Due to the decline of Wellesely College’s endowment last year, the college must further cut down on the operating budget—or face increasing net budget deficits in the subsequent years. This process of selecting and implementing policies has been further obstructed by the need to request the donors of various funds as well as the necessity to compromise with members of the community.
On Oct. 13, Andrew Shennan, Dean of the College, provided the most recent update on the College’s budget. The document, titled “College’s Budgetary Outlook for 2009-15,” suggests that the 17 percent decline—which translates to about $400 millions dollars—will not critically impair the College’s operating budget this year or the next. In the future, however, it is projected to create $10 to $12 million budget deficits.
In his statement to the Wellesley community, Shennan emphasized collective decision-making noting that, “it will be essential to involve the whole Wellesley community in the consideration of how best to meet this challenge…Our expectation is that by early in the spring semester we should have a clear sense of the overall multi-year strategy that the College will be adopting.”
Two summary documents were attached to the announcement. The first featured a chart showing the projections of spending and revenue for the next five years. This “Multi-Year Budget Projections and Assumptions” chart numerically shows the steady net budget deficit Wellesley will face in the upcoming years—from a surplus of $7 million to a $11.8 million net deficit in the year 2015. An asterisk below the chart puts the numbers in perspective: “For every 1% change (up or down) in endowment returns, there is a $400-$500k impact on the operating budget.”
The second attached document, titled “Possible Strategies for Addressing Multi-Year Budget Deficits,” is a list of suggestions to stimulate discussion on how to best address the current economic situation. Some solutions mentioned on the list include, “offer[ing] retirement incentive program for faculty,” as well as “reduc[ing] overall cost of international study.”
While cost-cutting measures have certainly been noticed, Debby Kuenstner, Wellesley College’s Chief Investment Officer, shared that Wellesley’s endowment fared well last year compared to other institutions. According to Kuenstner, the College’s endowment is not facing any major financial problems at the moment. She stated, “we’re in good shape. We’ve got plenty of liquidity to meet the College’s needs and meet the needs of the portfolio.” However, “[m]ost investors are hesitant at this point and can’t really invest in a lot of things they would like to,” she added.
Regarding the best strategy to address the upcoming deficits in the budget, Kuenstner echoed Shennan. “It’s a whole conversation the whole school needs to have. We, on this side of the office, are all about generating revenue—we’re not a big part of the conversation on how to spend it,” she said, clarifying her role in the decision-making process.
Catherine Ho ’10, Vice President of the Investment Society, recently attended a lecture given by Ms. Kuenstner on the endowment management. Ho shared that “we have $1.3 billion—to put that number into perspective, that could sustain our operating budget fully for four years.” She explained that four central questions are asked when managing the endowmnet, listing them as: “Where does the money come from? What should we spend it on? How much should we spend? And How do we invest the rest of it?”
Ho believes that the College doesn’t have too much centralized power in allocating its funds. “There are about 3,000 different accounts with very different restrictions on each of the funds,” Ho explained. “If you don’t use it for that purpose, then you can’t use it for anything else either,” she said of the restrictions that have been placed in part to protect the donors.
After looking through the strategies to address the budget deficit posted by Dean Shennan, Ho stated, “some of the suggestions on the document makes sense on an economic level.” However, she added, “looking forward, these changes are going to have a lot of long-term implications, so I hope they will be careful with this.”
Grace Cheng ’12 is a little doubtful of clear and effective communication between the administration and students. “The administration never seems to earnestly reach out to students by providing clear and easily understandable information and statistics,” Cheng said. “I think the students would appreciate more transparency.”
Given the choice between investing and spending, Cheng said, “I think it makes sense to re-evaluate the spending…As for investing, it’s a tough market.” However, Cheng disagrees with any further cuts. “I work at Phone-a-thon and when I tell parents and alumni that Beebe and Caz dining halls shut down and the whole quad is crammed in Pom, it’s a good selling point,” Cheng said. “If you cut any departments, you are potentially cutting out students that might come here and any future incomes.”
A college’s endowment and its management have important repercussions on the reputation of a college. As Ms. Kuenstner’s office seeks to generate revenue to fill the budget gap, both students and administration are now tasked with holding effective dialogue on how to wisely allocate what is left of the remaining funds.
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