2008 end of year message
I write to update you on Cornell's recent financial challenges and to share a few thoughts as 2008 passes into 2009.
Since my last communication, when I previewed the scope of the challenge brought on by the financial crisis on Wall Street, the markets have continued to deteriorate and the country now finds itself in a recession. A more complete analysis of Cornell's complex financial picture has sharpened the estimates of the fiscal challenge, confirming that, together, we must face up to a 10% correction in our annual operating budget over the next few years. The combination of state cuts, reduction in gift support for capital projects and other priorities, along with a real decrease in endowment support for academic programs and salaries, leaves us no choice but to act promptly.
Because forcing a commensurate blend of program cuts and revenue enhancements in a single year would be so debilitating as to change the very nature and character of the university, I have opted for a set of strategies that will lead the institution back into financial equilibrium over the next few years. However, we must begin immediately to reduce our costs. And while I do not anticipate any across-the-board cuts, the fact remains that this is a very serious situation and any reasonable solution will affect real programs, real jobs and real people. As I have said from the start, unfortunately we will have further layoffs. We will continue to do all we can to support those whose positions are eliminated and we will look hard for other ways to reduce costs. Cornell is widely recognized as being a great place to work; our commitment to our workforce remains a top priority for me, especially during these challenging times.
To avoid doing damage to our core programs, the approach we will pursue will tackle three interrelated yet distinct issues: (1) the reduction in distributions from investment earnings that support the university's operating budget, (2) the deficit in the annual operating budget – caused by state budget cuts, increased debt service for capital projects and reduced overhead on grants and contracts – and (3) the need for even more financial aid at a time of great economic stress for our students and their families.
With respect to the first objective, we must recognize that a more complete solution to the problem of reduced endowment-expendable resources will have to await the return of the financial markets and growth in institutional revenues over the next several years. Our strategy is to permit the university to grow out of the current financial crisis while balancing its budget within a reasonable period of time.
Second, the administration is engaged already in assertive actions to reduce expenditures. All vice presidents and deans have submitted scenarios to reduce expenditures and increase revenues so that the appropriate budget correction can be achieved. The provost and I are currently reviewing all of the proposals to determine which ones to act upon in the immediate or near term. These include such things as savings through institutional cost-efficiency actions, unit budget reductions, increases in operating revenues (both current and potential new revenue streams), tuition increases and future enrollment targets. We will look also for ways to further strengthen access, maintain competitive salaries programs at a time when recruitment efforts will be critical to our future and enhance the systems that distinguish a Cornell education and support research on our campuses.
Finally, we will seek an incremental endowment withdrawal, up to an additional 1%, for enhanced financial aid. Perhaps the best evidence of our commitment to Cornell's founding principles is our most recent financial aid initiative, announced just a few weeks ago in the midst of the economic turmoil, to make it possible for our neediest students to graduate debt free, and to help their families by eliminating parental contribution for students from families with incomes below $60,000. In the years ahead, we will continue to develop an even more robust revenue stream for financial aid by raising an additional $125 million as part of our overall "Far Above" campaign, which exceeded its midpoint this year, thanks to the generosity of our alumni and friends.
This challenge is an opportunity for us to come together as one university and make it organizationally more efficient. The very positive, constructive attitude of the deans and vice presidents to form a new unified leadership team, the overwhelming outpouring of ideas through the electronic suggestion box – over 400 at this point – and the willingness of Cornellians to look beyond individual interests to the welfare of students and families struggling to afford a Cornell education and the welfare of their co-workers on campus: All of this continues to make me very optimistic about the future of Cornell. I count on your continued ideas, comments and support.
There have been many changes in our senior leadership over the past year. My deep gratitude and respect go to David Harris for his outstanding leadership during his term as interim provost. During this semester, David has coordinated many significant academic efforts, including the newest financial aid initiative announced in November, as well as leading our effort to better respond to the financial challenges. His guidance will continue to be a great asset to Cornell.
I welcome Kent Fuchs as he assumes his new functions as the university's 15th provost. Kent's experience as dean of Cornell's College of Engineering has proven him to be an innovative and thoughtful leader of our institution. He will work closely with Tony Gotto, provost for medical affairs at the Weill Cornell Medical College in New York City. I look forward to collaborating to ensure that the future of Cornell's academic enterprise remains multi-faceted and robust. And, in this time of need, we will be alert to maintaining and strengthening our role in teaching, research and outreach as the land-grant university of the State of New York.
A special congratulations goes to all our winter graduates! Your hard work and determination have paid off, and I look forward to celebrating your great accomplishment with you and your families at the Graduate Recognition Event on December 20th.
I look forward, optimistically, to working together with you in 2009 and to learn more from your good ideas and feedback. I thank you for your continued commitment to Cornell and wish you all the best for happy holidays and a promising New Year.
David J. Skorton