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Presidential Search Update

To the Williams Community,

Summer remained a busy time for the Presidential Search Committee. Since I last wrote you in June, we have followed up extensively with the most promising candidates in our impressive pool – meeting with them in person and talking with those who know them. We have also met with a number of new candidates.

The Committee will begin a conversation about a short list of finalists with the Board of Trustees, which has the responsibility of naming the next President.

How long that process will take is difficult to predict, but we still expect to be able to announce the President this fall and for him or her to begin early in 2010.

Because of the reassurance of having in place strong campus leadership under Interim President Bill Wagner, we have the flexibility to take as much time as needed to ensure the appointment of the best possible candidate.

Those of you new to the community can catch up with the search process, including learning about your colleagues on the Committee, by visiting www.williams.edu/admin/president/search.

Best wishes for the start of a new semester.

Greg Avis ‘80
Chair, 2009 Presidential Search Committee

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#1 Comment By David On September 11, 2009 @ 2:11 pm

Bad news! I still want Cappy Hill ’76 to be the next President of Williams, but it is unlikely that she would be willing to start in “early 2010.”

My advice: Pick Cappy but allow her to start in January or even June 2011, thereby enabling her to finish up a full term at Vassar. Bill Wagner is a good guy and more than up to the task of leading Williams for the next 16-21 months.

By the way, any updates from the source that predicted Cappy’s hiring 6 months ago?

#2 Comment By JG On September 11, 2009 @ 5:08 pm

Interim presidents/heads of nonprofits are notoriously bad for fundraising.

#3 Comment By David On September 11, 2009 @ 5:12 pm

True. But my understanding is that Williams would not be starting another capital campaign for at least 2 years anyway. So, nothing more than “normal” fund-raising — alumni fund, reunion gifts — is going to be happening right now anyway.

#4 Comment By JG On September 11, 2009 @ 5:43 pm

Um, a lot of “normal” fundraising involves some significantly-sized gifts that are at least partially secured by glad-handing with the Prez. Major gifts are not only for capital campaigns.

#5 Comment By hwc On September 12, 2009 @ 3:52 pm

I’m guessing that Cappy Hill would gladly hop on the nearest bus from Poughkeepsie and start Monday morning at Williams. She is currently overseeing a total train wreck at Vassar:

Vassar’s financial planning has recognized since the late 1990s that reinvestment in the physical plant has not met the goal of financial equilibrium. The amount budgeted in the annual operating budget for plant renewal has been growing slowly for the last decade, but is still far less than would be called for under conditions of financial equilibrium. This is evident in the continuing backlog of deferred maintenance in certain areas of the campus.

As we address the effect of the current financial and economic crisis on Vassar, we are temporarily drawing on the college’s financial resources at a rate in excess of the sustainable rate of spending from endowment, and we are reducing once again the rate of reinvestment in the physical plant. Both of these conditions are unsustainable. The financial crisis has highlighted a need to reduce operating costs so that the college can move closer to conditions of financial equilibrium in the years ahead.

And, this from a college that has relied on soaking its wealthy students to the tune of $8,000 a year more than Williams for the average student in 2008. They have no revenue upside whatsoever. They’ve posted miserable financial results on the back of the highest net per student revenues I’ve seen.

So what’s this year look like? Well, they’ve “aggressively” trimmed $2 million from last year’s $155 million budget. Woah! Alas, they’ve budgeted to spend $50.6 million from the endowment, up $3 million from last year.

Bottom line. They are budgeted to spend 7.6% of their endowment this year. To put that into persective, state law makes that illegal in some states, such as Pennsylvania. I know of one liberal arts college with an endowment roughly double Vassars that modeled a 7% spending rate for 2009-10. Their model showed that spending rate would blow through their entire billion dollar plus endowment in just 22 years.

Right now, Cappy Hill is presiding over a going out of business sale at Vassar College and hemmed in on all sides. The college is already far too large (that’s their fundamental financial mistake) to consider growth. Their per student revenue can only decline. Their decade of neglected maintenance takes away the option of three years of deferre maintenance (like Williams and others). They have some very difficult decisions to make. I’m surprised they haven’t slashed spending more aggressively. Even now, they are only targeting $37 million in budget cuts over the next three years.

#6 Comment By Collegepro On September 13, 2009 @ 7:42 pm

Vassar is a magnificent college—and in the grand scheme of private higher education–it’s one of the wealthiest UG schools in the country. Maybe it’s not in the top ten or so in overall wealth, but it’s a well off school. It is *not* on the verge of going out of business (!), it is not too large (at 2,500 students!), and if the economy and stock market don’t recover quickly, and gifts don’t match needs, the College has a lot of ways to cut expenses. The College leadership will need to decide which cuts will have the least impact on what Vassar values most.

Granted, the College’s endowment spending rate is higher than desirable, and not sustainable in the long run, but in the short run, it’s not an unreasonable measure. FYI–some prominent economists have been arguing for years that colleges and universities should be spending more money from their endowments–and Congress has periodically debated whether endowment spending rates are unreasonably low.

as for replenishment of the physical plant–yes, Vassar has to maintain it’s exceptional physical plant—and maybe it needs to spend more than it is—but the notion that it’s physical plant reinvestment is not in financial equilibrium is a relatively new financial concept. A consulting company has pioneered in the calculation of physical plant financial equilibrium—but it’s still a pretty new idea. Colleges and universities, in general, use pretty informal methods for determining physical plant reinvestment, and aduited financial statements are not a good measure of what a college/university is spending or should be spending.

