Thanks to all for participating in our ACBP discussion. Again, this was a listing of all the items that could be cut from the Williams budget which a) Did not involve lay-offs, b) Did not touch financial aid and c) Resulted in at least a $200,000 annual savings to the operating budget. We reviewed 14 items over the last two weeks. I am unaware of any other items that meet these criteria. Cost-cutting is hard. Let us know if we left anything out.

Below are some minor updates, along with my recommendations.

1) Green Spending: I think that a more accurate estimate is $2 million per year. Morty reported that they were cutting $700,000 out of this target spending in fiscal 2009.

2) Charitable giving: the Presidential Prospectus tells us

A recent study showed that over the previous ten years Williams had made annual financial contributions in the community that averaged more than $500,000 and additional one-time contributions of $5 million.

So, call average annual spending $750,000. This is more than I initially estimated.

3) Cutting high salaries: Consider that there are 134 full professors with an average salary of $126,400. If you followed my algorithm and cut half the amount of any salary above $100,000, you save about $1.8 million. (There would also be a kick, I think, from a decrease in retirement matching funds as well.) Through in several well-paid administrators (plus Morty), and you can probably reach $2.5 million.

4) The budget for WCMA for 2008 was $2.6 million. All agree that WCMA is a wonderful institution, integral to the Williams Art History (and Studio Art) major, as well as to the College’s educational mission more broadly. But do we really need to spend $2.6 million? In 2000, the budget was $1.2 million. In memory serves, WCMA was a wonderful and vibrant institution in 2000, meeting all the requirements of an excellent art museum for an elite liberal arts education.

My recommendations:

1) Although I have been a critic of much of this spending in the past, my previous position was that the College should cut spending in these areas and add it elsewhere. I have always been a big proponent of more international students. Since almost all of them are on full financial aid, increasing their numbers is hugely expensive. I have also sought to spend more money on targeted awards to excellent faculty and more Tyng Awards for African-American students.

But that was then. The financial situation is so serious that the College just needs to cut spending, not reallocate it.

2) It is hard to have a good sense of cost savings without access to detailed data. And some of these savings would not be achievable immediately and/or involve some double-counting. Consider the below an extremely rough estimate.

3) I would Cancel the Bolin Fellowships (200k) Close the Boston Investment Office (1 million), End all one or two year positions (1 million), Cancel Questbridge (200k), End Green Spending (2 million), Close the Office of Campus Life (200k), Stop Giving to Local Charity, (750k), Make Significant Cuts in High Salaries (2.5 million), Cut the Budget for WCMA (1.4 million), Cut Visiting Professors (500k) and Cut Faculty Benefits (200k). Total savings of about $10 million.

4) I would not touch Williams-in-Oxford, NCAA play-off participation or football.

5) Is $10 million of cuts enough? Perhaps for 2009-2010. Recall Morty’s January e-mail.

Next year’s operating budget is planned to go down by $10 million to around $207 million.

As always, it is hard to keep track of the various parts of the budget. I think that this is total spending, including capital projects. (But then why call it operating?) Recall that this later discussion projected a Williams budget for 2010 of $215 million. There is not necessarily a contradiction between these two numbers. Much depends on how much the College spends on maintenance, whether or not any work is done on Stetson-Sawyer, and so on. Note also that some of the cuts I recommend have already happened, at least to some extent.

The real key is to decrease the operating budget. The College will need to finish Stetson-Sawyer someday, so it doesn’t much matter if that happens this year or next. The College needs to do maintenance on its infrastructure. It can skimp and delay but, ultimately, that money must be spent. So, if you are a smart and serious trustee, you don’t focus on the total number (whether is is $215 million or $207 million or whatever). You focus on the operating budget and, perhaps even more importantly, the avail spending.

Recall that the operating budget was $177 million in 2008 (all fiscal years ending in June) and (I think) around $193 million in 2009 — but perhaps that has been trimmed to around $190 million. If the Trustees do not ensure that the operating budget for 2009-2010 is significantly less than that, then they are not doing their jobs. I would like to see no more than $180 million (which my cuts would get you to) or, better yet, the $164 million that was spent in 2007.

Big picture: I think that it would not be unreasonable for the College to only make the cuts that I have suggested (or other ones that save equivalent amounts of money) along with the cuts it is already planning on. We do not need to start firing people (or changing financial aid) yet.

[If it were me, I would fire a bunch of people because Williams is overstaffed and it would be nice for Morty’s successor if she arrived after the bloodletting. But I can also see a reasonable case for waiting a bit to see if markets turn around.]

But even if the College makes all the cuts I want (or a similar amount of cuts that you want), we are still in a world of hurt. Even with the recent market rally, stocks are still below their levels on December 31. The next endowment update will report further losses. Williams can not afford to keep spending $80 million from the endowment every year. Something has to give.

6) Barring a market miracle, significant lay-offs or changes in financial aid are inevitable. Start planning accordingly.

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