News Release: Finance and Economics, University News

Oct. 9,  2008

President's Letter: Emory and the Economy

Letter from President Jim Wagner

October 8, 2008

10:00 PM ET

Dear Emory Community:

Given the extraordinary global economic turmoil of the day, I hardly need to draw your attention to the concern that so many are feeling during these uncertain times. And given the character of this place, it may be unnecessary to write to encourage us all to be especially attentive to each other. But from the perspective of the institution, it is necessary to write and to communicate candidly about how we at Emory are being affected, and how we must work together to move forward prudently and responsibly through these uncharted waters. Our success in doing so will depend on our renewed commitment to partnership and community, the very things that have helped us to be successful in the recent years of more abundant economic resources.

Since early summer, the President's Cabinet and especially the Ways and Means Committee have been hard at work to stay ahead of developments and to craft a sound budgetary response for this year and next. At the same time, all of us should be aware of ways we can help to address the situation, and I want to touch on these.

As we know, the economy depends on a healthy banking system and well-functioning capital markets. These are under the greatest stress in the United States in three quarters of a century. Thus, the external context in which Emory operates is severely disrupted; it is only sensible that we will have to adjust in order to carry out our financial stewardship responsibly and to continue operating from relative strength in our core missions of education, research, scholarship, and patient care.

The good news is that we do face these challenges with strength, both in program quality and in financial stability. Over the years, Emory has demonstrated excellent management practices that position us well for this financial storm. Still, we are not immune from the impact of significant declines in investment markets, tight credit markets, higher inflation, and real constraint felt by our many constituencies. Apart from the ragged performance of the stock market, which weighs down the long-term funds we have invested in our endowment -- and therefore the spending available for our programs -- we are also hampered by falling interest rates on our short-term investments, rising interest rates on outstanding debt, and the closing off of ample credit in the marketplace. Add to this formula escalating costs for utilities, travel, and, most importantly, financial aid, and we have the conditions for a very challenging year.

A Focus on Priorities

Ensuring that Emory's momentum and positive trajectory continue will require clear understanding, discipline, and prudent tradeoffs. We will continue to invest in those areas that are essential to achieving our vision. To these ends, budget priorities will include:

  • Investing in competitive, merit-based salaries to reward, retain, and attract the best faculty and staff.
  • Investing in the financial aid required to retain and attract the best students, regardless of their economic standing. This will be especially challenging in the coming years.
  • Completing all the construction we have started and reviewing the timing and pace of future projects.
  • Investing in research and teaching in accord with school-based and University-wide strategies.
  • Investing in Campaign Emory, whose success is critical to our future.
  • Investing in research compliance and support, an indispensable business function for a University that now competes successfully for more than $410 million a year in research funding.

To be able to meet these priorities in the near term, we anticipate that most administrative budgets in the University will not grow in FY 2010. We will still mandate, however, that academic and administrative leaders allocate funds to support some form of salary program in their budgets to reward, retain, and attract the best performers and highest contributors. To meet these dual requirements -- flat budgets and a salary program -- most managers will need to reach into their existing program and personnel budgets to find the required resources. Steps taken to lower costs now will likely result in greater degrees of freedom in FY 2010 and must be pursued.

Cost-Cutting Recommendations

What are some of the cost-cutting moves we recommend? First, we should all think twice before filling any staff position that comes open. This is a year to absorb some attrition to reduce the likelihood of having to make much more painful decisions next year. Or departments might reallocate existing open positions to fund more-critical new positions in the pipeline.

Second, we should consider changes in regular operations: teleconferencing or videoconferencing instead of air travel; cutting back on the number and scale of social events; paying close attention to the volume of flyers, paper announcements, and other mailings (including holiday cards, though abundant good cheer is necessary). These are merely suggestions. The point is that we must begin adjusting behavior now as we face the reality of constrained resources in the coming year.

Some have inquired about the likely impact of the sobering economy on our campaign to raise $1.6 billion from private philanthropy. The campaign has been underway for three years now, and we have already realized $838 million in gifts and pledges -- more than half of our target. That success alone is good cause to celebrate, as we did in late September while announcing our longer-term goal. The current economic conditions do not warrant suspension of our campaign. If anything, now is the time to redouble our efforts to secure private funding for our future and to offer opportunities for donors to invest in ways that produce dividends of the sort not available in financial markets.

Emory continues to be in a place of opportunity and bright prospect compared to much of the rest of higher education and indeed, now, most other sectors in our economy. There is none with whom I would trade places. Emory will face our very difficult economic environment with strength, courage, and discipline, and we will adjust as necessary to meet our highest priority needs -- those required for excellence.

Thank you for your support, for your counsel, and for your commitment to Emory -- you certainly have mine.


Jim Wagner


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