Balancing the Budget and Planning for the Future

Summary of information sessions for faculty, staff, and students

In a series of informational forums following the Board of Trustees winter meeting, President William D. Adams and Vice President for Administration Douglas C. Terp explained to students, faculty, and staff the current and future financial challenges Colby faces and outlined a process for revising the College’s 10-year financial model, which projects changes in Colby’s anticipated income and spending. Some highlights of those presentations:

Colby’s Income
The presentation began with a review of the College’s primary sources of revenue for the annual operating budget. The comprehensive fee is Colby’s single largest source of income, followed by the endowment and the Colby Fund. Together they comprise virtually all of Colby’s annual operating budget.

The Endowment
Adams pointed to the drop in market value of the endowment and the worsening of the overall economy as the major drivers behind the challenging financial future confronting the College. The endowment is down an estimated 25 percent from the audited $600-million total reported at the end of the 2007-08 fiscal year (June 30, 2008). Budget planning includes contingencies for possible further declines.

Endowment Spending
The endowment provides 17 to 18 percent of the College’s operating budget each year, and the drop in market value means less money for future operating budgets. Terp explained that this expectation of lower endowment revenue in the coming years requires adjusting Colby’s 10-year spending model. The Board of Trustees is considering a one-year increase in the rate of endowment spending to provide additional time for the College to assess its long-term financial projections and reset some priorities, but, Adams stressed, spending more of the endowment is only a temporary measure.

The Colby Fund
The Colby Fund is running approximately $400,000 behind its goal for the year, though it is clear this is not due to a lessening of support for the College. The number of contributors is up over last year, but the amount of their gifts is lower, which Terp said is understandable given the shape of the economy. While celebrating the strong commitment of Colby’s supporters, Adams explained that Colby Fund contributions are counted in this year’s budget and so the shortfall in contributions has to be matched, dollar-for-dollar, by a reduction in the current year’s budget.

Reducing the Budget....This Year
Increasing the computer replacement cycle to four years from three, reducing the amount of discretionary travel, and shifting more communications from print to electronic media are among the changes the College has identified to reduce this year’s budget by more than $700,000. These reductions, which will not have a material impact on the core teaching and learning mission of the College, are expected to bring the budget back into balance and maintain a funding contingency through the end of the academic year.

...And in the Future....
Recognizing the weakening economy will affect the entire Colby community for some time, Adams outlined a process of revising the College’s spending priorities for the coming years. Working with his senior staff, the associate vice president for academic affairs, the four elected division chairs, and two appointed faculty members, Adams is convening a series of meetings to identify ways in which the College’s long-range financial model can be brought into line with reduced revenue projections. President Adams will present the Board of Trustees with a number of long-term budget-reduction initiatives at an on-campus meeting in June, and the board is expected to approve a balanced 10-year financial projection at its regularly scheduled October meeting.

Academics and the Budget
Colby’s financial situation cannot be separated from its core teaching and learning mission, and any budget reductions will be made with careful attention paid to any impact on the academic program. The curricular working groups established in 2008 are preparing their final reports, and Adams said their findings will be integrated into the discussions regarding long-term financial planning.