we’ve gone from 1.9 billion in the bank to about 1.3, which is a pretty massive change. In fact, all of Morty’s trips for the capital fund for the past five years were probably neutralized last month.

However, we’re still the 10th richest in endowment size/student. The plan, then, is to jump to a 7% draw. This is what happened in the early 1980s, when the college went to 7% for three years. However, a board member fears that we’ll have 10 years to recovery, like Japan in the 90s. The question is, “Is this a sea change?” If it is, “It’s going to be a different Williams.”

Williams lacks the dials that certain other colleges can use. Of the 35 private colleges that are need blind, Morty expects half of them to drop this status, and for the rest to amp up the % of admissions made partially on the basis of income. We’re not going to do that; Morty is committed to the idea of a good education regardless of income, though it may be different for Internationals, which largely pay either everything, or nothing. That decision has not been made, and should not be anticipated, but Morty didn’t rule it out the same way he did for domestic students.

To see the other dial (and the rest of the notes), click:

The other dial we don’t have is in “head count.” Williams spends about 50% of its budget on compensation, and is the economic power of the northern Berkshires, with 770 staff. These staffers’ spouses are getting laid off and fired; furthermore, this isn’t a area with many nearby jobs like NYC. Morty is NOT going to lay anyone off, he feels committed to retaining all staff. Ergo, “the two major dials are frozen.”

Attrition wise, significant reductions in staff and faculty will take 8-15 years to accomplish (back to the levels of 10 years ago), but Morty plans this, to some degree. He wants to slow or stop searches for visitors, and would rather solely hire tenure-track professors.

Morty wants Williams to remain a force for income mobility, especially as everyone else becomes more need aware. He doesn’t want Williams to return to a “Prep School” status, and has a plan to knock spending down from 7% to 5%. It won’t get notices much for this year, but next year will see some changes, with greater change coming in the ’10 – ’11 year and beyond.

At this point, Morty took questions.

Will the College reconsider renovating Sawyer?

Right now, construction plans are frozen. Although Morty would have rethought aspects of Paresky (expensive wood and shale, as well as unexpected environmental costs), he wants to wait, especially given the horrible debt markets. Paresky is on a 2% interest rate; the rest of Stetson-Sawyer would hav required a 11% interest rate. It’s bad borrowing, and thus the Weston field project, which was to start on Monday, has also been stopped. We couldn’t get the loans.

Are you worried that attrition will slow?

Morty waited to send this out until AFTER tenure reports were in, so that no one would do what he did at USC when this kind of thing happened, which was to put everyone up for tenure.

Mainly, there’s a lot of fat in the budget. Our number one priority is the need blind admissions, and the average student on financial aid pays 20%. Williams hasn’t had hard choices, Morty discussed a faculty reception and some excesses to cut.

Adding students?

Yes, because a few extra students will be great on the margin for Williams. It was a dumb thing to say in his letter; it caused a ruckus, when all that’s going to happen is that a few singles will revert to the doubles they once were, and there will be fewer classes with 7 people in them. It’s easy money – for almost no cost, the college can get $600,000 in extra revenue from 20 more students, half on aid. That’s $600,000 more to spend on travel and other programs. In retrospect, the college might have done better to “misjudge” the yield, and keep the extra students without articulating a policy change.

With the cuts from other colleges, will we get more who need aid?

I don’t have notes on an answer to that question; Morty talked more about internationals. He would like Williams to be able to say, “We take the best in the world,” but “we could live with” changing that in regards to need-bling international admission. It’s Morty’s call; he’ll have to think about it.

The faculty are Williams. Can we use this freeze to get a bunch of GREAT new faculty?

This is what the college did when it expanded the faculty in ’00-’01; there was an economic slowdown, and these folks now coming up for tenure are great. Williams will get as many tenure track faculty as possible, but no visitors.

(Confusion on new hiring policy)

We just recommended new searches; department heads have already told Morty that some searches aren’t vital.

The cost of Winter Study travel

This is something dependent on income, and Morty would like to do away with a Williams education at all dependent on the student’s income.

On the financial markets (which I can’t take notes for tonight, sorry)

<Morty discussed the budget decreases more>

We have 265 million in debt; unlike other institutions, we have real raw wealth; our debt isn’t leveraged. US News is stupid for not looking at net wealth. This year, the college only drew 4.1% from the endowment.

We had no lobster dinner!

Yes, but we’re buying organics for a fortune, though it should be good for us students in the long run, health wise.

How will this change the endowment management?

Thank goodness for Collete Chilton. Without her, we might be down 40% this year. Hedge funds are not asset boosters; they are compensation schemes (and I have no clue what this means). Williams is buying more commodities, which are not hedges in bad times. However, we’re still being conscientious. Williams had the chance to buy into a timber thing, and chose not to (Killing the Amazon, etc.), forgoing real profits. It’s not only how you spend the money, but how you raise it.

DISCLAIMER: My handwriting is poor, and I don’t know what “leveraged debt” is. Trust this as much as you trust Wikipedia – check first before making assumptions.

EDITED for clarity and typos at 2 AM on Friday.

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