photo by Sally McCay
HIGHER ED ECONOMICS, THE VIEW FROM UVM
The global economic crisis hit home at UVM on February 20 as the University announced $10.8 million in cuts to the fiscal year 2010 budget. The measures include layoffs of sixteen staff employees and elimination of another sixteen vacant staff posts; not filling eighteen existing vacant tenure-track and four new faculty positions; the elimination of varsity men’s baseball and women’s softball; and other moves to counter a budget gap nearing $30 million. The University was also preparing for a potential second round of reductions in mid-April once more information regarding revenue sources was available.
With all eyes focused on the economy, VQ sat down with President Daniel Mark Fogel to consider some key questions before UVM.
For continuing updates on UVM’s budget situation: uvm.edu/president/budgetinfo
Q. The strategy for closing the budget gap includes increasing next year’s enrollment target by three hundred students. How do you address concerns expressed by some that this will compromise the educational experience?
A. I think there are concerns both about the educational experience and the co-curricular experience outside the classroom. We are committed to assuring that there is no compromise in either domain. The addition of three hundred students beyond our earlier enrollment model, in fact, simply brings us to the faculty–student ratios that were an integral part of the strategic financial plan that the board of trustees reviewed and approved in May 2004. That ratio is 16 to 1. It is lower than the ratio of 16.8 to 1 that UVM attained at the height of the Public Ivy era of the mid-1980s.
When we model this we see that more than 80 percent of the class sections next fall—assuming this enrollment and the other changes that are contemplated—will be thirty-nine or fewer students. A large complement of the class sections will be nineteen or fewer students. Indeed, we think that the quality and character of a UVM education, with the intimate interaction between teacher/scholars and students being one of the hallmarks of the University’s distinction, will be maintained.
In February, the board approved renovation of a residence hall that is being restored to residential use, adding between 150 and 200 beds in McAuley Hall on the Trinity Campus. That work will include renovation of a dining hall, adding a full-fledged dining space on Trinity, essential when some six hundred students will be living on that part of campus.
In terms of all the other metrics—classroom availability, opportunity for participation in club sports, service organizations, co-curricular organizations, and so on—we do not see any element of this enrollment modeling that will detract from the quality of student life.
Q. Why not just solve this problem by dipping more deeply into the endowment?
A. The simplest thing to say is that dipping into the endowment is not consistent with the fiduciary responsibility of the administration and the board to build long-term fiscal strength for the University. But one can also say that it doesn’t make sense when we’re trying to adjust for the long-term in a financial crisis of indeterminate length. One-time funds are not a permanent solution to base budget adjustments.
Also, like many institutions, we have endowed accounts that are underwater. If someone gave us money in the course of the campaign for an endowed scholarship, for instance, the shares of the endowment that are part of that scholarship fund are worth less today than they were at the time of the gift. It would not be responsible to spend from the earnings of those underwater endowed accounts before they’re rebuilt. This notwithstanding, UVM has done as well in this severe market downturn as any institution. Our investment advisors and our investment committee of the board have done a terrific job of managing our assets in an environment of very steep decline of the markets.
I’d also point out, though, that we are not cutting as deeply as we would have to otherwise if we were not drawing on reserves. But we are drawing on general fund cash reserves rather than endowment, which represents the nest egg for the future of UVM.
Q. You’ve said that UVM is in a stronger position to weather this economy than many other institutions. Why do you believe this?
A. Well, of course, some of the reasons are paradoxical, almost ironic, counterintuitive strengths. Last April, I shared my thoughts in an essay that touched on the University’s competitive advantage in the face of a rising economic and demographic storm. At the time I foresaw no more than anyone else how fantastically and terribly deep the economic decline would be.
Among those advantages is the fact that we are less reliant on spendable earnings on endowment for our annual operations than are much more heavily endowed institutions. Places like Dartmouth, which just laid off five times as many people as we did, or Middlebury, which is unfunding six times as many positions as we just eliminated, or Harvard, which is facing substantial losses to its large endowment, are suffering more on that score. Princeton takes 44 percent of its operating budget from spendable earnings on endowment. Our proportion of our annual operations represented by spendable earnings on endowment is in the low single digits.
At the same time, we’re not as reliant as our public peers on public financing. For instance, a school like UMass-Amherst is being deeply hurt by the inability of the state of Massachusetts to support the university. Their faculty salaries are frozen this year while ours are continuing to gain in market competitiveness, essential for the long-term health of the University. While it’s an exceedingly good raise for UVM faculty—and some would say excessively so in this environment—the faculty contract was negotiated before that deep downturn this fall and it represents, after all, an opportunity to really build market competitiveness and the strength and distinction of the faculty going forward. UMass is raisingtuition and fees already 15 percent and may raise it more. We are only going up 6 percent, but we’re doing that with a $10 million increase in financial aid from $52 million to $62 million.
