Responding to the Global Economic Crisis: Challenge and Opportunity
Shirley Ann Jackson, Ph.D.
President, Rensselaer Polytechnic Institute
Remarks to Tenured and Tenure-Track Faculty
Rensselaer Polytechnic Institute
Troy, New York
Wednesday, January 14, 2009
Thank you for taking the time to join us this afternoon. As we work our way through the economic downturn that affects all of us, it is important that we all understand the ways in which it affects Rensselaer, and the actions we are taking to weather it.
The backdrop for our actions is important to understand, on the national and international economic levels, and on the institutional level. These are related, and I would like to spend a few minutes discussing that relationship so that we all can have the same context today.
Across the United States and around the world, economic conditions deteriorated dramatically during fall 2008. In the last year, there has been a 40 percent drop in the stock market (worse in Europe and Asia), and the unemployment rate has skyrocketed to 7.2 percent. The best estimates are that this downturn will last 18 to 24 months, and that a full recovery of the economy could take four to five years.
We all have read in the national news media about the impact of the economic crisis on college and university resources. Harvard has announced restrictions on nonacademic hiring, and suspended most searches for new faculty. Cornell, after its endowment lost 27 percent in the second half of last year, has begun layoffs in selected areas. Dartmouth is in the process of making a 10 percent cut in its budget, which will include staff layoffs. M.I.T. has announced an initiative to make major reductions in its budget over a three-year period of up to $150 million ($50 million in this fiscal year). Syracuse recently announced layoffs of nonacademic staff, and Boston University has indicated that layoffs are “very likely”.
In fact, this is only the tip of the iceberg. The Chronicle of Higher Education recently reported that 11 percent of U.S. colleges and universities would be implementing layoffs, and that an additional 26 percent would be considering layoffs in the future.
Many of these steps have been taken, at least in part, because university endowments have seen unprecedented impacts of the market turmoil. Institutions across the country have reported losses ranging up to 35 percent of the value of their endowments. Rensselaer has experienced losses as well, but through sound policy and excellent management, we have held our endowment decline to just over 20 percent. (The defined benefit pension plan, likewise, has experienced losses.) While we are much less reliant on endowment income than many institutions, and we have not suffered as much loss as many, we must manage the current and future potential decline in all sources of revenue.
All of our major revenue sources tuition, gifts, research, and endowment income will undoubtedly be impacted over the next several years. We are not alone in this. But, in so fluid and unpredictable a financial environment, it is particularly important to manage risk as we respond to changing circumstances.
We have taken responsible actions to manage our resources in a number of different ways, in terms of the decisions we have made to pro-actively reduce our budget. I know a number of you were involved in these very difficult deliberations and decisions, and I thank you for it.
We are in a better position than many institutions to manage through the downturn. Why? Because of the investments we have made that have given us a position of strength, relative to our recent past. We have recruited more than 225 faculty members to build the strength of Rensselaer, and we have invested more than $650 million in our campus facilities.
Investment in our faculty is important, because as we all understand it is scientific discovery and technological innovation that will revive our economy, and preserve our global leadership as a nation. But innovation requires innovators, and that is why the health of institutions such as Rensselaer is crucial. And it is why you, our faculty both as researchers in your own right and as the educators of the next generation of innovators are so important.
Our investments have led to new academic offerings, a doubling of sponsored research, a surge in student demand, higher rankings, and stronger national and global presence and visibility. In addition, we have improved the student/faculty ratio, raised retention and graduation rates, and witnessed significant increases in student quality at all levels.
The demand for a Rensselaer education is nothing short of striking. A few statistics tell the story. We have seen a 246 percent increase in senior inquiries over the past three years, with more than 95,000 inquiries this year. We have experienced a 100 percent increase in freshman applications since 2005, with over 11,000 applications last year for our class of just over 1300. And we have seen a 700 percent increase in the number of students choosing Rensselaer as their first choice. These trends continue with the applications for the Class of 2013. All of this speaks directly to our thoughtful planning, our sound decision-making, and the extensive and growing reputation of our faculty, our programs, and our platforms. This is what we have achieved together.
Although we were (and are) confronting the new economic realities from a position of strength, there was a tectonic shift in global markets and the economy in the last quarter of 2008. Turmoil in the financial markets, and the rapidly accelerating economic decline, required us to act quickly to do more. It became clear that, in addition to our earlier actions, we needed to reduce recurring compensation expenses, which make up half of the Institute's operating budget.
The earlier progressive steps we took to freeze hiring and to make operational budget cuts have kept staffing reductions to a minimum. We have worked to make these reductions in as compassionate a way as possible for the individuals involved, by extending benefits pay, medical coverage, and pre-staged unemployment benefits and, by providing outplacement services, and, as needed, psychological counseling. Nonetheless, these actions have been painful for the individuals affected, their families, and for all of us in the larger Rensselaer community.
We did explore a number of alternative ways to reduce our recurring compensation expenses, including furloughs, unpaid work days, a four-day work week, salary reductions, and early retirement incentives. After carefully considering each of these options, we determined that a staffing reduction was necessary to meet the short-term and long-term needs of Rensselaer.
The staff reductions and other measures were taken in order to help in a number of areas to address the additional financial need of our students who are impacted by the current economic crisis; to minimize tuition increases in the coming year; to enable continued faculty recruitment; and to meet required increases in contributions to the defined benefit pension plan that continues to support a number of our current faculty and staff, as well as those who have retired under this plan.
We will continue to work closely with our current and future students to mitigate sudden changes in their financial circumstances that may threaten their ability to attend or remain at Rensselaer. We will preserve financial aid and continue to provide an accessible education for our students.
Importantly, we have protected our academic enterprise, the foundation of which are the tenured and tenure-track faculty. The combination of measures we have taken will help enable us to continue to recruit and hire new faculty members to add to our academic strength.
As we navigate our way through the economic storm, we will stay on the path laid out in The Rensselaer Plan. In addition to our commitment to you the faculty we will continue to meet our commitment to enhance the student living and learning experience.
To support these and other efforts, we will continue to work to raise funds under the Renaissance at Rensselaer campaign, which has enabled us to implement The Rensselaer Plan. Much of the over $1.4 billion raised in the campaign, thus far, has been in the form of gifts restricted for specific purposes and for endowment growth. As we all know, in any campaign and ours is no different many contributions are gifts-in-kind, or they come in the form of pledges that are paid for years beyond the completion of the campaign, and in the form of planned gifts as part of estates.
Let me leave you with this thought. The painful steps we have taken were very difficult, but they were taken in the best interest both the short-term and long-term of the entire university. That is what defines my job to act for the welfare of the Institute as a whole.
Because of the good work of the individuals in this room, supported by the hundreds of others who enable you to do your work in the classrooms, the labs, and the studios, we are in a strong position to weather the storm, and to remain one of the preeminent universities in the world.
What you do is important. What we do is important.
I am grateful for your support.
Source citations are available from the division of Strategic Communications and External Relations, Rensselaer Polytechnic Institute. Statistical data contained herein were factually accurate at the time it was delivered. Rensselaer Polytechnic Institute assumes no duty to change it to reflect new developments.