September 16, 2016
Dear Laurentian friends,
Our new academic year opened confidently and happily. It already feels like the beginning of Thoreau’s book composed in his tiny cabin by a pond, A Week on the Concord and Merrimack Rivers: “I sailed up a river with a pleasant wind,/New lands, new people, and new thoughts to find.” This is a very good moment for all of us to be at St. Lawrence together. And yet, Thoreau also learned on the journey with his brother, “Go where we will, we discover infinite change in particulars only, not in generals.”
I write the Laurentian community today about “particulars only.” In general, St. Lawrence enjoys the condition of “perpetual stability” (a term from theological Latin known as perpetuam stabilitatem). In my remarks at our fall convocation a few weeks ago, traditionally a set of summer reflections that include mention of essential institutional priorities for the year, I spoke pointedly about developing a sustainable financial footprint for the university as we, and our peer institutions in higher education, enter a demarcation period, already marked by the drama of an American national election and instances of unexpected global economic behavior. Put simply, it sure feels like a new business cycle for all of us in higher education. My purpose here is to say more about St. Lawrence and the “particulars.”
We have followed a strategic map since the Great Recession, adapting ourselves skillfully to risks and opportunities along the way, sometimes altering routes, but traveling a course originally described by a faculty-staff task group as the true north of “a sustainable St. Lawrence.” We grew our enrollment by over 100 students, we added new majors, we have recruited and tenured the finest talent to our faculty, we enjoy a campus made even more beautiful in recent years, and we have extended our strong brand around the world by all measures. Tracing the years since drawing our original map, the quality of the student experience, our enlarged reputation, the depth of alumni engagement, and the commitment to financial equilibrium have given St. Lawrence a source of energy and esteem. These strategic themes do not work independent of the other parts, but are designed as a well-integrated whole.
Our plan for achieving financial equilibrium, in particular, requires us to adapt again to a different landscape of economic circumstances. Our assumptions and budget model over the last five years proved our strategy was correct for the most part, but if only by degree, not in kind, the variables have changed unmistakably. Today, fewer than half of all private colleges in the U.S. have been able to increase net revenues, particularly from their enrollment results. St. Lawrence is among the exceptional institutions able to grow its annual net operating revenue. That’s good news, of course, but our performance assumptions, based on reasonable data-driven expectations, had scheduled annual growth rates of 3%, which we notably gained for a while. We have achieved, however, in more recent experience an annual revenue increase of only 2%, not 3%. The difference will compound into multiple-millions of dollars if we ignore it. Prudence suggests we have begun a new norm.
Meanwhile, our financial equilibrium strategy has featured two firm absolutes—pricing (that is, the comprehensive fee) is constrained by the tightest margins in twenty years and institutional borrowing (that is, collateralizing university assets for the equivalent of a second mortgage) is not, on principle, a responsible course of action. Also, our financial aid budget, generous by all benchmark comparisons, has increased at a faster rate than any cycle of the last two decades, just as median family incomes in inverse parallel have had little upward movement. Those two realities correlate like one big boulder in the river.
When our first-year class size swings from exceeding the target by record numbers in 2015 to significantly missing the same target (with the same number of applications) in 2016, we can’t wink away the disparate results. Yes, as St. Lawrence has become stronger and more popular, the competition has become more intense. But we also have to become much more sophisticated in how we recruit and yield our future classes that will continue our healthy patterns of diversity and selective quality.
Along with our trustees and independent experts, we have been diving deeply into admissions analytics and have gained fresh insights to the “soft spots” in our applicant pool. In response to the findings, we are making appropriate changes in earlier and more consistent touch-points with top students, particularly with high school juniors. We learned something this year about the Early Decision part of our enrollment plan that requires immediate adjustment: just when we thought our record gains in yielding one-third of the first-year class by the ED option had achieved a competitive edge, we realized our competitors had “upped” their game and now yield 40% or more in these terms. In August, we launched an ED marketing initiative and set a higher target for this year.
What does this mean now and over the next few years, particularly to the structure of budgets that begin next summer and go through 2020? The simple answer is that pressure on our operating revenue projections (and actuals) will create gaps we won’t and can’t sustain without doing three things differently and simultaneously. We must put in place a financial framework based on reorientation, innovation, and building.
First, as we develop multi-year budget strategies, and do so within our campus and Board committee traditions, St. Lawrence must reorient its funding priorities to enhance the intensification of revenue “productivity,” both on near-term and long-range horizons. As it is the case at most of the top-endowed private universities, the largest revenue stream comes to our treasury from enrollment. Fortunately, admissions and campus capacity at St. Lawrence have upside opportunity. Our fiscal reorientation must also examine, as matters of routine and discipline, our program, operating, and administrative efficiencies to ensure the core of what we already do extremely well is achieved within reasonable costs.
Innovation is deeply embedded in St. Lawrence history and culture. We cannot rest on even our most recent success in inventing the New York City program or the Business in Liberal Arts major, as only two of our many innovative examples. But in this next cycle, we will also need the creativity among us to imagine using current assets already in place to new purposes with an accelerated payback. This year ISAC (Institutional Strategic Assessment Committee) will develop a list of seriously potential innovations, seeded with investment resources, to produce alternative revenue streams for the university. To state the obvious, we have an under-utilized property in the summer months and we have the combination of a powerful brand and secure platform in our technology resources to be less traditional and more original.
In rededicating ourselves to a secure financial future, using the criteria of the strategic map to guide us, by accepting the dual opportunities of reorientation and innovation to meet demanding fiscal goals, we must also build. And build boldly. We must build our endowment to support professorships and scholarships. We must build into our annual plans campus facility improvements. We must build the best classrooms for the next generation. We must provide quality residential spaces, not merely austere or adequate student lodging, but as the means to the larger purpose of building the magical community our students should learn is an authentic possibility in life.
The comprehensive “Campaign for Every Laurentian” is now real, not just a moonbeam abstraction. The funding of two endowed professorships at $2.5 million each is completely fulfilled, but we have barely started. More is coming. Our early commitments, in only a year’s time since the Board said, “let’s go,” now exceed $60 million. These commitments will sustain and add to our current base of support for the duration of the Campaign, and in some cases be realized in later years through bequests. Once again, the loyalty to this university is stunning, a durable source of virtue. Never before has this much been raised this fast in St. Lawrence history.
Meanwhile, administrative and tripartite bodies will begin to explore alternative measures of fiscal responsibility. Senior Staff will lead discussions with administrative divisions, and the Vice President and Dean for Academic Affairs will work with various faculty committees and department chairs to identify opportunities for reorientation and collaboration. The Budget and Finance Committee will continue to work with the Chief Financial Officer on meticulous budget planning and management. As already mentioned, ISAC will examine innovation from other angles, possibly ending with a proposal for new revenue-generating programs that appropriately assimilate with St. Lawrence’s liberal arts mission. The ongoing self-study for Middle States reaccreditation is perfectly suited to giving these matters focused and diverse attention. Such a comprehensive and profound report ought to serve as a strategic prospective and not as a merely obligatory exercise to trace our activity over the past decade.
The best way for us who are now living and working on campus to affirm the confidence our supporters are so eager to demonstrate, a sign that they believe in each one of us, is to make our own statement of truth and faith. Our future must have a sustainable financial structure. Let’s join together to leave such a footprint so that our posterity will say to itself, “we have big shoes to fill—those people loved this good place and gave everything they had to its ultimate success and prosperity.”