October 31, 2008
The economic events of the past few months have affected all of us, and we all now know that we are in the midst of a serious and likely prolonged global economic downturn. The consequences of this downturn are still unfolding, and it is becoming apparent that there are no quick fixes for the current economic problems.
In recent weeks, I have been asked two questions over and over again: how long will the downturn last, and what impact will it have on Tulane University? The response to the first question I will leave to the new President of the United States and his administration. However, I thought I would share my response to the second question with all of you today.
Fortunately, Tulane University's future remains bright and our current financial position, despite the lingering effects of Hurricane Katrina, is solid and improving at a faster rate than originally anticipated. Student interest and quality are at an all time high, and are expected to remain so because weaker economic conditions normally lead to increased university enrollments. We successfully completed our "Promise and Distinction" campaign in June, and external research funding is strong. Thanks to our recovery success, we have sufficient liquidity to cover our normal operating cash flow needs for the foreseeable future. We have also significantly reduced our post-Katrina debt load in the last two years and have no need to access the credit markets.
Since September, the value of our endowment has decreased as a result of the stock market decline. Despite this decrease, income from the endowment (i.e. the payout) will remain stable this year and is not expected to decrease next year. Tulane is fortunate because the endowment payout represents about five percent of our revenue base and we are not as dependent on this source of income as are many of our peer institutions. It is likely that fund raising, especially for major gifts, will be challenging in this environment but I expect that our annual giving program should remain stable. I am also concerned that some of our students, especially those who are most in need of financial aid, may have a difficult time financing their education.
Considering all factors, the university is well positioned to weather rough economic times. However, to ensure our continued stability and progress, we will have to be particularly careful in how we use and allocate resources.
As we look at the remainder of this year and begin to prepare next year's budget, we will continue to focus on achieving the same short and long-term objectives I have shared with you in meetings and in writing. Our five highest priorities are to:
• continue the phased implementation of the faculty and staff compensation enhancement program;
• invest in the growth of our doctoral programs consistent with the framework developed by the provost and Office of Academic Affairs;
• invest in our research enterprise, especially in the biological and medical sciences, and engineering;
• further diversify our student body; and
• provide financial assistance to meritorious students so they have access to a Tulane education.
We will continue to focus on these priorities while carefully monitoring the impact the economic downturn could have on the university's operations going forward.
As we begin to prepare the fiscal year 2010 budget, we will take into consideration many precautionary measures, among them the following:
• Faculty and staff hiring: We will modulate the pace of our hiring until we get a better feel for the impact that the economic turmoil might have on Tulane.
• Capital improvements and expansions: We will defer all projects where total funding is not currently in place.
• Non-salary expenses: To the extent possible, we will keep non-salary increases to an absolute minimum. In the meantime, we ask you to be as prudent and careful as possible when committing university funds.
• New or expanded academic and administrative initiatives: We will defer significant investments in any new or expanded programs that have not already been identified as a high institutional priority.
Tulane University is in a strong position, academically and financially, and we are better prepared than most major universities to cope with this economic downturn. We have dedicated and talented faculty and staff, and a student body that is the envy of most colleges and universities. Our alumni are loyal to the university and the university's Board continues to provide courageous and enlightened leadership. Collectively, we are prepared to adapt to any challenge. We will successfully manage ourselves through these troubled economic times and prove once again that we can overcome any adversity no matter the odds.
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