President Falk provides an update. I have copied the entire letter below the break because the College has a nasty habit of making these documents disappear. (Can you find similar letters written by interim President Bill Wagner on the Williams website? I can’t.) Highlights:

The return on our endowment investments for the fiscal year was 11.9%. Factoring in gifts to the endowment and spending from it, this put our total funds on July 1 at around $1.52 billion, a welcome increase over its value last year, but still more than 20% lower than this time three years ago. We project spending some 5.1% of that in the current year. Although that rate is widely considered to be unsustainable over the long run, it is part of a Board-approved plan to soften, over last year and this one, the impact on Williams of the world financial crisis.

1) This is not inconsistent with the $1.6 billion number that was mentioned in June but it is less than I expected. Did various illiquid investments come in lower than Chilton expected three months ago?

2) 5.1% of $1.52 billion is $77.5 million. That is too much spending! The College continues to not take the financial crisis seriously enough. Note that Morty claimed two years ago that the plan was to spend $70 million from the endowment in fiscal year 2011. Why isn’t Williams sticking with that plan? Because the people who run Williams don’t want to cut the budget enough. Future Williams administrators will curse their profligacy.

3) This is the first time that anyone from the college has ever admitted (realized?) that 5% endowment spending is unsustainable. I have made this point over and over and over again. Glad to see that Falk recognizes my genius. (Also, I am unaware of any other elite college that admits that, over the longterm, 5% real returns are unattainable. Pointers welcome!)

4) As usual, the College ignores its debt when discussing spending rates. Williams has a $1.5 billion endowment, but we also have around $250 million in debt. So our net financial wealth is $1.25 billion. Assuming a 3% real rate of return on that would allow for $45 million in annual spending from the endowment. Williams is spending approximately $25 million more per year than it should.

As many of you know, when the financial crisis hit, the College put two building projects on hold. I remain optimistic that we’ll be able to begin work this spring on the new Sawyer Library, which we continue to seek funds for. Meanwhile, the Weston Field project is undergoing a review to make sure it’ll provide what we need at the right price. I’m optimistic about this project, too, though on a somewhat longer timeframe.

Williams is not rich enough to be able to afford major changes at Weston for years to come. I hope that Falk and the trustees adjust to this reality. Stetson/Sawyer is a tougher case.

Full letter below the break.

September 10th, 2010

To the Williams Community,

The start of classes marks the launch of a new year: new in terms of a fresh cycle of the learning, challenge, and fun that characterizes college life, and new as my first full academic year in this remarkable place. There’s so much I’m looking forward to.

I thought I’d take a moment to brief you on where things stand for Williams at this point in the calendar and to think a bit about what lies ahead.

Anyone who believes that colleges close down in the summer didn’t spend the past three months here, where faculty were busy with scholarly work and course preparation, working with almost 300 students. The amount of student learning that takes place here in summer is impressive, fueled by a level of research opportunities that’s unique to Williams. A busy schedule of summer conferences and camps kept the dorms, classrooms, theatres, and playing fields abuzz. Meanwhile, staff were making the usual, large transitions from one year to the next and, in many cases, planning carefully how to reorganize our operations to make them more effective and efficient. More on that later in this letter.

News of the world economy remains unsettling, while the College’s finances continue to warrant cautious optimism. Thanks to the efforts of many, we finished the 2010 fiscal year somewhat ahead of budget. I know how difficult budget setting has been of late, so to stay within our spending targets while protecting our core academic offerings was a significant achievement. I’m grateful for the hard work, careful prioritizing, and creative solutions, from all quarters of the College, that brought us to this goal. We’ll need to continue to show considerable restraint in our expenditures, and I look forward to working with you to assure that the money we do spend is aligned with the College’s highest priorities.

The return on our endowment investments for the fiscal year was 11.9%. Factoring in gifts to the endowment and spending from it, this put our total funds on July 1 at around $1.52 billion, a welcome increase over its value last year, but still more than 20% lower than this time three years ago. We project spending some 5.1% of that in the current year. Although that rate is widely considered to be unsustainable over the long run, it is part of a Board-approved plan to soften, over last year and this one, the impact on Williams of the world financial crisis.

The full financial effect of the early retirement program that the College launched last spring won’t be known until it’s been determined how many vacated positions will be filled. Those decisions hinge on reorganization discussions, some of which have been concluded and others that are ongoing or will begin soon.

Adjusting our spending to the new fiscal realities has depended on the adaptability of many. People across campus are absorbing work previously done by others, and in some cases are moving organizationally or geographically. Our thanks go to you all, for, if we follow this process to its end, we should, barring another dip in the world economy, be able to meet our goal of realigning College spending while protecting our core offerings and avoiding layoffs.

I’m pleased that, despite the tighter times we live in, the faculty was able, through careful planning, to approve new majors beginning this year in Arabic Studies, Environmental Policy, and Environmental Science. With creativity and the sharing of resources, we can bring about timely curricular change even in this economic climate.

As many of you know, when the financial crisis hit, the College put two building projects on hold. I remain optimistic that we’ll be able to begin work this spring on the new Sawyer Library, which we continue to seek funds for. Meanwhile, the Weston Field project is undergoing a review to make sure it’ll provide what we need at the right price. I’m optimistic about this project, too, though on a somewhat longer timeframe.

Personally, the joy of this summer was finally being able to move my family here. The campus, Williamstown, and the Berkshires have already proven wonderful places to be part of. My warm thanks to all who’ve been so welcoming to us.

This year will be one in which I continue to work to understand more deeply the Williams community. I’ve met many of you but hope soon to meet and learn from you all. I also plan to help guide the campus-wide reorganization discussions, which are so important to our future, and to do all that I can to get that library built.

All told, I’m more excited than ever to begin our first full year together. May it be a deeply fulfilling one for us all.

Best wishes,
Adam Falk
President

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