Layoffs at CMC

Dear Members of the Claremont McKenna College Community,During the past year, we have all witnessed the crisis in the global economy. I have continued to communicate to the CMC community about how this environment has impacted all of the College’s primary revenue sources. Our endowment, which accounts for approximately 35% of our core operating budget, has lost approximately 30% of its value during the 2008-09 fiscal year, and we continue to be cautious about future endowment growth. Tuition revenues, which represent approximately 50% of our revenues, are also under significant pressure. We have focused our efforts on minimizing the level of tuition increases while also continuing to support our financial aid program, including our policies that meet 100% of every student’s financial need without any packaged loans. The recession has also taken its toll on private giving to CMC, as individuals, foundations and corporations have all cut back on their philanthropy.

I want to share with you the size of our problem. Although our current operating budget of about $80 million is in “balance,” our financial analysis projects that we will face a deficit of at least $10-$12 million by FY 2012-13. Last fall, we initiated a process to strategically address this budget gap over the next several years. Although we hope to address some of this budget gap through developing new revenue sources (such as a potential summer session), it is clear that most of the gap will need to be addressed through budget reductions.

We are taking a combination of actions to address this problem. The first step was initiated last fall, when I called for an immediate $1.5 million reduction in operating budgets, some of which was implemented this year, and all of which will be implemented beginning in 2009-10. We also took steps to modify our financial aid policies and programs, while preserving our commitment to our 100% need blind and no-packaged loan policies. In addition, except for projects that were already authorized and funded, such as the Kravis Center, we have also suspended any new major construction projects.

In my recent updates, I have indicated that direct employee costs, including all faculty and staff, represent roughly 56% of the College’s core operating budget. While the initiatives outlined above have helped minimize the impact to faculty and staff, given the magnitude of the budget reductions that are necessary, it is essential for us to reduce these costs if we are going to be successful in re-establishing the financial equilibrium of the College. In order to achieve this, we have targeted a direct employee cost reduction goal of roughly 25-30% of the overall budget gap.

We began to address the direct employee costs area last fall, when I implemented a review of open positions in the administration and staff to determine whether the position would be held open, cut, or filled. Through this process and the immediate $1.5 million in budget reductions mentioned earlier, we eliminated 7 open staff positions. At the same time, the Dean of the Faculty also reviewed and ultimately suspended any non-essential faculty searches. In January, I announced the decision to forego salary increases for both faculty and staff for the 2009-10 fiscal year, and, in March, we announced the Voluntary Early Retirement Plan (VERP) for staff. The total number of applications for the VERP came close to achieving our planning goal, which I view as an important indicator that the VERP met our objective of providing an attractive retirement package to qualifying employees while also helping the College manage its overall costs.

Based on the positive staff response to the VERP, and on subsequent discussions with the Dean of the Faculty’s office, we also announced yesterday the establishment of a faculty retirement incentive plan (FRIP), which we also hope will provide an attractive retirement package to eligible faculty members effective July 31, 2009.

Unfortunately, even though all of the foregoing steps will provide meaningful reductions, it became clear that we would not be able to emerge from this process without the need for involuntary staff layoffs. We therefore completed an evaluation of staffing levels across the College. Through this review, we sought to minimize the number of layoffs and the impact on our core academic programs. Ultimately, we identified a total of 11 administrative positions that will be eliminated as of June 30, 2009, including three positions that are effectively “open” and eight positions that are subject to involuntary layoffs.

Earlier today, department supervisors met individually with the staff members whose jobs are affected. We plan to offer support during this transition by providing a financial package that honors years of service and provides assistance for health insurance and career and other counseling services.

I truly regret the impact these reductions will have on our colleagues, but these steps are necessary in order for CMC to move forward. The College has weathered substantial challenges before and thanks to the CMC community we will emerge strong, still driven by our mission. Thank you for your patience, your understanding, and your support.

Sincerely,

Pamela B. Gann