Ho. Ho. Ho? How The Grinch Is Stealing Christmas at Earlham College

You read it here last August:

“At Earlham College, it’s going to be a tense Christmas this year, especially for faculty and staff.

That’s because, whatever goodies Santa brings, the Grinch will be close behind, snatching away the good cheer and hopes for a happy new year in 2019. . . .”

And this week, Mr, G. will indeed be out there, prowling the streets of Richmond Indiana. And he’ll be delivering pink slips.

The trigger was pulled Wednesday Dec. 19, 2018. The Earlham College Board of Trustees adopted a plan, in preparation since late summer, that will cut Earlham College’s budget by 12 per cent, or $4.3 million (to $45.7  million total), and result in elimination of 12 staff positions, a reduction of five more staff jobs from full to part-time, and the ending of 11 visiting faculty positions: 28 in total.

It is the eleven faculty who will be getting pink slips from Mr. G. By college regulations, the bad news must be delivered, preferably in person, by New Years Eve. (The plan was announced in an email letter from the Board on Friday Dec. 21, which was also the Winter Solstice. The staff cuts will be made official by February 15; rumors that this date was chosen to spoil Valentine’s Day as well were unconfirmed.)

[The full text of the December 21 letter is  at the end of this post.]

From one perspective, the cuts were a big success for the faculty: they protected all the school’s tenured & tenure track professors, and turned back the Trustees’ earlier call for $8 million in cuts.

But for how long? The Board was careful to point out that this batch  of cuts was not the end of the matter. Their original $8 million target for cuts, almost 17 per cent, was not forgotten.  To reach that higher number would likely have meant adding some tenured names to the pink slip list. (We explained in the August post how the Board can get around tenure, by abolishing entire majors or departments.) And the December 19th letter was explicit that this option was still on your the table:

“It is quite possible that some majors will be discontinued in the future due to staffing reductions. The College will work with all current students to make sure they can take the classes they need in order to complete their majors. We will follow the faculty governance documents and established process in making these decisions.”

To my southeastern ears, that sure sounds more like “when,” rather than “if.” They then added, under the heading “Future planning”:

“The president also recommended that the College immediately begin work on a new institutional and curricular plan that will focus on a path forward that allows Earlham to fulfill its mission and serve the needs of current and future students in a financially sustainable way. The Trustees approved this recommendation. . . .

The board has requested that this framework, which will be developed in close consultation with the Faculty Meeting, be completed no later than April 19, 2019 so that it can go to the board for their approval at their June 2019 meeting. The Board expects a full curricular plan and institutional plan, also created in close consultation with the Faculty Meeting, to come for approval during the October 2019 Board Meeting.

It was clear from the conversation during the meeting that the Board is committed to financial sustainability . . . .” [Emphasis added.]

“Financial sustainability” is the key phrase here. The Board’s analysis of admission and income trends views Earlham’s present path and staff/faculty configuration as “unsustainable,” requiring much more drastic restructuring (and job cuts) to stop the bleeding.

A concrete example of where “financial unsustainability” leads can be found by looking east, to Boston. There Wheelock College, after 131 years “merged” last June with Boston University, shrinking from a freestanding college to a department in BU’s ed school. And when the merger” was done, 111 employees, more than half of its almost 200 faculty & staff, were laid off.

How did this happen? One report said: “Schools like Wheelock have experienced a perilous cycle of shrinking enrollment and rising costs over the past decade. . . .

That spiral — of rising costs and shrinking enrollment — is common at small colleges colleges across the country.

Michael Horn, an education consultant based in Boston and co-founder of the Clayton Christensen Institute, puts it this way: pit “significant increases in tuition, year over year over year, against the reality that middle-class wages have largely been stagnant.”

Horn anticipates that many such schools could end up merging, closing or going bankrupt in the years ahead. “Forty percent of colleges in this country have fewer than 1,000 students — I think all of those are at grave risk,” he warns. [Emphasis added.]

Earlham’s recent enrollment is barely over a thousand.

An informed Earlham veteran advised me last week that another big factor in Earlham’s plight is that it gives away a great deal of scholarship aid, which has cut down its net tuition revenue to dangerously low [aka “unsustainable”] levels.

So one “fix” likely to be in the mix for the Round Two plan is a substantial reduction in scholarships and raises in tuition.

Such reductions might yield a jump in net tuition income. But then again, maybe not: perhaps enrollment would fall, as prospective  students take their tuition money and look for better bargains elsewhere.  Wheelock raised tuition; it didn’t save them.

And there’s another wild card the Board did not mention in the December 19 letter, but which I bet has been on all the Trustees’ minds since then: the stock market’s rapid slide. Just three months ago, as the first round of plans were taking shape, the market was riding high, seemingly  promising continued steady growth and income from endowments.

Last August, Earlham estimated its endowment at $438 million, up from $425 million in 2017. The school had been drawing on its endowment to cover operating deficits (“unsustainably,” said the Trustees).

But as of last week, all the year’s growth in major markets had been abruptly and completely erased, and more chaos was in the forecast. The Christmas Eve fall of 600+ In the Dow Jones Indexwas one for the record books. Could the markets be heading into a new crash like that of September 2008, when Lehman Brothers collapsed?

Who knows? But uncertainty hangs over us all, including colleges living on or near the edge. Wheelock College saw its endowment tank in 2008, and it never recovered.

Can Earlham pull through this time of uncertainty? I make no predictions, but here’s one somewhat upbeat footnote: I am reliably informed that these financial problems have not affected the Earlham School of Religion. Or at least not yet.

ESR has a separate budget, which is currently deemed to be “sustainable.” (Of course, seminaries have their own problems, involving shrinking church attendance and finances, which means fewer job opportunities for their graduates. But that’s another story.)

