The Axe Falls at Earlham (Again): Virus & Depression taking Big toll

It’s even happening in Cambridge Massachusetts: 

“Harvard Offers Staff Early Retirement to Reduce Expenses,” roars a recent Bloomberg headline. “Richest U.S. school also allows voluntary cuts in work hours . . . asking employees to consider a series of voluntary measures, including early retirement, giving up vacation and reducing work hours as it faces a revenue shortfall of $1.2 billion over two academic years.”

We’ll not weep for the Crimson here; if Harvard is down a billion or so, its endowment still has a $39 billion cushion. (For that matter, Yale announced in May it was cutting next year’s budget by several hundred million, and freezing salaries and hiring.)

But when Harvard/Yale catches a cold, many a smaller private college gets swamped by, well, pandemic pneumonia panic. And sure enough, in this week’s news, the axe is falling, heavily, at Earlham College in Richmond, Indiana.

Forget golf and tennis, you student athletes,  a May announcement said, they’re gone. Plus, president Anne Houtman said, there would be “$7.6 million in budget cuts made for the next fiscal year. As of July 1, 34 positions will be eliminated with 27 more ‘restructured through efficiencies across campus.’ The college employs about 400 people.”

Houtman: “I don’t have to tell you that we are facing a perfect storm of an unprecedented nature — deficit spending for several years, now exacerbated by COVID-19, which has upended our enrollment projections and significantly added to our deficit,” Houtman said.

“New student enrollment for the fall is half what we modeled for and built our budget around, and that goal was conservative before the pandemic struck. It is imperative we act now, both to reduce our current deficit and ensure Earlham’s future.”

Zimmerman said It’s too early to share exact numbers for fall enrollment. The college’s deadline for new students to confirm they’re coming is June 1, and many wait until the last minute.

“We and our peer institutions expect enrollment to be fluid well into the summer,” he said. “We are anticipating a total enrollment of 750 for the 2020-21 academic year.”

Enrollment over the past few years has been basically stagnant, but tuition revenues have steadily dropped over that period of time.

The “restructured through efficiencies across campus” jargon means that 18 facilities management jobs,  plus a number of housekeeping staffers will be moved from one outside contractor to another. With the new contractor, their salaries will technically be the same, but health insurance and other benefits will become much more costly, so the net will be a substantial loss of income. A student petition is protesting the change.

On the plus side, the college reported last week that an unexpected alumni donation would keep the golf program active.

Earlham has been in financial trouble even before the pandemic and depression engulfed the nation. It was reported here, in December  2018, that a 12 percent budget cut was required to stem runaway deficit spending, and it resulted in numerous job and other cuts.

Then just last month, Standard & Poor’s investment rating service reminded the public that Earlham has spent a couple of years on a list of colleges in persistent financial and credit trouble.

Enrollment is also expected to drop this fall, from near 1000 to 750 (or maybe less; the situation is still “fluid” in Earlham’s terms. How dangerous is this trend? Earlham spokesman Brian Zimmerman was firmly upbeat:

“Many of our peers without a strong endowment like we have are facing daunting questions about their long-term viability. We are not. Our endowment value has dipped somewhat during the pandemic but is still a strong $376.7 million.”

Yet two years ago the school had to grapple with a deficit of $47 million.  And in an email to staff and faculty last month, Houtman acknowledged:

“There is no way to trim $7.6 million from a budget without impacting lives and livelihoods, and the sad truth is that we still have a long way to go before we are out of the woods financially, especially if the COVID-19 pandemic continues for another year or two.”

Sad indeed. The woods of the 2020s are dark deep, and the pandemic’s impact is still gaining force. Earlham faces a long slog.

 

 

 

 

 

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