Susquehanna is a financially strong institution. While many colleges and universities have been forced into a defensive position in responding to the economic downturn, Susquehanna’s fiscal discipline has created the financial capacity to balance “offense and defense” in our planning. The “offense” resides in the seven strategies outlined above; their successful realization will advance the institution, and we must be sure that our commitments are matched by our resources. Effective “defense” requires us to make prudent choices in providing those resources through revenue enhancement, resource deployment and cost management.
- Our Current Financial Condition
- Investing in people
- Maintain and develop facilities and infrastructure as institutional assets
- Recruitment and Retention
- Final Note
Susquehanna has not been immune to the global financial crisis. The market value of our endowment declined by 27 percent from its peak of $125 million in December 2007 to $91.5 million in December 2009. At one point it was as low as $66 million. Also, this unusually long period of very low interest rates has significantly reduced the amount of interest income that flowed into the operating budget: in just three years, between 2007 and 2009, interest income declined from $3,139,486 to $399,133 on a $65 million operating budget.
In response, we reduced operating expenses by approximately $1 million in 2008–09. In line with our commitment to academic excellence, administrative budgets were reduced by about 10 percent, while academic budgets experienced a more modest 5 percent reduction. We were able to avoid the more painful cuts experienced at many other institutions, in part because we were not as dependent on endowment income, but also because we met enrollment and financial aid goals. Meeting those targets has allowed us to add the faculty and staff necessary to implement the new Central Curriculum.
What differentiates Susquehanna from many institutions is its history of positive bottom lines. While annual operating margins have been modest, over 25-plus years they have accumulated to build significant reserves, which now total about $50 million. This is the equivalent of almost 10 months’ worth of operating expenses invested in readily available bank cash and treasury bills, giving Susquehanna extraordinary and valuable flexibility. Our cash reserves allow us to act from a position of strength as we consider the challenges posed—both known and unknown—in the coming years.
Our reserves have also allowed us to adopt a cash preservation strategy that takes advantage of low tax-exempt borrowing rates to finance capital projects rather than expend reserves. This strategy assumes that we will not spend down reserves but will invest them to earn interest that flows into the operating budget. In most years, that strategy produced significant interest to fund operations; in the current environment, with its unusually long period of low interest rates, interest earned has been minimal.
A marker of our financial strength is our A2 Moody’s bond rating, which is an important quality indicator to external audiences. Our current long-term debt stands at $74 million; since 2006 we have borrowed $48 million. It is not likely that we could assume additional long-term debt and maintain our A2 rating.
Because of its strong short-term cash position, Susquehanna has the ability to assume an even longer-term horizon for the endowment and take on a higher level of risk. The endowment’s asset allocation invests 88 percent in equities and 12 percent in real estate. While this allocation caused outsized volatility over the past 18 months, we are confident that it will allow us to achieve better-than-average returns over the long run and provide superior future funding to the university.
The financial modeling we regularly undertake to assess our ability to underwrite our vision for the future assumes that the elements that contributed to our current strong financial position will be essential going forward. By fall 2013, we anticipate modest enrollment growth that will produce 2,400 full-time undergraduates (compared to 2,195 in fall 2009); operating results that contribute to reserves; the preservation of reserves in light of additional debt taken on during the past five years; and no additional borrowing for the next three years. In our budgeting, we will continue to be guided by similar financial assumptions as in the previous strategic plan: in each year, the cash operating margin will be positive; over the five-year period ending with 2013, the financial statement operating margin should average greater than zero.
Our five-year financial plan (Appendix C) has been adjusted to reflect lower endowment income and investment income as well as lower annual fund contributions and state grants. We have also reduced our expectation of future increases in the comprehensive fee from an annual 5 percent increase to an annual 4 percent increase. Partially as a result of these reductions, financial statement deficits are currently projected in several of the five years of the multiyear plan; however, operations still yield positive cash in all years.
Although the five-year financial plan has significant embedded risk, given its assumptions that we will achieve enrollment growth and maintain current levels of financial aid, our conservative financial posture, with only a minimal exposure to variable-rate debt, no interest-rate swaps, no investments in hedge funds and a minor investment in private equity, positions us well to manage this unpredictable economic climate. As conditions improve, we will be eager to reinvest in our operations.
In the most basic sense, we are in good financial condition because we have been prudent, and we will continue to be.
As noted in our last strategic planning effort, people are our greatest asset. The commitments we made then to professional development and enrichment opportunities, adequate staffing and compensation levels, and the nurturing of connections within our growing community will continue to guide us through the time frame for this plan, and beyond.
We continue to believe that high-quality student learning requires a full-time faculty and staff base. When faced with difficult resource decisions, we will be guided by our commitments to maintaining appropriate staffing levels, maintaining the 13:1 student-to-faculty ratio, providing competitive compensation and funding professional development opportunities for faculty and staff. Our financial modeling has included additions of full-time faculty and staff to support our strategic initiatives.