And in the meantime, there’s the Mean One, on the loose.

 

Full text of Board letter, released in Friday, December 21, 2018

On Wednesday, December 19, 2018, the Earlham Board of Trustees held a special meeting on campus to consider some time-sensitive issues. Following is a report on the meeting.

Presidential search

The trustees heard an update from the Presidential Search Committee, and they approved a slate of semi-finalists who will be invited to participate in preliminary interviews in January. Finalists will then be invited to visit campus for interviews in early February. The committee will share feedback on those interviews and a recommendation for next steps during the Board’s meeting on February 9-10, 2019.

Financial sustainability

The trustees received the president’s recommendations for a budget reduction for the 2019-2020 academic year. (This was in response to the Board’s direction in June to reduce the 2019-20 expense budget to $42 million, which would be about an $8 million reduction from the current year’s budget.) More than 20 teaching faculty, administrative faculty and staff attended the discussion with the Board. Trustees heard reports from committee conveners on the processes that led to the recommendations, and asked questions to which teaching faculty, administrators and staff members responded.

After a robust discussion, the recommendations were approved. The resolution will reduce the College’s operating budget by nearly 12 percent, lowering our annual expenses by approximately $4.3 million. After this reduction, the College’s operating budget for the 2019-20 academic year will be about $46 million. We consider this a positive step toward long-term financial sustainability, but we must continue to find ways for the College to meet this important strategic goal.

The Board expressed its gratitude to the Teaching Faculty and Curricular Working Group, the Administrative Budget Reduction Team, the Cabinet and the President for their hard work, thoughtfulness, perspectives and advice on the budget reduction process. Trustees acknowledged that they had given the College a very challenging task and that the recommendations are difficult and, in some respects, unwelcome to some in the community. They believe that what they have approved will help the College address its financial challenges while staying true to its core educational mission.

The budget reductions approved by the trustees touch every area of the College. We will eliminate 12 administrative or staff positions, most of which are vacant or will be vacated as a result of our voluntary early retirement program. In addition, five administrative positions that are currently full-time will be reduced to part-time.

We will also not be renewing the contracts of some visiting faculty members, many of whom were hired on one-year contracts. In total, the size of the teaching faculty will be reduced by 11 positions. Most are visiting positions that were scheduled to end this year. In addition, two retiring faculty members will not be replaced. All searches for tenure track and visiting positions that are currently underway will continue. These reductions will change our student-faculty ratio (currently 10:1) to 11:1. The recommendations did not call for the elimination of any tenure or tenure-track faculty positions.

Visiting faculty members whose contracts will not be renewed are being informed this week. We feel that it is important to share this sort of information in person, when possible, and it is necessary to do so this week since the Faculty Handbook stipulates a deadline of December 31, 2018 for non-renewals for visiting faculty. Administrators and staff whose positions will be reduced to part-time will be notified no later than February 15, 2019.

It is quite possible that some majors will be discontinued in the future due to staffing reductions. The College will work with all current students to make sure they can take the classes they need in order to complete their majors. We will follow the faculty governance documents and established process in making these decisions.

Future planning

The president also recommended that the College immediately begin work on a new institutional and curricular plan that will focus on a path forward that allows Earlham to fulfill its mission and serve the needs of current and future students in a financially sustainable way. The Trustees approved this recommendation.

The first step in this effort will be the creation of a framework for a curricular plan, developed by the faculty, that will articulate the core values of an Earlham education and offer the world a compelling value proposition.

The board has requested that this framework, which will be developed in close consultation with the Faculty Meeting, be completed no later than April 19, 2019 so that it can go to the board for their approval at their June 2019 meeting. The Board expects a full curricular plan and institutional plan, also created in close consultation with the Faculty Meeting, to come for approval during the October 2019 Board Meeting.

It was clear from the conversation during the meeting that the Board is committed to financial sustainability, but that it is also steadfast in its desire to offer an exceptional educational experience to a diverse group of students with a diverse and committed faculty and staff.

 

4 thoughts on “Ho. Ho. Ho? How The Grinch Is Stealing Christmas at Earlham College”

  1. I take it the Trustees at Earlham are salaried, hence the desire not to use any of the Endowment for operations. what happens to the Endowment if or when the college if has to close?

    W E Merrow
    Henniker Meeting

    1. Trustees at all US nonprofits are volunteers: they are forbidden by law to accept compensation for their service (unlike boards of for-profit corporations).

    2. Chuck: you missed a very important piece of information, which can be gleaned from reading Earlham’s 990s, or anyone in the Earlham community can tell you. Earlham’s trustees went on a building spree a few years ago, hoping to attract new students who can pay a greater share of their tuition. But they built without raising any money. Instead they incurred about $85 million in bond liabilities to find the construction. A major part of the financial crisis is the need to service and repay that debt. Anybody in the fundraising world knows that donors hate paying off debt and they hate contributing to the construction of buildings that are already built and in use. This is the great elephant in the room. It is certainly true that excessive financial aid is eating the heart out of the budget: but they were saying that 20 years ago when I taught there. This horrific debt may end up being the far worse corrosive factor.

  2. Perhaps one answer/solution to the current crisis lies hidden in the assumptions of its description: It’s the administration that must hand down some top-down approach that surmounts the current financial strictures, rather than a whole educational community that must together work out new ways to move together as a whole institution–administration, faculty & staff, students. Wouldn’t that be a much more Friendly way of describing the problem? Of course, I can already hear the multiple objections to such a formulation. But I do believe that the old ways are a sure dead-end that, pursued, would lead surely to many bruised hearts and much discontent in any resulting institution.

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