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Economic Conditions and
Holy Cross

Frequently Asked Questions

 

How is the current financial health of the College of the Holy Cross?
As we prepare to begin a new fiscal year on July 1, 2009, the College remains in a solid financial position, thanks to prudent budget planning, contingencies and reserves built into the operating budget, as well as strong operating and capital budgeting controls. However, the market downturn means our endowment has declined sharply over the past year from its $627 million level at the end of the previous fiscal year. In anticipation of decreasing levels of endowment support, increasing financial aid requests, our commitment to maintaining competitive compensation and benefits, as well as other financial contingencies, we had to close a budget gap of approximately $3 million for fiscal 2010, and must be prepared for additional $3 to $5 million − and perhaps more severe − cuts in the years ahead.

What budget cuts have already taken place to make up for the budget gap?
All divisions have submitted budget cuts for their operations. These cuts range from reductions in operating expenses such as subscriptions, travel and professional development, to consolidation of some services, to moving some publications (such as the College Catalog) to Web-only distribution. We have put some planned capital projects on hold. Some College events have been cut, or are being done on a more modest level. Salary increases were considerably smaller than in recent years. We have also postponed a planned debt issue, the proceeds of which would have been used primarily to finance a new residence hall.

One thing is certain: we will seek to avoid any action that would have a negative impact on the College’s mission or its academic standing. We do not currently anticipate any cuts or changes that would significantly affect our students’ experience, either academically or in other areas. In fact, the College’s academic program as well as all campus activities − from athletics to campus ministry to cocurricular opportunities − are stable and thriving.

Will there be layoffs or a hiring freeze?
As of June 2009, the College has not had to lay off any faculty, staff or administrators; nor have we needed to institute an across-the-board hiring freeze. However, a voluntary early retirement program (see below) was established, and when a job vacancy occurs, the affected department must explore all alternatives to filling the position, including redistributing responsibilities or outright deferment wherever possible. We will carefully review all proposals for replacement hires.

It appears that there are some signs of economic recovery (as of summer 2009). How is the College’s endowment doing?
Although the College’s endowment has recovered somewhat from its low in March, it is still down significantly (around 20%) for this fiscal year. While Holy Cross was forced to make significant budget cuts for the coming fiscal year, the real brunt of the losses will be felt in future years. That’s because we base the percentage of endowment funds that go to the operating budget each year on a three-year rolling average of the endowment value − with a lag year built in. So for the 2009 -10 academic year, the percentage will be based on the average value of the endowment in fiscal 2006, 2007 and 2008. Those were, by and large, good years. While the endowment lost value in 2008, it had gained 20 percent in 2007. The rolling average is designed to smooth out bumps in endowment growth or loss, but it will also be pushing off the real hit of the 2009 endowment losses into future years.

The immediate endowment impact for the fiscal year beginning July 1, 2009, is the $60 million worth of individually endowed funds within the endowment that are currently "underwater" − that is, they are worth less than when donors made their original gift. Under current Massachusetts state law (6/30/09) and according to prudent practice, the College will not spend below the original gift value. The majority of the funds that are in this situation are dedicated to helping pay for faculty salaries and for scholarships for students with need. The College is committed to picking up these expenses from the savings generated by the budget cuts instituted for the coming fiscal year − thus protecting those scholarships and faculty positions.

Does the College still need to plan for budget cuts?

Yes, additional cuts are indeed a possibility. We continue to plan for all contingencies and explore cost savings, including reducing the College’s work force through natural attrition and other voluntary means.

Without layoffs, how can the work force be decreased enough to make an impact and still keep operating at a level of excellence?
Several options have been offered to employees, including voluntary early retirement and voluntary reduction in work hours. Divisions have been asked to consider restructuring staff responsibilities when positions become available. When a faculty member goes on leave, the College may recruit a well qualified adjunct (rather than a full-time visiting professor) if one is available, or even stop offering some of that professor's courses for a semester.

What is the College’s voluntary early retirement plan?
In addition to an existing Faculty Voluntary Early Retirement Program, the College announced in April a voluntary retirement plan for exempt administrative and nonexempt hourly employees age 62 years or older who have at least 15 years of service as of June 30, 2009. Fifty-four employees were eligible for this option, and were notified of their eligibility for this one-time offer. Thirty-five employees accepted the offer.

What is the College’s plan for voluntary reduction of work hours?
The College announced in April that, with the approval of an employee's divisional vice president, it will accept proposals from staff and administrators who are willing to work a reduced number of hours at a prorated reduction in pay. The College is also willing to evaluate job share proposals that result in two part time positions replacing one full time position. Each proposal will be reviewed on a case-by-case basis to determine whether it is in the best interest of the College to re-organize any position.

