None of us knows the duration or full impact of the current global economic downturn. However, as we continue to celebrate the 175th anniversary of our founding we recognize that "K" has weathered severe economic challenges in the past and we will weather this one and emerge a stronger institution. One thing we know for sure is that a sound financial strategy and clear strategic plan are keys to success in a difficult time. "K" has both and I would like to take a minute to talk about each.
It might be helpful to step back and consider the multiple ways through which the current global economic downturn might affect us. Nearly 80 percent of our operating revenue is generated through tuition and fees. This means that our ability to attract and retain academically gifted students, even as their families experience financial challenges, will be most important. Our other two major revenue streams are the spending from our endowment earnings and fund raising. The latter includes the Kalamazoo College Fund, Kalamazoo Athletic Fund, endowed gifts, and grants. Our donors, whether they support the College through annual funds, endowment giving, bequests, or all three, are vital always, but especially during these difficult times. I would like to thank them - or, as appropriate, "thank you" - for your generosity. Our endowment has dropped from more than $150 million in July to less than $117 million in mid December. Our trustee Investment Committee is working tirelessly to ensure that our portfolio is well balanced and that we are stewarding carefully Kalamazoo College's resources.
The good news is that we are in a good cash flow situation and have no major capital building projects underway. We recently finished about $30 million in major upgrades to the Upjohn Library Commons and the Hicks Center that will serve our campus community (especially our ability to attract and retain academically gifted students) for years to come. Although the endowment has taken a hit, we are long term investors. We use a rolling 12-quarter average of endowment values to determine how much revenue is available for the operating budget. This will provide a temporary cushion as we plan for 2009/2010; however, it also suggests that endowment earnings for the 2010/2011 academic year may be particularly limited. We do know in the long run our endowment will recover.
Our financial strategy is one of conservative stewardship. We will guard against over spending of our endowment to meet the needs of our current situation at the expense of the future. At the same time we are committed to sustaining "K's" quality and to protecting our current students, programs, and faculty and staff as best we can in the short term. We have very intentionally delayed the start of our 2009/2010 budgeting process in order to gain the best possible data to make informed forecasts regarding annual giving, endowment earnings, and the size incoming first-year class. We have developed a series of scenarios that we can implement depending on what we project. Undoubtedly, as is the case on almost every college and university in the country, we will need to make budget reductions. During December every department on campus developed a response to three scenarios. The Board of Trustees will consider a budget based on these factors early next month.
A recent Chronicle of Higher Education article noted that institutions with a well-articulated strategic plan are likely to fare better during challenging economic times. Kalamazoo College has begun implementation of the Plan for Kalamazoo College's Future, which includes revitalization of the K-Plan, increased engagement of alumni, a larger student body that is national and international in representation, and competitive compensation for our exceptional faculty and staff. The strategic plan represents the framework that guides our programmatic and financial decision making.
Even without the innovations proposed in the Plan for Kalamazoo College's Future, a Kalamazoo College education continues to be an outstanding investment that yields a lifelong return. That fact accounts for our longevity. During the past 175 years, we've survived every recession, depression, and financial crisis the country has faced. We've survived wars, fires, tornadoes, flu epidemics. Today we know we'll take our financial lumps just like other colleges, businesses, and individuals. But we'll survive because a Kalamazoo College education is an outstanding investment that yields a lifelong return. How do we know?
Our financial strategy is one of conservative stewardship.
- On the Collegiate Learning Assessment, a direct measure of undergraduate outcomes administered to students at more than 100 colleges and universities nationwide, "K" placed among the top three in students' ability to think critically, reason analytically, solve problems, and write effectively. The K-Plan does a superb job of developing these abilities, which are critical to professional success.
- Almost half of the students who planned to enter the job market immediately following graduation in 2008 already had jobs as they walked across the stage in June. For those planning to go to graduate or professional school, 80 percent had been admitted.
- A survey of the Class of 2007 six months after graduation showed that more than 96 percent of those who responded were in graduate school, had jobs, or were otherwise engaged in something that was of interest to them.
- Students at "K" have a greater breadth of opportunities to participate in meaningful leadership experiences through campus programs and service learning. By forging a link between service and learning, students strengthen the local community, enhance their educational experience, and are prepared to build a more just, equitable, and sustainable world. As they participate in the many leadership opportunities on campus, they heighten their self awareness and learn to become effective and ethical leaders.
- Our nationally recognized study abroad program enables our students to develop the skills many multinational corporations tell me they seek in their new hires: the ability to work as members of global teams, to speak a second language, and to understand cultural differences. Eighty-five percent of "K" students study abroad, and because our programs are both longer and more in-depth than any others, our students develop the capacity to be successful in our interconnected world.
Our liberal arts mission by its nature always has been about the discovery of connections. In these turbulent economic times I believe a Kalamazoo College education has never been more significant. Thank you for your support of Kalamazoo College. That support has never been more important.
by Eileen B. Wilson-Oyelaran