To the Williams community,
COVID-19 has brought extraordinary changes to the college. Two months ago, we were enjoying winter study, engaging in strategic planning, and preparing for the spring semester. Today, only essential staff and a small number of students remain on campus, we are transitioning to remote work and education, and we are continuing to support the core operations of the college. Despite how disruptive this period has been, it has been inspiring to see how our community has come together to respond to these unprecedented challenges.
The college’s initial response to the crisis appropriately focused on the health and safety of our students, faculty, staff, and community, as well as on our ability to support the educational mission of the college. Behind the scenes we have also been carefully monitoring and responding to the pandemic’s financial impact, which has severely disrupted the markets and our overall economy. A sharp recession seems imminent, and the stock market is down about 30% relative to its peak. Our intention with this letter is to give you some insight into how Williams is working to protect our resources and our focus on our core mission in the face of these challenges.
Williams was fortunate to enter this crisis in a position of financial strength, thanks to generous support from alumni, parents, and friends of the college, the careful stewardship of resources, and a prolonged economic expansion. Nonetheless, even institutions of extraordinary strength must respond strategically to radically changed circumstances.
The most direct financial impact of the crisis has been on the value of our endowment, which supports about half of total college spending. While we do not need to respond to high-frequency movements in financial markets, a deep and lasting decline in the endowment would require a commensurate reduction in annual spending. In addition, we will likely see further consequences from the pandemic’s economic impact, including a slowdown in philanthropy and an increase in the financial need of our students and their families. Combined, these reductions in revenue will need to be met by offsetting adjustments in both operating and capital budgets.
The college spends time each year modeling and preparing for such substantial changes in economic circumstances. Those exercises have helped us make sure we have the capacity to respond to severe economic shocks while protecting core priorities including our educational mission, access and affordability, and support for staff, faculty, and students. They have also underscored the importance of acting promptly and deliberately, in order to avoid having to make larger adjustments down the road. The most immediate application of this principle is that we will begin pausing capital projects in early stages of design and asking managers across campus to scale back their current and future spending and budget plans.
Doing this work well requires both a shared sense of urgency and an appropriate level of confidence derived from the fact that we have successfully weathered such challenges in the past. In the 2008 global financial crisis, for example, Williams made a number of difficult decisions to support the highest priorities of the college. We paused building projects, including Stetson-Sawyer and numerous planned renovations. We reduced managers’ budgets by 25% over a five-year period. We slowed the growth of pay and hiring. And we revisited some recent changes to our financial aid policies. These were hard decisions, but we made them in order to limit the impact of the crisis on the educational experience of our students, the intellectual life of the college, and the lives and livelihoods of our faculty and staff. As recent years have attested, we have more than recovered, and this experience has made us wiser about how to approach the current challenge.
The pandemic and its economic effect are different in important ways from the 2008 crisis, and, as we move forward, we will need to make decisions that are right for this moment. But we will follow similar principles, with a similar focus on our mission and our people, and a similar determination to keep true to our strategic ambitions. We will engage many of you in this work, and we will strive to maintain open communication about our evolving financial situation and the steps we will take to ensure that Williams remains strong in the years to come.
Dukes Love, Provost and Class of 1969 Professor of Economics
Fred Puddester, VP of Finance and Administration