Finally–presidents are supposed to provide leadership in good times and bad. They are supposed to raise money in good times and bad. President Hill has been a wonderful leader for Vassar. The extensive “Vassar and the Economy” web site is but one example of her progressive leadership. Vassar may not have the aura of prestige of Williams, but that doesn’t mean it doesn’t deserve top leadership.

#7 Comment By hwc On September 13, 2009 @ 8:27 pm

…and if the economy and stock market don’t recover quickly, and gifts don’t match needs, the College has a lot of ways to cut expenses. The College leadership will need to decide which cuts will have the least impact on what Vassar values most.

I agree that Vassar is a magnificent college. If they have a lot of ways to cut expenses, I would like to see the administration act with a little more sense of urgency in light of a 7.6% budgeted endowment draw. I don’t know what they are waiting for. That’s the highest number I’ve see so far in the early bidding.

When I saw that their financial issues result from growing too large, I mean that they are trying to provide a top-of-the-market education experience for more students than their endowment will support. They have Bowdoin’s endowment and are trying to match Bowdoin’s product, but they are tryign to offer that product to 50% more students than Bowdoin. That math does not work. They either have to offer a lest costly product or offer it to fewer students.

The options are to either reduce the cost of good sold (i.e. the operating budget) or increase revenues. They already generate more per student revenues than any other college or university I’ve looked at. Amazingly, the 7.6% endowment draw comes even as the college is reducing its faculty by 16 FTE’s for this year and planning as much as a 15% reduction in overall faculty cost over the next five years.

One reality that Vassar will have to face is that they cannot afford to be need-blind. That much is certain. Whether they can afford to not be need-blind is an interesting question, too.

#8 Comment By frank uible On September 13, 2009 @ 8:34 pm

Of course another option of Vassar is to continue to manage itself as a wasting asset to the logical conclusion – it ain’t against the law.

#9 Comment By hwc On September 13, 2009 @ 8:53 pm

In fairness to Vassar:

The budget cutting steps they are already taking are as severe as any I’ve seen. Serious cuts in faculty and staff sizes, reducing course offerings, reducing student employment, and so forth. These kinds of cuts, combined with the rebound in endowment values at year end have most similar schools getting their endowment spending rates surprisingly under control — near the 5.5% cap that most schools would like to observe. The fact that Vassar is doing all that and is still at 7.6% is a bit surprising.

Unfortunately, Vassar is one of several schools (including Oberlin, Middlebury, Wesleyan, and Smith off the top of my head) that had been spending at unsustainable rates during some of the recemt boom years. They had no cushion. The endowment losses, even though milder than expected, translate directly to endowment draws above sustainable levels.

Imagine what the endowment draw would have been had Vassar finished the year with their endowment down 30% instead of 23%. Well, I guess we don’t have to imagine. The endowment draw would have been an eye-popping 8.5%. Now, you can see why I say a lot of colleges had their bacon pullled out of the fire at year end.

#10 Comment By David On September 14, 2009 @ 9:02 am

“some prominent economists have been arguing for years that colleges and universities should be spending more money from their endowments”

Citation, please. I have never heard of an economist, prominent or otherwise, plausibly argue that schools like Vassar should be spending more money from their endowments.

#11 Comment By collegepro On September 14, 2009 @ 9:23 am

Henry Hansmann. A quick google search will reveal several citations.

#12 Comment By David On September 14, 2009 @ 9:35 am

I stand corrected. Here is a relevant citation.

One voice in favor of increased spending by universities came from a professor at Yale Law School who participated in the discussion, Henry Hansmann.

Mr. Hansmann said it only made sense of universities to keep so much money in endowments if there is a “better use for it in the future than the present.”

That is unlikely, Mr. Hansmann said. He predicted that “future generations will undoubtedly be more prosperous” and that “there is no reason for us to subsidize future generations of education.”

Much more detail here. I like Hansmann’s writing because he is a total outlier. But the basic idea — no need for large endowments — still seems highly suspect. I am fairly certain that every university in the country who has been ignoring Hansmann’s advice for at least 20 years is glad that they have done so.

#13 Comment By hwc On September 14, 2009 @ 11:00 am

That is unlikely, Mr. Hansmann said. He predicted that “future generations will undoubtedly be more prosperous” and that “there is no reason for us to subsidize future generations of education.”

By that logic, today’s generation is undoubtedly more prosperous than the generations before who built Yale’s endowment. Therefore, I would propose giving Yale’s entire endowment to a worthwhile charity (like Acorn Housing?) and testing the hypothesis. Would there be enough money from today’s generation (a doubling of tuition) to continue paying Mr. Hansmann’s salary?

Alternatively, let’s invite Mr. Hansmann to simply take an immediate pay cut equal to the percentage of Yale operating budget derived from the endowment payout. He could have no argument with that based on his desire not to be subsidized by previous generations.

#14 Comment By hwc On September 14, 2009 @ 12:18 pm

BTW, reading between the lines of the Presidential Search update, it sounds like Williams has probably narrowed the field to the final three candidates and is moving to the round of intensive interviews with the board and other constituent groups on campus.

#15 Comment By frank uible On September 14, 2009 @ 1:33 pm

Better yet, like the result of the current fiscal conspiracy by, between and among the American people and their duly elected Congressional representatives, have future generations of Ephs incur debt in order to provide financial and other benefits to current generations,