In December, President Roth announced plans for significant across-the-board budget cuts to mitigate the University’s $15.5 million budget shortfall. In the last two months, however, the national economic crisis has only further weakened the University’s financial stability. According to sources close to the matter, the University’s annual budget deficit is now $19 million.

According to the 2008-2009 Proposed Operating Budget from Vice President of Finance and Administration John Meerts, the University’s annual budget for 2008-2009 is about $197 million. With a $19 million budget shortfall, the University will be forced to make even greater budget cuts than those currently being proposed.

The growing deficit is partially caused by the University’s dwindling endowment, a percentage of which is funneled into the budget each year. While market volatility contributed to a $200 million decline in the endowment for the first two quarters of Fiscal Year (FY) 2009, the University’s percentage draw on the endowment has remained at 5.5 percent. Consequently, as the endowment declines, so does the percentage of funding that goes into the annual budget.

According to Wesleyan Student Assembly (WSA) President Mike Pernick, the annual budget is also comprised of tuition and donations. The recent budget shortfall, however, appears to be a direct result of the endowment’s poor performance.

As Roth stated, the University will not draw from the endowment to compensate for the loss in budget. Other measures, such as the proposal for increasing undergraduate enrollment, will remain as originally written.

“The University will balance its budget and we have no plan to increase the draw on the endowment beyond what is mandated by the Board of Trustees, nor will we propose increasing the class size beyond the small increase we proposed previously,” Roth said in an e-mail to The Argus.

It remains unclear, however, where new budget cuts will be made. Currently, the administration’s December proposals for revenue enhancement are still being considered. Last semester, the administration proposed several ways of eliminating the University’s budget deficit, including an increase in undergraduate enrollment, a salary freeze for faculty and staff, and a one-time tuition increase for the 2009-2010 academic year.

According to Pernick, it is unlikely that the campus community will find a viable alternative to the proposals being tabled by the administration. As the budget deficit grows, so does the need for revenue enhancement.

“We’re down to the bones in cuts,” Pernick said. “Financial aid remains a priority, and so does not firing professors. But granted, we need to see the exact costs that these proposals will have on the University before going through with them.”

The proposal to expand incoming class size, for example, would generate a reported $3.9 million in additional revenue by its fourth year. For Professor of Psychology Emeritus Karl Scheibe, who has been at the University for 46 years, the increased class size proposal seems like a hasty solution.

“I can well imagine that no one has proposed an alternative way of providing the additional income that this move would produce,” Scheibe said. †“Nor is anyone likely to produce a plan for reduction in spending that would result in a more balanced budget. The rule seems to be to take the least painful course into the future.”

According to Pernick, while the Board of Trustees will convene in the coming weeks to discuss these proposals in relation to the University’s declining endowment, it is unlikely that the proposals will be rejected.

“I don’t expect that the Board will have objections to the proposals,” he said.

  • down to bones

    Down to the bones in cuts ? Have the salaries been reduced for those who make more than , say, 200k$ ? Has the headcount in admin been cut by 10% ?

  • David Lott, ’65

    Fact is, Trustees should probably be planning to cut the percentage they take from endowment below 5.5% In a time of declining market values, a 5.5% draw can deplete the endowment further in a quick hurry. Assume a further 5% decline in market value for each of the next five years, and add a 5.5% draw, and you will reduce the endowment by another 50% from current depressed levels.

    Someone ought to start thinking about and preparing for the further downside risks. Wesleyan is still living in a dream world.