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Economic update: Letter to the Lehigh community

Dear Lehigh Community Members,

As we know from reading the papers and hearing the news, this is an exceptional and extraordinary economic crisis and one that will not pass quickly. Lehigh University’s role in providing a quality education and forefront research has never been more important. We remain committed to carrying out our mission with the excellence that we require. It is important that we act as responsibly as we can to ensure that Lehigh University will manage through this downturn and emerge as an even stronger institution. Accomplishing this will require focus on priorities, hard work and difficult decisions.

The economic conditions are not affecting all people and institutions uniformly. Those universities having substantial endowments supporting their operations are the hardest hit in the short term. There are institutions where endowment income funded nearly half of the operating budget. Lehigh University’s endowment earnings are spent very conservatively and fund less than 15 percent of our operations. The majority of our budget is supported by revenues from tuition, auxiliaries, gifts and grants. Thus, Lehigh’s immediate economic situation is stable and we must plan carefully to ensure that it remains so. I have noted that Lehigh’s prudent financial stewardship has served us well, and I continue to be grateful to our Board of Trustees and their predecessors for their wisdom.

In managing our endowment, we are taking action now to control circumstances and prepare for an uncertain future. To promote the recovery of our endowment, the Board of Trustees has approved a modification to our spending policy, which will conserve endowment capital but reduce funds available for the operating budget over the next several years. We realize that this will be felt unevenly by units across the campus having varying dependence on endowment revenue, but it is a necessary step to protect the endowment in perpetuity.

While Lehigh is financially sound in the short term, we are concerned about the longer term impact of the economy on our students and their families. Ensuring that our students can continue their Lehigh education and that we can provide the quality experience they need and expect is paramount.

We remain determined to making Lehigh University accessible to families who need financial assistance. We will continue the financial aid policies we put in place last year to remove or limit loans for the neediest families and increase our work study opportunities. The financial aid support by the university increased by nearly 40 percent since 2004. We anticipate that students’ need for financial aid will increase substantially in the coming years, and we are taking action now to be ready. Thus, our highest priority in our budget has been to build a reserve for financial aid and enrollment.

We have worked hard to constrain our budget and proposed the lowest tuition increase at Lehigh in 40 years. The undergraduate tuition and fees for 2009-2010 will increase by 2.9 percent over last year. We expect this will be among the lowest increases of any college or university.

In addition to restraining the rate of growth in tuition, we are taking steps to reduce expenses. For example, each department head has been asked to identify a 10 percent reduction in non-salary administrative expenditures for fiscal year 2010. These reductions, and savings we achieve in the current fiscal year, will be placed in the financial aid reserve.

Vacant staff positions will be carefully reviewed, and all options for reducing, reassigning or sharing of work will be explored with the goal of not filling the position. A Vacant Position Review Group, made up of faculty and staff representatives, will review any positions that a department head or senior leader deems essential.

All departments will reduce overtime and wage costs, and the Provost’s Office will work with the college deans to reduce adjunct teaching staff costs by 15 percent. All new campus renovation and construction projects that are not fully funded by gifts will be put on hold, except renovation directly related to the arrival of new tenure-track faculty.

As you may be aware, there will be no salary increases for the senior leadership this year. The Provost and I have consulted and are working with the Faculty Compensation Committee and the Employee Relations Advisory Committee about merit increases. These discussions are helping us come to closure on the merit increase process and we will communicate the merit increase details by mid-March.

Working together, with a focus on our mission of teaching, research and service, we will ensure that Lehigh remains a strong and vital institution. I know that faculty, staff and students are thinking creatively about how we can make Lehigh better even as we focus on reducing costs.

I appreciate the work and the progress many of you have already made in reducing costs. I do not believe that our current budget was bloated, and I appreciate that the decisions we must make require hard thinking and tough choices, and will result in some reductions in services we have been accustomed to. We must all, now more than ever, be careful stewards of our university’s resources.

Despite our challenges, there are reasons for optimism and evidence that Lehigh is moving ahead. For example, new faculty members introduced themselves earlier this month at a Trustees dinner. Their expertise, enthusiasm and energy were very impressive. These new faculty members represent the talent and commitment that is so evident in the entire faculty.

We are continuing with our 38 faculty searches and are greatly encouraged by the quality of the candidates we are recruiting.

Our STEPS initiative is moving forward, with the steel structure being the most visible physical evidence. The interdisciplinary approach to addressing society’s most pressing challenges represented by STEPS is in many ways a manifestation of Lehigh at its best.

The federal government’s stimulus plan contains dramatic increases in federal funding for research in areas such as energy, the environment, infrastructure and health care. Lehigh has expertise and accomplishment in these areas, and we are working to obtain research funding in these fields.

The Shine Forever Capital Campaign remains on track with $440 million raised to date and we are working toward completing the $500-million campaign by year end.

We are actively recruiting the Class of 2013 with a smaller but very strong pool of applicants. It is clear that these prospective students value what Lehigh has to offer and they will bring much talent and diversity to the university.

Our Strategic Plan outlines a trajectory for Lehigh to become a premier residential research university of international distinction. This plan sets ambitious and important goals for the next decade. We intend to advance our intellectual footprint by enhancing our research portfolio, increasing graduate studies, and augmenting our distinctive student experiences and important interactions with the community. While the current economy may slow our implementation of the plan, there are actions we can take to make progress toward fulfilling our goal.

I am optimistic that Lehigh will not only survive these challenging times, but will emerge even stronger. As the new faculty spoke at the dinner, a number of them noted quite movingly that what attracted them to Lehigh was the strong sense of community. I have heard this sentiment from other faculty, and from staff, students, and alumni. We are a community—a community of outstanding scholars and researchers, a community of talented students and dedicated staff, a community of enthusiastic and supportive alumni—united by a common mission.

Our sense of community, a hallmark of Lehigh, is an enduring strength and will help us move through these difficult times.

Alice P. Gast
President

Posted on Wednesday, February 25, 2009

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