Budget Planning Administrative Forum February 10, 2009

Status of FY % reduction in S&E Swept salary savings from hiring freeze Released hiring freeze at end of January Monitoring “underwater endowments”

FY 2010 Planning Annual growth in endowment distribution will be 1.5% (tentative) Likely to announce tuition increase below 5.5% that we announced for Asking schools and divisions to cut 5% from A1 and A2 budgets (~$13M)  Calculated from FY 2009 starting budget No decision yet on how much to provide for payraises

Why are reductions necessary? Estimate endowment market value will be down % this year (before spending) Endowment distributions support 45% of total revenues (63% of core budget revenues) Endowment spending policy calls for spending between 4.5% and 5.5% of trailing three-year market value of the endowment and not exceeding a ceiling of 6.5%  Need to slow growth in endowment distribution to 1.5% to stay within ceiling

Assumptions for Stress Testing of Endowment Spending Optimistic Case Base Case Pessimistic Case Annual Endowment Return: FY %-20.0%-25.0% FY % 5.0% FY 2011 and beyond9.5% Annual Base Spending Increase*1.5% New gifts of $25 million are added to endowment each year. *NOTE: Original planning figure was 4.0% annual increase in endowment spending

Endowment Spending Projections Targeted annual base spending increase is 1.5% Spending as % of 3-Year Moving Average

Cost Saving Suggestions Submitted on Web People Issues  Don’t pay for cell phones  Increase years required to vest for benefits  Lower mileage reimbursement rate  Charge recreation center fees to visiting faculty  Four-day workweek or telecommuting Service Issues  Shuttle service Use of Paper  Require double-sided copying  More automation of forms  Eliminate hard copy directory and other publications  Encourage direct deposit for pay and no paper stub Other Eliminate hard copy director and other publications Eliminate food at meetings “Rent parties” Turn the Lights Off

Situation at Other Schools Princeton: 5% reduction Stanford: 15% reduction in next two years Brown: $16.5M reduction over two years Cornell: 5% reduction Carnegie Mellon: 5-10% cut by FY 2012

Timetable Budgets Due the End of February Discussions in March Update Discussion With Board of Trustees in March Decisions in April Budget Submitted to Board in May