What has been the impact on financial aid?
Holy Cross remains committed to its need-blind admissions policy and to meeting 100% of the demonstrated financial need of all admitted students. We have increased the financial aid funds available by 5.2%, with the possibility of adding more if needed, and remain committed to the accessibility of a Holy Cross education to all those who are admitted to the College. Families requiring financial assistance, particularly as a result of a change in their own economic status, should know that our Office of Financial Aid has a wide range of resources for those who qualify for them.

What will a Holy Cross education cost in 2009-2010?
At its January meeting the Board of Trustees voted to set tuition, room and board, and mandatory fees at $49,342 for the 2009-2010 academic year. This new fee schedule represents a 3.9% increase over current charges. The Board and the College’s senior administration conducted rigorous analysis and made major budget reallocations before setting this fee schedule, in order to limit the increase as much as possible while maintaining the quality and value of a Holy Cross education in the face of falling endowment income. About 66% of the College’s budget comes from student fees, with about 15% coming from endowment, 7% from direct donations, and 12% from other sources. Ultimately, the full cost of attending Holy Cross is on average $14,600 less per student than it otherwise would thanks to philanthropy and other resources.

What happens if a family’s financial circumstance has changed significantly?
Please contact the Office of Financial Aid. If the change has happened during the current academic year, limited funds do exist that may be available to help offset these unforeseen events. The College will review each situation individually and respond as soon as possible.

The biggest challenge for many students and their families is accessing the cash to pay for tuition and living expenses. As banks struggle, lines of credit are harder to obtain. To date, we have not seen an impact on applications for admission, enrollment or students’ ability to get loans. Part of the reason for this was the College’s decision to exit the Federal Family Education Loan Program (FFELP) in favor of the Federal Direct Lending Program, which helped ensure that qualified students and their families would have access to federal loan funds. The Office of Financial Aid can provide further assistance in this area.

If the credit markets remain constrained, can Holy Cross help families find loans?
In the spring of 2008, Holy Cross joined the Federal Direct Loan Program, which gives families access to loans directly from the government for up to the cost of attendance, without relying on private lenders. This has worked well for the College and our families. This year, everyone who needed loans received them. The Office of Financial Aid is available to guide families through the process of finding and identifying a lender.

Are the College’s cash reserves safe?
Yes. The College has adequate cash and cash equivalents invested in very safe and stable short-term investment vehicles. The College’s projections indicate that there is ample cash to fund operations under normal operating circumstances through the end of the next fiscal year (June 30, 2010).

Is it likely that employees might not be paid?
No. This is a very remote risk. Payroll is one of our highest priorities. Current projections indicate that the College should have no issues making payroll over the foreseeable future. If the economic environment changes dramatically, we would postpone other discretionary spending in order to help ensure adequate cash was available to make payroll.

Are employee retirement funds secure?
Hourly employees with a pension plan at Holy Cross are covered under a guaranteed defined benefit pension plan. Regardless of what the investment markets do, the College bears the risk and is the guarantor of the plan, which is also insured by the Pension Benefit Guaranty Corporation (PBGC), a federal corporation created by the Employee Retirement Income Security Act (ERISA).

Faculty and staff participate in the College’s retirement contribution plan, which directs College funds and employees’ own contributions to TIAA-CREF or Fidelity accounts. These funds, held in separate accounts for each participant, are invested at the participant's direction in a multitude of investment vehicles. In the face of the current declines in the stock market, employees are encouraged to maintain an investment strategy that parallels their retirement outlook and to maintain asset allocations consistent with their retirement objectives and risk tolerance. Employees are also encouraged to consult with retirement plan advisors and to review with frequency the TIAA-CREF and Fidelity Web sites for timely and relevant information concerning the investment markets.

How is Holy Cross preparing for next year’s budget should the current situation continue, or if enrollment declines?
Depending on the severity and length of the current economic downturn, planning for future budget years could be impacted. The College is constantly monitoring leading indicators that may hint at stresses on the current and future budgets. Applications for admission to the Class of 2013 (including Early Decision applications) were very strong, and more than 700 first-year students will enroll in August 2009, at or above the budgeted number. We currently do not see any signs that enrollment will decline. However, in this economic environment, we must be cautious about our own spending plans. We are preparing multiple contingency plans beginning with fiscal year 2010 that would enable the College to react to a reality that is different from our baseline planning assumptions. The focus of these contingency plans will be to find opportunities to increase revenues and/or cut costs while ensuring that the quality of student experiences remains first rate. In the event that costs need to be cut in a significant manner, the President, the administration and the Board of Trustees will try to ensure that the adjustments are made in a manner that preserves the mission of the College and maintains the value of the Holy Cross experience for our students.



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(Updated: July 1, 2009)