April 28, 2010

To Members of the Bowdoin Community,

I write to discuss the financial condition of the College as we approach the end of this academic year. In short, the College is currently in stable financial condition and well positioned for the future in support of our fundamental mission of education in the liberal arts tradition and a commitment to the common good.

We will present a balanced budget to the Board of Trustees, continue full support for our academic program, preserve financial aid and major maintenance, and we will avoid general staff layoffs. A great deal of work by many has brought us to this point, and I am grateful to everyone who has thought hard about our priorities, held the line on spending, and provided the support so critical to the College.

The purpose of this letter is to review where we have been and to provide details as we work together on behalf of Bowdoin.

The last two years have been challenging in many ways for us and for the nation as the economic recession and instability affected all parts of our society, including Bowdoin. Last year we made some choices and charted a course that we hoped would ensure our financial health into the future. At this point, and given current economic conditions, it appears that those actions and choices were correct and largely sufficient.

Along with a balanced budget for next year, our models and projections for the future financial condition of the College also suggest a stable and balanced outlook. We established principles that have guided us over the past year. These included continued support for our academic mission, maintaining our commitment to need-blind financial aid (and our “no-loan” policy), maintenance of our facilities, and preservation of our community and jobs for our faculty and staff. Based on these principles, we set in place a number of steps to reach financial stability.

Achieving Financial Equilibrium

Faculty and staff salaries were frozen (except for those employees making $40,000 a year or less) for this academic year and the next. We were obviously concerned that we might fall behind our peer schools with this action, but based on the available data, we remain more than competitive, since salaries for faculty and staff were similarly affected at most institutions. At Bowdoin we continued to hire faculty this year to replace those retiring, and we are expanding the size of the faculty based on the capital campaign completed successfully last summer. We continue our policy of not adding a faculty line without new endowment to support that line. It has also become our policy to be much more rigorous in our consideration of replacement faculty for those on leave or sabbatical. We also maintained the same level of health care and retirement benefits for faculty and staff. These actions by the College reflect our financial health and stability, and compare very favorably to the those taken by many other colleges and universities, where faculty size is being reduced, retirement contributions are being diminished, health benefits are becoming more limited, and substantial staff reductions are common.

We sought to hold operating costs flat. (By “operating costs,” we mean all expenses of the College other than salary and benefits.) This goal has been met through the cooperation of many on campus. We reduced our operating expenses by $1.3 million last year, and we expect this reduction will be permanent. The community has saved an additional $1 million in expenses this year through cost cutting and efficiencies. These savings arise from discretionary operating expenses such as travel and conferences, supplies, and the normal day to day operations of the College. I am personally grateful to all on campus who have been responsible for creating these important cost reductions, and especially to our Senior Vice President and Treasurer Katy Longley and her staff for all their good work.

Size of the College

I suggested last year that we contemplate increasing the size of the College by 50 students to a residential student body of 1,750 over the next few years. We did not admit more students to achieve this result. However, we are actually a college of nearly 1,750 students this year. This is due to significantly fewer numbers of students electing to study away in their junior year as well as a reduction in the number of students taking leaves from the College. Based on current projections, we believe that the reduced number of students studying away will be replicated next academic year. We are analyzing the reasons behind the reduced study away numbers, but at this point, we do not plan to admit additional students to increase the size of the College.

The issue of the size of the College will always be under evaluation, but it is my view that we should not seek to balance our budgets by admitting more students if this can be avoided. Our financial goal should be to become more endowment-driven and less tuition-dependent. In the long run, increasing the size of the College without adequate increases in the endowment is not desirable. There may be good reason to increase the size of the College very modestly, perhaps by increasing the number of international students on campus. But this should not be driven by a financial strategy aimed at balancing budgets.

Capital Projects

There are no substantial capital projects on the drawing boards, and we are carefully planning for a future that assumes a much-reduced capital program compared to the past decade. Major maintenance of our buildings and grounds continues and represents a critically important investment by the College. Any new substantial capital projects in the near term will, for the most part, require gift support to the College in order to fund the cost of the project.


We have maintained our commitment to our staff to avoid layoffs, and we are among one of the very few colleges and universities that has been able to avoid rounds of general layoffs. As was reported in the Bowdoin Orient recently, we did, with great regret, lay off three people on the Development staff over the past couple of weeks. We expanded our development operations over the past number of years, principally in support of The Bowdoin Campaign. With the successful conclusion of the campaign, it was appropriate to review staffing levels in light of projected future activity. It was out of that review that we made the difficult decision to reduce staff levels in Development. From my perspective, this decision is not linked to the financial condition of the College, but represents prudent leadership by Senior Vice President Bill Torrey and the College that is appropriate even during healthy economic environments. This does not minimize the challenges we have created for those no longer with the College, but all institutions (particularly non-profit institutions) must carefully review levels of staffing given projected levels of activity and given levels of effectiveness in the organization. We continue our commitment—based on our current financial position—to avoid general layoffs. I understand that our recent actions create more anxiety for many on our campus, but I do not anticipate additional broad-based layoffs, and I hope this will allay the concerns.

