Mo' money, mo' problems

This just in from College President Jim Yong Kim:

October 9, 2009

Dear Members of the Dartmouth Community,

As we settle into the new academic year, I want to express appreciation for the
warm welcome you have extended to my family and to me. With the celebration of
Convocation and Inauguration on September 22, many of us had the chance to
reaffirm our commitment to each other as members of the Dartmouth community,
and to the pursuit of excellence in education.

In less challenging economic times, you might expect that my first letter to
you as president would focus largely on our aspirations for the coming year.
But these are not normal times. I am writing today to update you on
Dartmouth's financial picture, and the difficult work we face in continuing
to bring the College's finances into balance.

The global economic crisis has created significant challenges for every
institution of higher learning, but Dartmouth remains committed to providing
the finest education in the world. Our priorities are clear: to enable the best
students to attend Dartmouth, regardless of their financial means; to continue
to attract superb faculty who are both great scholars and great teachers; and
to build on our reputation as an exceptional place that offers a personalized
educational experience for leaders who will shape the future.

Generous friends, parents, and alumni have once again enabled Dartmouth to act
according to its priorities. The level of giving held up extraordinarily well
over the past year, despite the recession. However, unprecedented volatility in
global financial markets caused substantial losses in virtually every part of
our endowment in the fiscal year ending June 30, 2009.

Here is an overview of key financial metrics for fiscal year 2009:

Endowment Losses

* Dartmouth's endowment fell 23 percent to $2.8 billion (a decline of 19.6
percent due to investment performance, with the balance as a result of spending
from the endowment, somewhat offset by new gifts to the endowment).
* This loss of $835 million equates to approximately a $50 million reduction in
annual operating revenue available to the College.
* Long-term endowment performance, however, has been excellent. Dartmouth
achieved an 8 percent annual return over the past decade, when the performance
of the broader stock market was flat, placing it in the top 5 percent of all
endowments and foundations.

Endowment Spending

* Dartmouth increased its rate of endowment spending several years ago to
support key initiatives including enhanced financial aid, additions to the
faculty, and critical facilities projects.
* Endowment spending of $227 million represented 32 percent of Dartmouth's
revenue last year (total revenue of $701 million) and, after tuition, was the
largest source of revenue for the institution.
* We are making conservative projections about future endowment performance.
Given these projections and the decline in the value of our endowment,
contributions to Dartmouth's budget from the endowment will be flat or will
decline over the next several years relative to fiscal year 2009 -- further
reducing revenue to fund operations.

Prospects for Recovery in the Endowment

* While the stock market has recovered somewhat in recent months, college and
university endowments, because of their asset allocations, generally have not
rebounded as quickly. Dartmouth's endowment, with only 26 percent of assets
invested in public equities, is no exception.
* We do not expect our endowment to return to its fiscal year 2008 level of
$3.66 billion for quite some time.

Fundraising Progress and Goals

* The Dartmouth College Fund raised $38.1 million in fiscal year 2009, down
from the record $42.2 million raised in the previous year. Alumni participation
remained high at 46 percent, off just one percentage point. The Fund provides
unrestricted dollars which directly support financial aid, faculty and academic
programs, athletics, the arts, and service opportunities for students around
the world.
* Volunteers are hard at work to meet our $40 million goal for the fiscal 2010
Dartmouth College Fund.
* The Campaign for the Dartmouth Experience is now raising the final $60
million necessary to meet its $1.3 billion goal, which we anticipate achieving
by December 31. These gifts are generally restricted to specific priorities,
and are not available to fund general operating expenses.

Efforts announced last February to cut the operating budget have affected all
parts of the institution. These efforts have included reducing the work force
and holding compensation flat for most employees. These were not easy actions
for the campus community. While these actions produced meaningful savings and
helped address the immediate shortfall in the budget, they are not enough to
cover the gap we face.

No single path will be sufficient to address these serious financial
challenges. We will proceed on three fronts:

* First, we will reduce expenses. This must be done thoughtfully. We will work
collaboratively and creatively to arrive at innovative solutions. We will be
called upon to make some difficult choices.
* Second, we will aim to increase philanthropic giving to Dartmouth, in part by
continuing to demonstrate to donors that we are using our resources efficiently
and effectively.
* Third, we will pursue new initiatives that build upon the strengths of
Dartmouth and produce revenue while addressing the evolving needs and potential
of our students and of society.

As we address these challenges, we will seek campus input widely, through
meetings and forums, and will continue to communicate with you in the weeks and
months ahead. Meetings are already underway with the Arts & Sciences'
faculty Committee on Priorities and with the institution-wide Budget Committee.

In my Inaugural address, I spoke of pursuing our most cherished goals not only
with passion, but also with a tough-minded practicality that will allow us to
deliver on those goals. I am confident that we will overcome these financial
challenges and realize our aspirations, and that the character of this
community will not just sustain this institution, but enable Dartmouth to
continue to thrive.

Sincerely,

Jim Yong Kim
President
Dartmouth College