Dear Members of the Campus Community,
I am writing to provide you with an update on the financial position of the College at the midpoint of the 2009-2010 fiscal year and some current information about the state of finances of the private higher education sector.
The College's operating budget shows positive results at December 31, 2009, with six-month revenues running slightly ahead of budgeted targets and six-month expenses running slightly below budgeted targets. The market value of the College's endowment was $117.6 million as of December 31, 2009 and represents an increase of $8.7 million or 8.0% since June 30, 2009. Finally, the College remains in compliance with its credit covenants and the weekly interest rate resets on its variable rate demand bonds remain at historic low rates of approximately 15 basis points (0.15%).
Moody's Investors Service recently released their outlook for higher education and their assessment is that economic prospects for both public and private institutions of higher education remains negative. Factors cited by Moody's for their negative outlook for private institutions of higher education include tuition pricing and enrollment uncertainty, pressure on other key revenue sources (i.e. gifts, grants and contracts, state appropriations and investment income), reduced financial resources, increased regulatory review and liquidity challenges. Moody's forecast for the year ahead includes ongoing expense reductions, more lasting restructuring of business models, a heightened need for demonstrating value in the marketplace and expanded disclosure of finance and operating practices.
Moody's report also summarized the most common responses by colleges and universities to the economic crisis. These included employee furloughs, salary freezes, retirement contribution freezes, limitations on hiring, reductions in other discretionary expenses, capital project suspensions, outreach to donors to accelerate pledges or release restrictions, pursuit of new operating lines of credit, modified enrollment targets, and increased retention efforts.
These actions were similar to the actions taken by a select group of approximately two dozen West Coast private liberal arts and comprehensive institutions that comprise the PAC-CON Business Officers Association. My more detailed observations from the December 2009 annual meeting of PAC-CON on the impact of the economic crisis can be viewed here.
I hope you find these insights and observations helpful in understanding and reacting to the financial challenges that Saint Mary's College faces in the months and years ahead. As always, I would appreciate receiving any thoughts, observations, or suggestions you may have regarding these challenges.
Peter A. Michell
Vice President for Finance