So, we have those advantages. But we also have the advantage that in the last half-dozen years we have really invigorated the quality of University programs, the intellectual life of the University. We have strengthened the appeal of the University, not only to students in this region, but nationally. We have a historically robust, diverse, and highly academically qualified applicant pool of more than 22,000 students thanks to enormous interest in UVM. Our admitted student visits to the University are having record turnouts. This, too, is part of the competitive advantage of the University.
Q. As students and families are now struggling more than ever to meet college costs, could you speak further about what the new budget scenarios will mean for financial aid?
A. We are very mindful of the challenges that students and their families are facing in this very, very chilly economic climate. Far from pulling back on financial aid, we are building financial aid resources to build a safety net under our students and their families. Our financial aid budget expenditures this year were $52 million. The plan next year was originally to rise to $59 million. Instead, as part of this budget reconciliation exercise, we decided to put more into financial aid than we had planned as an increase. So we bumped the $7 million planned increase to $10 million. We created a financial aid safety net under our enrolled students to provide support for students who might be facing difficulty staying in school.
We are fulfilling this commitment to our students in a variety of ways. For instance, for our Vermont students, for whom we have a very strong commitment to access and
affordability, almost 29 percent of our undergraduate enrollment of Vermonters receive full financial aid support for tuition and fees with no loans. That proportion could increase in these challenging financial times because 90 percent of these students are identified by the federal government as Pell
eligible—students with the greatest financial need. Of course, the federal stimulus package increases the federal Pell grant maximum, which will help us not only to address the needs of that community, but to extend more need-based aid to
students who are above the threshold for Pell eligibility.
Q. The administration recently announced $10.8 million in cuts and more will possibly follow in April. Are you confident that this is strong enough action to set the University on more solid ground financially?
A. I am confident that we are doing the right things and that we are taking a very sensible approach to preserving academic quality and value and the positive momentum of the University, given what we now know. One has to acknowledge that the ground has been shifting beneath all of us much more dramatically, much more rapidly than any of us had foreseen a year ago. But, I think we are doing the right things and we have significant reserves with which to address the possibility of further downturn. Our cash flows are strong, and as I’ve said, the applications and the enormous interest of students around the nation in UVM continues to surge and that is the backbone, that is part of the capital that we can draw on as the recession continues.
Q. In this rapidly changing economic environment, are there particular variables that concern you the most?
A. Well, I think I’m most concerned about what we’ve just been discussing—our ability to attract and retain enthusiastic, highly motivated, capable, and diverse students to the University of Vermont. As long as we are able to do that, I think we can maintain the academic quality of the University, the quality of the faculty and the staff. But the concern, ofcourse, lies precisely in the uncertainty that afflicts all of us in terms of how long the downturn will last and how deeply it will affect the ability of students and families to make the very high-return investment in higher education, and especially in an education of the quality that UVM affords.
Q. At a recent campus forum, several baseball players attended in uniform and pressed you on the decision to cut the program. It was clearly a difficult moment for you. Could you speak to that?
A. There are many painful aspects of the cuts being made here, even though they are much more modest than the cuts being made at many other colleges and universities. We are very mindful of the pain of job loss to any individual.
But I think the decision to cut those athletic teams had a different and very deep emotional resonance for a lot of us. It was a very difficult decision. Softball is a relatively new sport at UVM for women; baseball has a tradition that goes back into the late nineteenth century, it’s a storied tradition, it’s one that we value greatly. For all the players, the women on softball, the men on baseball, the coaching staffs, the parents and families of the players, of course there is an enormous investment in the value of the program. These sports were very, very painful to cut.
We are operating in a radically changed landscape and one that has led me to call on the University to shift gears from the invest-and-grow strategy that has served us so well in recent years to a focus-and-invest strategy. Really, it was the iron imperatives of that call to focus-and-invest playing out in the evaluation Dr. Corran (UVM athletic director) and his colleagues conducted of the athletic programs that led them to determine that in order to maintain the high and rising quality of the Division I athletic programs, we need to trim our sails, reduce the number of our varsity sports. That is consistent with the focus essential for us to embrace as an institutional strategy at a time of scarce resources. What we don’t want to sacrifice in athletics and the classroom and the laboratory and our service mission to the people of Vermont and beyond is quality, is excellence, is a commitment to the highest levels of competitiveness. That was the context in which that decision was made.
Q. When the February cuts were announced you said you were confident UVM would emerge from the downturn earlier and stronger than the vast majority of colleges and universities. Why?
A. The basis of my confidence is the essential strength of UVM—our underlying fiscal strength; the quality, distinction, dedication, and talent of our faculty and staff; the rising quality of our student body that has always been so capable and is now exceeding the historic metrics of academic credentials and student achievement. I’m confident that the University has the resources, both financial and human capital, to sustain its continuing surge in quality and reputation.
