May 26, 2009
Grinnell College Community
Re: Budget Update #5
Dear Friends:
At its late April meeting, the Board of Trustees adopted a budget for the fiscal year beginning July 1, 2009 (FY 2010). This budget follows the broad assumptions we have been talking about this spring. Specifically, the upcoming budget reflects: 1) reduced endowment support due to its lower value, 2) higher financial aid expenses, 3) the possibility of reduced giving as our alumni and friends face their own financial challenges, and 4) significant reductions in expenditures. This budget includes no pay raises, although we hope to include a modest pool in FY 2011 if economic circumstances improve sufficiently. Many of you encouraged us to forego salary increases if it would help us put our financial house in order.
We are also moving forward with discussions about how to construct a budget for FY '11 that will entail additional reductions in expenditures occasioned by flat or even declining revenues. We believe that FY '11 will be our most challenging budget year. Even if the endowment were to bounce back relatively soon, the spending policy that helps protect us by slowing down the reductions to our operating budget will also slow down the rate at which we can return to previous spending levels. We continue to plan with three very high priorities: 1) preservation of the academic core, 2) continued generous financial aid, and 3) no wholesale reductions in employment. This is going to be extraordinarily challenging. Starting now, we have at least six months to develop ideas and plans that will help us achieve these goals.
In the longer term there are a number of major questions that Grinnell and every well-endowed college will need to face. First, is it likely that endowment values will recover rapidly enough to avoid a series of cuts or do we need to re-engineer our entire structure of revenues and expenses? Second, will the ability of parents and friends to pay for secondary higher education deteriorate further and if so, what can we do? Finally, we need to continue to look for and fund new ideas that will keep Grinnell vital and moving forward as a top liberal arts college.
We were well positioned to weather the financial difficulties of this year as compared with many peers. But the longer term risks and questions are just as serious here as they are everywhere. We need to be thinking about how to meet these challenges.
My best,
Russell K. Osgood
RKO: ms
