Challenging Financial Times Remain
Dear Members of the Saint Mary's College Community,
Having weathered the financial storms of the past year's global economic crisis, many are using the relative calm of this moment to think about and plan for the future. This is especially true for institutions of higher education, such as ours, that are in the midst of developing budget assumptions for the coming year and years. My meetings this fall with college presidents, trustees, regents, donors, faculty members, students and their parents have often turned to discussions on the financial future for higher education and Saint Mary's in particular. I am writing to share some initial reflections on what the future may hold for Saint Mary's.
The signals are mixed. Some encouraging developments suggest that the economic picture is brightening: financial systems appear to have stabilized; the stock market is up almost 50 percent from the worst of the crisis; and retail activity in the third quarter indicates that the recession may formally, at least, be coming to its end. The calming of credit markets and rise in the Dow Jones has strengthened the College's balance sheet and helped the value of the endowment recover some of its losses. Somewhat larger attendance at our on-campus student recruitment events indicates that some are feeling more confident about their ability to afford a private education.
At the same time, most economists project a modest, steady and slow recovery at best. Unemployment levels are higher than any time in the past four decades and are expected to increase before recovering in the latter half of next year. Recent reports that the 2010 California budget deficit is likely to approach $20 billion only increase the probability that our friends and colleagues in public education will face even more harmful budget cuts in the coming year. Unofficial word that Governor Schwarzenegger will ask for across-the-board reductions in all state programs raises the possibility that we will soon again be called upon to fight for the preservation of Cal Grant funding for the state's deserving and needy students.
Evidence is also emerging that even before the current economic downturn financial realities for private higher education were shifting. This fall's College Board Trends in College Pricing and Aid report provided striking data that private colleges were facing constricted revenues and related reductions in expenses even before the current downturn. For example, the report shows that the average net tuition paid at private colleges has actually been declining since fall 2004, falling on average by more than $1,000 per student by fall 2009. (This compares with a modest increase in undergraduate net tuition revenue over the same period at SMC.) In effect, colleges were raising their tuition rates by healthy margins but more than returning the increases in the form of institutional aid and increased tuition discounts. As an apparent result, the number of FTE staff and faculty members per student at private colleges had actually declined in the decade ('97-'07) before the downturn.
While the overall impact for Saint Mary's of these economic trends remains less than clear, some consequences seem to be coming into focus:
1. The days of 7 percent or more average annual undergraduate tuition increases at private colleges are not likely to return anytime soon.
2. High unemployment rates in our core geographic markets suggest that demand for aid will remain high, the pool of nonneedy students has markedly declined and cuts to state aid will continue to be a distinct possibility.
3. While the College's endowment has begun to recover with the rise in the markets, it will be many years before the amount we are able to utilize for College operations returns to previous levels.
4. We are continuing aggressive fundraising efforts but in the current economic climate we are likely to be many years from realizing the kind of results that will fundamentally change our financial condition.
5. Graduate and adult program enrollment and related revenue, while steady, will not show substantial growth in the near term.
Due to the preceding factors, even after planning for growth in the undergraduate student enrollment and a significantly lower new student discount rate for 2010-2011, balancing the College's budget will remain a challenge.
It appears then that we, like other institutions of higher education, will need to find ways to prosper financially while operating with restricted resources. This seems a daunting task, but I am confident that Saint Mary's is uniquely qualified to meet this challenge. We are inspired by a compelling mission and guided by a detailed strategic plan. The College's highly competent and hard-working Budget Committee will undoubtedly align its financial recommendations with the strategic priorities spelled out in my strategic plan. These priorities -- enhancing academic excellence, maintaining the affordability of an SMC education, enriching the quality of student life, improving efficiency and effectiveness in College operations, and maintaining momentum on strategic initiatives -- will remain our touchstones as we make decisions in the days ahead.
Fully realizing that these issues are matters of concern for all members of our community, I encourage you to use the comment feature at the end of this message to share your thoughts. Finally, I am most encouraged by the talented, faith-filled and dedicated people (faculty, staff and students) who make up our community. I have no doubt that, inspired by the charism of our Founder and working together and by association, we will continue to offer high-quality education while finding effective and creative ways to meet the current financial challenges.
In St. LaSalle,
Brother Ronald Gallagher, FSC