The Endowment

Bowdoin’s endowment lost 16.9% of its value in the prior fiscal year ending June 30, 2009. As bad as this is, our endowment performance compares very favorably with the losses at many peer institutions and the Ivies, where the losses were between 20-30%. Nonetheless, it has created some financial problems for us. We draw 5% of the endowment for College operations each year, representing nearly 30% of the total revenues available to the College for operations. Because we use a twelve-quarter lagging average to set the annual draw—a formula that is common for colleges and universities—the resources from our endowment available for operations will go down in absolute dollars over the next several years, creating current and future budget problems, even if the economy improves.

For budget purposes this year and next year, we have projected that our endowment performance would be 0%. This was prudent given the financial condition of the markets last year, but the good news is that the markets have improved substantially. Our endowment performed relatively well over the past number of months, and we now project that our endowment performance for this year will be in excess of 7%. We will continue our practice of not disclosing interim performance figures because they are unaudited and because the competitive marketplace relies on these announcements in ways that are often confusing. But the bottom line is that our endowment performance is quite positive, providing substantial support for future economic stability.

This is very good news, and we should continue to congratulate Senior Vice President Paula Volent and the Investment Committee of the Board of Trustees for their superb work in a very difficult environment. We all understood how important that work was in the “boom times” because it allowed us to expand the College and our program. But we should appreciate even more vividly the importance of our financial endowment team and their hard work as they navigate through these more difficult environments.

Our Fee

The endowment performance is good news for the College on the revenue side of the equation. But not all the news is good—our comprehensive fee, financial aid, and contributions all present challenges.

Over recent years we have increased the comprehensive fee by approximately 5% annually. Our projections suggested this trend would continue. At this point, given the economic conditions, it seems unlikely that we can continue to raise our fee at this level. Obviously, this is welcome news for parents and families, but it creates real challenges for College operations. Even with a comprehensive fee in excess of $50,000 a year, it doesn’t cover our actual costs of $80,000 per student per year.

The Board of Trustees will set the comprehensive fee at our meeting in May. We will recommend to the Trustees an increase of less than 5%, and that is consistent with public announcements of our peer schools. Although the Trustees will make the final decision on our fee in consultation with the campus leadership, we made financial aid awards to our prospective first-year students assuming a 3.9% increase in the comprehensive fee. To be clear, the difference between a 5% and 3.9% increase means an annual revenue reduction of $700,000 for College operations.

Student Financial Aid

In terms of financial aid, we are not yet able to predict with any certainty the needs of our admitted students or the students currently on the campus. We believe we have budgeted sufficient resources to support all of these students, but we will know more in a few weeks for our admitted students and by late June for our continuing students. Given the economic conditions, it is difficult to be confident that we have taken account of all these needs. Based on our review of our financial position, we remain committed at this point to the “no-loan” policy that was adopted a couple of years ago by the College to the wide acclaim of our entire community and particularly our alumni.

Fund Raising

It remains critical to the future success of the College that we continue to earn the support of alumni, parents, friends, and foundations. The completion last June of The Bowdoin Campaign was a dramatic success, with a goal of $250 million and a result of nearly $300 million raised. This was an impressive demonstration of support by our entire community and it has allowed us to maintain and augment our financial aid commitments, enhance our faculty and academic program, and improve our residential life experience and services for our students. We at the College are tremendously grateful.

Obviously, our work supporting Bowdoin is never done, and our Annual Giving fund raising remains critically important to the College. Annual Giving provides nearly $10 million to our annual operations. We are optimistic that we will hit our goals for Annual Giving, but fund raising has been a real challenge this year—as it has been for many colleges and universities. We are all solicited by our favorite community charities—by hospitals, religious organizations, and schools—and Bowdoin folks give because they are genuinely committed to the common good.

We hope and expect that Bowdoin will be on everyone’s list this year at last year’s levels or maybe a bit higher. The fact is that the outcome of this fund raising will have a significant effect on our financial condition for the next few years. To our donors, thank you for your continued support. We could not be the exceptional College we are without you.


So while the next few years for the College will be challenging financially, we are right now in a very stable economic position. The College is always required to operate prudently, making thoughtful and responsible decisions on all of our programs—more so now than ever—and we will continue to make decisions guided by our core principles.

The next period for colleges and universities will present new challenges that are much different from the past 15 years. Like all colleges and universities, Bowdoin has been in a position of rapid expansion of program and has made substantial physical improvements. We have defined success by the volume of new space and the physical changes taking place across campus. These improvements were essential to our future success, but it is likely that success in the next period will be defined differently.

In this time, we will continue our focus on the principles of liberal education, residential life, and service to the common good. All of us—faculty, staff, students, parents, alumni, and friends—must recognize that the success of Bowdoin is fundamentally about excellence around these central values. Bowdoin is particularly suited for success in this period because we know well who we are as a College. As long as we remain focused on our identity and stay true to our mission, Bowdoin will continue to define excellence and distinction in American higher education for decades to come.

Sincerely yours,

Barry Mills