| President Larry Shinn recaps Berea's scenario planning response
Dear Berea Alumni and Friends,
In my nearly sixteen years as President of Berea College, we have had many challenges to face, both programmatic and budgetary. But the financial crisis of the past fifteen months— which we now call the Great Recession with its home mortgage fiasco, its claiming of the 158-year-old financial giant Lehman Brothers, and its continuing near 10% unemployment
rate—hit Berea College particularly hard given our unusual funding method. In this letter to you, our Berea alumni and friends, I provide an update on how we at Berea College have not only survived the original economic collapse, but how, in our current planning processes, we hope to educate more, not fewer, students with reduced economic resources.
President Larry D. Shinn
The Financial Impact on Berea: As you know, Berea College does not charge tuition, which is the primary source of funding for most colleges and universities in America. We provide a full- tuition scholarship to all students, whose average family income this year is $29,945. Berea funded 80% of its operating budget during the past year from its endowment, 10% from gifts from alumni and friends, and 10% from state and federal scholarships that students bring with them. When 80% of our income stream was jeopardized by the collapse of the United States’ financial markets, Berea faced uncommon economic challenges.
Berea has excellent trustee oversight of its endowment so that in the fiscal year ending June 30, 2009, Berea’s endowment was down 20.8% when benchmark indicators were down 24-26%. With a decline of 4.7% the previous year, we were faced with a two-year decline in our endowment income of about 25%. In the past eight months Berea has regained nearly two-thirds of its losses, yet we still have a significant budget dilemma.
Initial Response: There was no time to waste in addressing the fiscal urgency of this situation. We engaged two primary processes in response to our financial challenge. First, we set about reducing our operating budget. Second, we simultaneously began a strategic planning process.
Because personnel accounts for approximately 70% of Berea’s annual operating budget, reducing Berea’s workforce size was necessary. After much deliberation, in spring 2009 the administration placed a hiring moratorium on all new hires and began a process of eliminating 21 vacant positions and an additional 9 filled positions, for a reduction of 30 positions. In the fall, a one-time Retirement Incentive Program led to the planned retirement of 43 faculty and staff. Of those positions, 16 will not be refilled.
With the 2010-11 budget, whose guidelines were just passed by Berea’s trustees, we will have eliminated nearly 60 positions out of a workforce of approximately 500 full-time employees. In addition to reductions in personnel, we have reduced operating budgets across the College and identified ways to increase income. These steps have allowed us to reduce our 2008-09 operating budget of $43 million to $37.1 million in our 2010-11 budget—a nearly $6 million reduction in two years time. Our first and continued response to our financial shortfall is to find ways to reduce our budget—and scenario planning has helped us make our reductions in a strategic and focused way.
Scenario Planning Response: Our second and simultaneous response to our uncommon financial challenge was to seek new ways of thinking about how Berea’s educational community was structured and how we could reduce our budgets in a way that led to an even stronger Berea College. In February 2009, I appointed a Scenario Planning Taskforce led by the Dean of the Faculty. This 11-person group of faculty and staff was asked to develop at least three different scenarios that would (a) maintain Berea’s full and unique mission, (b) maintain our 110-year-old no-tuition policy, and (c) simultaneously reduce our operating budget by up to 25%.
The Taskforce met throughout the spring and forty hours a week during the summer and produced three distinct scenarios in a 133-page document called “Of Journeys, Landscapes, and Destinations.” These three scenarios were considered and debated among students, faculty, staff, alumni, and trustees. Using key elements of the three proposed scenarios, the administrative Committee constructed a fourth scenario called “Engaged and Transformative Learning” that was endorsed by Berea’s faculty in December of 2009 and by Berea’s Board of Trustees at its February 2010 meeting. This scenario’s intentional and intensified focus on student learning has guided both the budget and staff reduction decisions over this academic year and also suggested new ways Berea might enhance its students’ education. Early initiatives include a new academic calendar that lengthens each semester and moves our special four-week term to May; an effort to maintain the independence of Berea’s Appalachian, International, and service centers while integrating where possible their programs and budgets; and the decision to reorganize the faculty into larger academic units that promote increased flexibility, innovation, and excellence. A full description of the “Engaged and Transformative Learning” scenario and its various “building blocks” will be presented in the summer issue of the Berea College Magazine.
Conclusion: As you can see from the above description of Berea’s reaction to the financial crisis of the past fifteen months, we are resolute in ensuring that our critical self-assessment and painful cuts, though forced on us by the economy, will strengthen, not diminish, The Berea Way. Not only are we preserving Berea’s mission of serving talented students with economic need by maintaining our no-tuition policy, we are also seeking to strengthen the learning environment for those students. Our Labor Program, which requires all students to work, will help ameliorate the impact of having fewer full-time staff. And with the new academic calendar, restructured centers, more flexible academic departments, and the other building blocks of the “Engaged and Transformative Learning” scenario, Berea College will be more agile in a 21st-century world where rapid change and uncertainty are its hallmarks. Thus, even with reduced budgets, Berea will prepare its extraordinary students for the challenges—and opportunities—of a quite uncertain future.
As I close, I want to thank every one of you who supported Berea College as we faced challenges not seen by our college since the Great Depression. During that desperate time, President William J. Hutchins spoke words as relevant today as then: "We who work in Berea today inhabit a world and minister to a world radically different from the world our predecessors lived in even ten years ago…. Adaptation, which has been the very watchword of Berea, will force upon us changes of emphasis and possible changes of methods."
Yes, adaptation has been the very watchword of Berea College throughout its 155-year history, and the past fifteen months have required large doses of this palliative elixir. But adaptation is hard work, and Berea’s faculty, staff, administration, and trustees have had to stretch their imaginations and their tolerance for rapid change. Equally important, you who are alumni and friends have provided invaluable financial and moral support during these difficult times. Thank you for all you do to help us sustain Berea’s complex and distinctive mission in these turbulent times.
Larry D. Shinn, President