Since the strategic plan was approved in 2003, the university has become a larger and more complex learning organization. Growing complexity makes communications all the more challenging. A new intranet, supplemented by traditional communication vehicles like newsletters and e-mail, will increase our effectiveness. The addition of more electronic communication tools does not replace our efforts to gather as a community as we seek to provide greater capacity and opportunity for two-way communication, access to information and resources, and engagement in decision making.
The following actions will form the foundation of our commitment:
- Use the 25/5 comparison group developed in 2008–09 to benchmark faculty and salaried staff compensation and use regional employer surveys for hourly staff. For faculty, continue to monitor and address impact of AACSB accreditation on business and non-business faculty compensation.
- Benchmark administrative staffing levels using the 25/5 comparison group.
- Launch cycle of external evaluation of administrative units.
- Extend the leadership development program to successive administrative levels.
- Complete and launch the online human resources policy manual to reflect best practices in human resource management.
- Include a faculty/staff satisfaction survey in the Institutional Research (IR) survey cycle.
- Finalize policies regarding internal dissemination of IR data.
- Launch campus intranet to serve as a single entry portal to enhance internal communications.
Susquehanna University’s campus is uniformly regarded as a significant competitive advantage, and maintaining its quality and functionality is essential. Since 2003, a total of $73 million has been spent on capital projects, funded by a combination of reserves, fund raising and long-term debt. Additional projects either underway or contemplated over the next five years (totaling more than $20 million) remain in the capital investment plan. More than half of this amount represents the renovation of Fisher Hall; other major projects under active consideration include the renovation of the former Catholic church in partnership with Geisinger to include a new student health center, and an initiative to build additional space for admissions and financial aid. Limited remaining debt capacity constrains our ability to address the possible need for additional dining space and student housing via major new construction; ascertaining those needs requires us to refine our understanding of whether students will choose to “go long” (i.e., for a full semester) or “go short” on programs as short as two weeks.
As noted in Initiative #5, our ethical and practical commitment to sustainability requires that we pursue options for reducing our carbon footprint. We will undertake needed health and safety and infrastructure improvements and avoid increasing levels of deferred maintenance. We will remain open to opportunities to make strategic property acquisitions for the long-term benefit of the institution.
Equally important to maintaining a functional and aesthetically pleasing campus is preserving a state-of-the art technology infrastructure. With the accelerating pace of technology innovation, we rely on the expertise of our information technology staff to recommend system upgrades and new product acquisition where technology is the stimulating enabler for our university strategy and tactical initiatives.
Other specific actions include:
- Completing the building audit and developing action plans to address deferred maintenance issues.
- Completing a new campus master plan to provide a vision for the continuing physical development of the campus, with supplemental student housing and landscaping plans.
- Updating the capital investment plan.
- Completing the conversion to Colleague Advancement and reinforcing the notion that data is a shared institutional resource.
- Continuing to make investments in our highly enabling campus network.
- Continuing to embrace cloud computing and the integration of hosted services through federated authentication and increased broadband provisioning.
- Advancing both internal and external university communications by providing a new single sign-on Susquehanna intranet.
- Pursuing greening through thoughtful technology use with new systems to manage paper consumption.
As a tuition-dependent institution, maintaining financial equilibrium is significantly dependent upon continuation of desired enrollments and managing our financial aid resources. We expect to undertake important efforts to ensure the desired enrollments in the coming years that are essential to providing a revenue stream to provide resources to achieve our goals. Concentrated efforts in the area of recruitment include the following:
- Continuing efforts begun over the past three years to target particular geographic markets where we can strengthen our market position.
- Increasing enrollment of international students, community college transfers and military veterans.
- Building a program of recruitment and support for international students, community college transfers and military veterans.
Additionally, retention must become a greater focus for us in the coming years. This has been and continues to be one of Susquehanna’s strengths; but our performance over the past four years has been mixed with more declines than gains. Under the leadership of the vice president for enrollment management, studying and understanding this trend and aggressively creating policy and programming interventions to strengthen cohort retention and persistence to graduation in the years ahead will be critical for us, especially as we recruit larger populations of international, transfer and military veteran students who will require special support systems. Increasing persistence by 1 percent in each of the next three years is an important and worthy goal for Susquehanna.
While we are living in a period of great uncertainty and ambiguity, one thing remains clear: Susquehanna is an institution with great momentum, proudly pursuing its very bright future; the collective work of our trustees, faculty, staff, students and parents to convey to those within and outside of the Selinsgrove community the value of a liberal arts education—and a Susquehanna education, in particular—will allow us to continue to prosper in these challenging times. We are partners in this effort, and our collective efforts will reap benefits long into the future.