I take this opportunity, before the 2002–03 school year begins,
to draw your attention to the evolving fiscal and planning landscape
we face. I do so because that changed financial environment—national
and local—will require us all to both adjust our plans and
renew our collective dedication to the hopes of the University.
What has changed? The economy of the nation has suffered the beginnings
of a recession, a sobered stock market and a reduction of confidence
in our business leaders. Those large changes have followed in time
the stunning, and worrisome, transformation of the American health
care economy. This transformation, sometimes called a “perfect
storm,” has seen escalating insurance costs, reduced governmental
assistance, escalating labor costs and shortages, supply costs rising
faster than inflation, and increased demands from patients for expensive
medical interventions. Since health care occupies one-seventh of
the American economy, its condition shapes all that we do.
Emory, like all comparable research institutions, will feel the
brunt of these changes. Last spring, we began to do so when we recognized
the necessity of reordering our employee benefits program. We must
now come to other recognitions. We must do so because the payout
of our endowment will be severely dampened, not just for a year
or two, but for at least the next four years. The payout formula
has been made sensitive (for good reason) to large cycles of change,
and not simply immediate ones. Therefore, what is happening now
will continue to affect what we can do with endowment support for
some time to come.
While this is no time to become discouraged about what Emory is
and what it will be, it is time to bear down hard on those realities
we can, on this campus, affect. Chief among them are our expenses.
I am therefore wholly in accord with the judgment of the Ways and
Means Committee that we must reduce administrative and service unit
costs. This “cost containment and reduction project”
story) will demand of each of the academic deans
and each of the administrative leaders of non-academic units to
employ existing resources in the most effective manner. Those leaders
must show how they will redistribute their resources to invest in
programs and initiatives of the highest priority. They must also
show how they will reduce, or terminate, programs lacking such priority.
Cost containment projects will be periodic. The 3 percent reduction
process that we used to redeploy University resources while developing
the 2001–02 Basic Educational and General Operating Budget
is a recent example. It will continue. Each of the academic deans
will be responsible for reviewing school resources and needs. Each
of the administrative and service unit vice presidents and directors
will examine expenses to see how reductions can be made. Ways and
Means and the President’s Cabinet will provide the leadership
for the undertaking.
The specific strategy will be as follows: A small team working with
Ways and Means will assemble information about each of the relevant
units, seek input, develop additional analysis, and then make recommendations
to Ways and Means. That group in turn will review the proposals
from the working team and develop final recommendations for the
President’s Cabinet. Following ultimate review and approval
by the President’s Cabinet, those recommendations will be
Emory will thereby be changed. The changes will be for the good.
Our task now is the same as it has always been: to sustain and enhance
our presence as a first-rate institution of education and research.
The realities we confront in this ambition have hardened. Therefore
we must renew our efforts and toughen our resolve.
William M. Chace
President, Emory University