Emory and the Economy

Letter to Oxford College faculty and staff
From Dean Stephen Bowen on planning for October 1st
Distributed via email May 2, 2009

Dear Oxford College Faculty and Staff:

As you are aware, President Wagner has asked each academic division to develop a written plan for the division’s future that can be achieved with reduced resources.  In his memo of April 29th, he set our three broad principles to guide the planning process.  They were…

1.  The first is that we are choosing to apply fuller funding to fewer activities rather than lesser funding to all that we have been doing.

2.  The second principle is that recommendations for decision-making must come from the deepest appropriate levels within the organization.

3.  The third broad principle… calls for a constructive double vision, viewing our current circumstances clearly without losing focus on our longer range vision.

Principles one and three describe required characteristics of divisional plans including goals, initiatives, and the budget plan that will support them. Principle one stipulates that our plans must be more focused with fewer goals (or fewer activities supporting goals) that are better funded.  It is expected that each of the academic divisions will be smaller in some sense than they were last year.  Principle three cautions that we should neither become so preoccupied with immediate challenges that we lose sight of our long term goals nor fail to confront short term challenges in creative ways that will make valuable contributions to our long term progress.  President Wagner connected these two principles in a recent discussion with the Council of Deans when he asked each division to consider “What must we do that is timeless?” and “What must we do that is timely?”

Principle two is about process.  Each of us knows the College in a slightly different way and can contribute his or her unique perspective to our October 1st plan.  It is important to emphasize that many important elements of the plan will concern very practical matters – things like how we can reduce expenses or supplement revenue – and those of us on the front lines will usually have the greatest insights.  Do not be bashful about suggesting these savings to your supervisors or to me!  It has never been more true that “a penny saved is a penny earned”

The specifics of our October 1st plan will depend on how much funding from the endowment, cash management, and other sources the University will be able to commit to Oxford College for the next several years, and how much income we can expect from our own endowments.  For our current year, Oxford’s University General Funds Allocation was $2.29 million and our Endowment and Trust Income was $2.67 million.  Together, these made up 18.4 percent of Oxford’s revenue for the year.  Given the decline in the value of our endowment investments, it is clear that these sources of revenue will be substantially less in the future.  Just how much less, we will not know until sometime in late May or June when the University-level planning is complete.

To think appropriately about our own planning process, it is important to understand the University’s current plan for endowment spending and its consequences.  Before the crisis, the endowment spending plan was essentially to spend each year from the endowment funds an amount equal to 4.75 percent of the value of the endowment’s investments averaged over the most recent twelve financial quarters (three years).  That rule meant our endowment revenue did not bounce up and down with short term fluctuations in the stock market and other investments, but it did track the value of our endowment over time.  Following that rule in the current situation could have disastrous consequences because the drop in endowment revenue would be sudden and great (the blue line on the chart).  As an alternative, the University plans to increase the spending rate to about 7 percent for next year and then reduce it gradually to less than 5 percent after a few years (green line) so that the endowment principle can be rebuilt.  In consequence, the drop in endowment revenue will be less severe and will help us avoid catastrophic budget reductions, but the length of the recovery period will also be longer.  The revenue from our endowments could be going down while the Dow is going up.  Exactly how all this will work out is unknowable and depends on the interplay of a host of economic variables.  For us, the take home message is that we will avoid a potentially catastrophic drop in endowment support but the “new reality” of lower base funding will be with us for quite a while and will define the context for which we are planning.

So, how are we going to do this planning?  We have the advantage of a widely appreciated Strategic Plan which will serve as our platform.  In June, with the help of several of you who have been directly involved in leading our Strategic Plan implementation, I will provide the College community with an update on our progress on the the six goals and the thirteen strategic initiatives that support them.  I will then suggest some options for sharpening our focus and setting priorities for the future.   This report will be delivered to everyone via the notice email lists with initial discussion via an online conference utility, very likely LearnLink.  In Late June, July, and/or early August, we will meet on campus for two or more open forums to discuss the emerging issues and plans.  By midsummer, I will appoint the members of the Budget Advisory Committee, a successor to the group of the same name that gave advice on the FY10 budget.  The makeup of this committee makes it well suited to serve as an ad hoc College-level planning group [1].  Its members come from all sectors of the College that have active and direct roles in and professional responsibility for the educational program.  By the time the Committee is convened, we will know the future funding commitments from the University, so they can work with both the ideas for focus and the budget to consider tradeoffs and balance.  From the work of the Budget Advisory Committee and with additional input from individuals throughout the Oxford community, I will draft an update to our Strategic Plan for wide circulation and discussion in at least two forums in September.  With input from the forums, my intention is to develop a plan that is endorsed by the Budget Advisory Committee by the October 1st deadline.
 
I am grateful to each of you for your willingness to contribute to this crucial planning process during the summer.  Although there are other things we would rather be doing, this is a wonderful opportunity to plan a future for Oxford that gives emphasis to its exceptional distinctive strengths and I believe it will be exciting and gratifying.  Let’s hope the air conditioning holds up.
 
Steve
 
Stephen H. Bowen, Dean
William R. Kenan, Jr. Professor of Biology
Oxford College, Emory University

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[1] The Budget Advisory Committee members will be the four members of the Faculty Advisory Committee, the Dean and Associate Dean for Academic Affairs, the Dean for Resource Planning and CFO, the Manager for Human Resources, and the Dean for Campus Life.