President Turner’s message on the economy

On April 3, SMU President R. Gerald Turner announced new measures designed to strengthen SMU’s financial position for the beginning of the 2009-10 academic year. The full text of his e-mail to the University community is under the link.

On November 18, 2008, I announced measures that the University was taking in response to the growing economic downturn, which included an overall reduction of 2% in institutional budgets. These steps have been implemented as we complete budgetary plans for the 2009-2010 academic year. At the same time, the first year of the public phase of The Second Century Campaign has provided continued momentum for SMU to move toward its academic goals.

In the meantime, the financial environment has continued to deteriorate, necessitating further actions to adjust to uncertain times and to ensure SMU’s academic health into the future. These steps are intended to build up reserves as we end the 2008-2009 academic year, and thereby to strengthen our financial position as we move into the fall semester.

As I have described on several occasions, there are three major sources of income for SMU that require our diligent attention. First, student enrollment is critical because tuition and fees provide two-thirds of the total University budget. I recently sent a separate memo to the University community describing the importance of our enrolling the students who have been admitted for the fall of 2009. Currently underway are important visitation weekends and later this summer a series of orientation sessions (AARO programs). These events give us the opportunity to help prospective students and their parents conclude that SMU is the right place for them, even in these tough economic times. In partnership with the families and supporters of these students, the University is providing increased levels of both merit and need-based financial aid to assist in their matriculation to SMU.

In addition, retention of our continuing students remains a top priority. Many of our current students, who, in the past, would not have been eligible for need-based financial aid, now require our assistance in identifying possible sources both internal and external to the University. The involvement of the entire SMU community can do much toward assuring our continued economic stability by meeting our enrollment and retention goals for the fall.

The second major source of income for the University is the amount of earnings from the endowment. I reported in November that the endowment had declined 13.3% from July 1 – October 31. However, with the continued deterioration of the worldwide economy, the value of our endowment has decreased an additional 12% for a total decline of 25% from July 1 – February 28. While significant, this is similar to declines experienced by other institutions of our endowment size. Although our spending policy helps to smooth economic changes over several years, unless the financial markets improve, we will have to take additional action as we enter FY2010 to prepare for reduced earnings and, therefore, less budget support from the endowment in subsequent years.

The third major source of funding for the University is private giving. I am pleased to report that our alumni and friends have continued to give, and that many faculty and staff have also made contributions as a statement of support for the University’s goals and as a way to encourage outside donors. The Second Century Campaign is providing a means for continued momentum, bolstered by the success of the first year of the public phase. As the economy continues to weaken, however, we should expect to see at least a delay in the gifts that some donors intended to make during this time. This development will have an impact on expenditures in areas typically supported by such contributions.

As we complete the current fiscal year May 31, 2009, and look forward to the 2009-2010 academic year, we are immediately implementing several prudent fiscal actions that will allow us to enter this next academic year in a strong financial position. These actions will help us manage expenditures and preserve resources during the completion of this fiscal year and add to our ability to address financial challenges during the coming year.

The following financial management strategies are effective immediately:

  1. The University will continue to make essential hires; however, all new and/or vacant positions must be reviewed and approved by the Provost, appropriate Vice President, or Athletic Director prior to filling or refilling. All efforts should be made to accommodate the tasks of the vacant position with current faculty or staff prior to hiring replacement or additional employees. Grant and contract funding is exempt and should be expended prior to any unrestricted funds. Graduate student recruitment will continue under current guidelines.
  2. All positions currently in the recruitment process will be reviewed by the Provost, appropriate Vice President, or Athletic Director to confirm the need to continue recruitment.
  3. End-of-year salary and benefit savings resulting from unfilled positions will be retained by central administration. These unfilled positions will remain permanently budgeted in their respective areas. Base budget for the following year will not be reduced as a result of unfilled positions, unless those positions are eliminated to meet subsequent budget reduction goals. Budget savings resulting from reductions other than salary and benefits will be retained by the college, school or department/division.
  4. Budget revisions from salary and benefit lines will not be permitted without explicit approval on a case-by-case basis of the Provost, appropriate Vice President, or Athletic Director.
  5. Any salary adjustments made outside of the normal merit process must be approved by the Provost, appropriate Vice President, or Athletic Director.
  6. Travel and entertainment expenses should be carefully reviewed and reduced where possible. The necessity of attendance at professional meetings should be carefully evaluated.
  7. General and administrative expenses should be carefully reviewed and reduced where possible.
  8. The Provost, appropriate Vice President, or Athletic Director will ensure that there will be no negative variances to budget.
  9. Restricted balances are not to be used to accommodate the reductions mentioned above or to compensate for deficit spending without prior discussion and approval from the Provost, appropriate Vice President, or Athletic Director.
  10. Capital project spending will be limited to those projects currently funded as defined by policy. Additional capital projects will be undertaken when funding is available.
  11. A thorough review of current expenditure authority will be undertaken by the Provost, each Vice President, or Athletic Director to ensure the most efficient utilization of our financial resources.
  12. These procedures will be in effect until October 1, 2009. At that time, a decision will be announced regarding their continuation, modification, or elimination.

Staff from the Office of Business and Finance will meet with campus financial officers to help implement these actions. The Provost will work with the Deans to ensure a smooth implementation.

In these very challenging times, we can be thankful to have The Second Century Campaign underway to maintain our momentum and to provide resources for our progress. The fiscal actions announced today will help us enhance the financial strength of SMU as we face uncertain financial conditions. Combined with the support of our alumni and friends, these efforts will ensure our ability to continue our academic advancements and to capitalize on the opportunities ahead.

As always, our commitment to SMU and our cooperative efforts will continue to make the University a great place to be, even during challenging times.