Dear Faculty and Staff Colleagues:
The Board of Trustees held its February meeting via Zoom on Friday following a week of committee meetings. Many important topics were discussed, with much of the conversation centering on College finances as we reviewed where we stand in the current year, FY21, and shared updated projections for the coming fiscal year, FY22.
As you know, the College moved swiftly to institute budget and expense reductions at the start of the COVID-19 crisis. The plan we implemented included two dimensions. Approximately $14.1 million in savings were produced through budget reallocations of college funds that included tapping contingency funds, ceasing normal transfers to the capital reserve fund, and suspending capital projects. Another $20.4 million of expense reductions in the operating budget brought the total anticipated “Level III” savings to $34.9 million.
Among the most difficult of these expense reductions were a progressive pay reduction of up to 6% for employees earning $37,000 per year or more, and a suspension of all College contributions to retirement plans, which were implemented July 1.
I am pleased to report that effective April 1, employee salaries and the College’s contributions to retirement plans will return to their June 30, 2020 levels. Faculty and staff who received promotions that would normally have resulted in increases on June 30, 2020, will receive those increases effective as of April 1 as well. As you plan your personal finances, please note that for eligible faculty and staff your required contribution to the exempt employee retirement plan—5% on salary above $15,000— will resume July 1.
The compensation reductions, combined with cuts in operating expenses and the savings realized from a hiring freeze, have contributed to reducing our projected deficit for this year to $3.5 million. Restoring prior compensation levels as of April 1 adds another $2.4 million of expense for a projected total shortfall of $5.9 million. The additional use of budgetary transfers, such as diverting funds from the capital reserve in order to fund current expenses, brings this year’s total financial impact on the College to $14 million. Although in the current market the College’s endowment has reached a record high, the endowment’s impact on operating budgets is not immediate, and pure fiscal prudence would argue against increasing any expenses when we are running a significant deficit. However, the administration and Board recognize the impact of the financial sacrifices we have asked of our community.
It is important to recognize that the budgetary impact of COVID-19, in particular the drop in enrollment we experienced with the Class of 2024, will still be felt in the coming fiscal year and beyond. Moreover, these COVID-19-specific impacts converge with other challenging trends in higher education, including demographic changes expected to reduce the number of college applicants in our primary markets in the coming years. The FY22 budget reflects these constraints. It does not include any salary increases except for those due an increase related to a promotion. More than 40 vacant positions have remained frozen during this year. This spring, we have had to permit a handful of critical positions to be filled, but we plan to keep many of these vacant positions open until at least June 30, 2022. Even with these steps, we are projecting a $1.7 million loss in FY22. Considerable discipline will need to be maintained in next year’s budget, and structural change will need to be considered to ensure a strong financial position for the future.
At the Board-Faculty-Administration retreat in January, we talked about potential revenue-generating opportunities that could help lessen the strain on operating budgets. The current FY22 budget, with its $1.7 million deficit, assumes that we will realize some additional revenue from new programs in the summer and Winterim. Those retreat conversations were the first step in what will be a critical institutional examination of potential new directions that may help to attract future students, and ways in which the College’s resources can best support its highest priorities. At this time of transformation and change, it will be important for all of the College’s constituencies to work together to define the Lafayette of the future.
I am immensely proud of the fact that in spite of the challenges we have faced, our faculty and staff have done everything we have asked, and more, to enable us to offer the best possible education and experience to our students. On behalf of the Board of Trustees, the administration, and most importantly, our students, I offer my deepest thanks to each of you for your steadfast support of the College’s mission during this difficult time.
Alison R. Byerly