Weathering the Economic Storm

admin February 11th, 2009

How is the global economic crisis affecting the College?

Like every college in America, Wooster is grappling with the challenges of the most severe, widespread economic downturn since at least the 1940s. While we currently forecast some reduction in revenues next year, our position is sufficiently solid and stable that we believe we can take comparatively modest measures to steward the College through this turbulent period.

What measures is the College taking to respond to the economic situation?

Early last fall, we began a process of contingency planning, which involved modeling scenarios of varying severity and developing a set of strategies, including both cost containment and revenue enhancement, for dealing with them. The five elected faculty committees, the Support Staff Committee, Student Life deans and directors, resident assistants, administrative staff in Enrollment and Academic Affairs, the Vice President for Finance and Business’ directors group, Campus Council, and the Student Government Association were all participants in those conversations.

The process has been guided by five principles, laid out by President Cornwell in his Dec. 15, 2008, memo to the campus community:

• “Our primary focus should be on stewarding the integrity of our core mission and educational values;
• Measures taken to balance the budget should allow for continued investment in strategic initiatives designed to advance our core mission and to improve our market position;
• We should make every attempt to accomplish staff reductions by attrition and reassignment rather than the elimination of positions currently held; we recognize that this approach might prove insufficient should the impact of the downturn prove worse than we are currently preparing for;
• Care should be taken not to implement an intervention that may cost more in terms of revenue lost through student attrition in the long run than it saves in terms of budget reduction in the short run;
• Other things equal, we should choose interventions that can be reversed over interventions that would be permanent.”

The planning process identified a total of $5 million in potential revenue enhancements and cost reductions that the College might pursue. Based on current forecasts, we believe we will need to implement $1.8 million of those recommendations in fiscal year 2009-10. We have identified interventions totaling that amount, some of which are already underway, while others continue to be analyzed.

On the expense side, we have begun a new review process for all open staff positions at the College, and are not refilling every position that becomes vacant. Likewise, academic departments will hire fewer visiting faculty next year to replace those on leave. In both instances, these strategies seek to avoid layoffs although workloads for continuing faculty and staff will likely increase in some measure.

Next fall, we will close Kittredge dining hall, consolidating our main food service operation in Lowry. Once the economic situation improves, we hope to reopen Kitt.

The College also is working to improve significantly the performance of its auxiliary operations: the golf course, The Wooster Inn, and Ohio Light Opera.

Moving to the revenue side, thanks to the generosity of one of our trustees and her husband, we have a new tool to help students whose families are facing financial hardship remain at the College. The Ruth W. and A. Morris Williams Jr. Emergency Student Aid Fund provides loans — half of which convert to an outright grant upon graduation — for students whose families have exhausted all other sources of aid.

When it comes to room pricing, Wooster has long been an anomaly in charging the same rate for all rooms, from quads to singles. No other college in the GLCA or the Associated Colleges of the Midwest does this, and after carefully analyzing the issue, we have concluded that neither should we. Therefore, starting next fall, we intend to lower our room rates for triples and quads, and increase them for singles.

Finally, we plan to convert four of our smallest program houses into rental properties for visiting faculty. By virtue of their size, location, and construction, these properties make very inefficient program houses. They will serve the College much more effectively as rentals, while having the additional benefit of encouraging visiting faculty to live very close to campus.

What other steps are being considered, if what has been done so far proves insufficient?

The contingency planning process earlier this year identified a total of $5 million in potential revenue enhancements and cost reductions that the College might pursue. Based on the available data, we believe we will need to implement $1.8 million of those recommendations for fiscal year 2009-10. If the impact of global economic conditions on Wooster becomes more severe, we will return to that list of options and select additional ones to pursue.

Will there be layoffs?

We hope not, and at this point there are no plans to do so. As the president said in his Dec. 18 memo, “We should make every attempt to accomplish staff reductions by attrition and reassignment rather than the elimination of positions currently held; [however] we recognize that this approach might prove insufficient should the impact of the downturn prove worse than we are currently preparing for.”

What impact has the turmoil in financial markets had on the endowment?

The year 2008 was a difficult one for financial markets and college endowments. Wooster’s endowment has fallen by just over $40 million since its peak value of more than $280 million in June, but our benchmark would have predicted an even larger loss of about $63 million. Thanks to prudent management, Wooster’s endowment is down only a little over 17 percent for the calendar year 2008 at a time when the Standard & Poors Index has declined by 37 percent. The results for January aren’t in yet, but appear to be much the same. The Standard and Poors Index has fallen by over 8 percent for the month, but Wooster’s endowment looks to have declined by only about half that much.

What’s the enrollment outlook for next fall?

It’s too early to forecast with any certainty, but we are cautiously optimistic. Unlike most of our GLCA peers, our applications are running slightly ahead of last year.

What’s the status of the Campus Center project?

We are proceeding with a detailed engineering study and architectural plan for the Campus Center, in order to keep this important project moving forward. The next step would be to develop fund-raising and financing plans, but in the current economic environment that is obviously problematic and we do not, at this point, have a firm timeline for proceeding to that next step.

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