'We've got to face the gap'
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By SUSAN J. BOUTWELL VALLEY NEWS - Published: December 7, 2009
HANOVER, N.H. — Dartmouth College President Jim Yong Kim recently spelled out the school's dire financial situation to an audience of more than 450 students, staff and faculty members and an Internet audience of more than 3,200.
Kim did not specify how the college will meet its target of a $100 million cut in spending over two years, but the new president revealed a number of details about Dartmouth's financial condition, including:
While he has repeatedly said there will be layoffs, Kim said they won't come before Christmas. Cutbacks may also include furloughs — essentially unpaid time off.
Officials will pare spending from the college's endowment, worth $2.8 billion as of June 30, with a target of spending 5.3 percent of the invested money, down from 7 percent this year. The higher spending level, which last year amounted to $203 million and represented 25 percent of the college's overall revenue, is not sustainable, Kim said. The college is targeting endowment spending of about $145 million in the fiscal year beginning July 2011.
Dartmouth is investigating a number of potential money-making ideas, including increasing the size of incoming freshman classes by 50 to 100 students, or 5 to 10 percent. Officials are also looking at offering Internet programs through the Tuck School of Business, creating summer and winter programs to attract visiting students and adjusting the college calendar so they could close the campus from Thanksgiving through Jan. 1, to save money on employee and building costs.
A major renovation of the President's House, pegged at almost $3 million, will be paid for by donors who want to take the cost — for which the college has received some criticism — out of the budget, and off the list of items raised whenever spending cuts are mentioned.
Kim spoke for 90 minutes last week and took questions from a packed Alumni Hall crowd, while more than 100 more watched on a big screen set up at Collis Center. The president amplified a PowerPoint presentation titled "Dartmouth's Financials."
"I'm very sorry we have to have this discussion," he said. "But it's one we just simply have to have."
As college officials spend the next two months coming up with a plan to cut spending and increase revenue, Kim promised that they would be "as disciplined as we can be. We're going to be as principled as we've ever been in terms of treating everybody with respect and humanity, but we've got to face the gap that's staring at us."
Mainly because of a $835 million drop in the value of its endowment, the college is facing a budget gap that will increase if cuts aren't made. The deficit, currently at $2.5 million, is projected to increase to $54 million next year and $96 million the following year.
"We did not plan for this kind of economy, nobody did," Kim said.
His presentation received generally favorable reviews from employees and students, who have been bracing themselves for bad news since the college's Board of Trustees three weeks ago announced the need for $100 million in spending cuts.
Paint shop employee Johnny Johnson said he was "a little overwhelmed" by the size of the cuts that need to be made.
"That's a lot of money. Where's it going to come from?" he asked.
Johnson, who has worked at the college for 38 years, said the cutbacks would have a ripple effect throughout the Upper Valley, where the college is the second-largest employer.
This round of budget cutting follows layoffs last year of 72 employees and hourly reductions for 68 others as part of a plan to cut spending by $72 million through 2011. About two dozen of the laid off workers have since been rehired.
Last winter, then-President James Wright said the college was making large cuts so officials wouldn't have to go back and do it a second time. Kim, who took over July 1, has since said that the scope of impending deficits wasn't realized last year.
The process this time around is much more transparent, said Mary Ellen Rigby, manager of the gift shop at the college's Hood Museum of Art. Last year's cuts came after "no discussion," she said.
"I really admire how (Kim's) going about it compared to the last process," she said. "It's a revelation. He's educating people on how the place works financially."
"I know people are really worried and that's a hard thing," said Rigby, who has worked at the college for a decade.
But not everyone was worried.
Sophomore Lee Farnsworth of Ft. Wayne, Ind., said he's not apprehensive about the looming cuts.
He said Kim "will take care of it and I'll keep writing my final papers and that will be that."
Trustees Chairman Ed Haldeman of McLean, Va., CEO of mortgage-finance company Freddie Mac, in a statement last week called Kim's approach "characteristically creative, thoughtful and inclusive" and urged members of the college community to "lend their support and answer President Kim's call to become active participants in this process."
Board of Trustees member Peter Robinson of Stanford, Calif., a former speechwriter for President Reagan, said Kim's talk was "the most open and comprehensive account of the budget that has ever taken place at Dartmouth — or at any other institution of higher learning of which I am aware."
Robinson said that before Kim's inauguration on Sept. 22, Kim "told the board that he would insist — insist — on complete transparency. He meant it."
The budget process Kim outlined calls for him and his top advisers to craft a plan for proposed cuts and new revenue projections in time for the trustees' next meeting Feb. 5-6. Implementation of the proposals will begin in February and run through September, with a major evaluation of progress next fall.
Kim told the crowd that "Everything's on the table. That doesn't mean that everything's going to be cut. But everything has to be looked at."
Last year's cuts put financial aid to students and cuts in the faculty off limits. This time, Kim said both will be scrutinized, but he also insisted "this process will not lead to a single student not being able to afford Dartmouth. That's not going to happen."
As for possible cuts in the faculty, Acting Provost Carol Folt reiterated that Kim said he was "looking at everything."
However, she stressed that the college has spent 15 years working to increase the size of the faculty, which has grown by 107, or 16 percent, in the last eight years, to a full-time equivalent of 767 faculty members.
"We don't want to diminish the quality of the academic experience," Folt said.
Over that same period, the size of the staff has increased by 83 FTEs, or just under 3 percent, to 2,867 employees.
Kim said the college remains committed to completing the two large construction projects now under way, the Life Sciences Center and the Visual Arts Center.
"There's going to be some tough going in the next few months, to probably a couple of years," the president said.
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