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September 3, 2002

Open letter from President Bill Chace

Dear Emory colleagues:

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” (see 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 implemented.

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