Messages to the Georgetown Community
The Impact of the Financial Crisis on Georgetown University Finances
November 7, 2008
Dear Georgetown Alumni:
This fall has been a truly unprecedented period in American economic history. With volatile fluctuations in the stock market, and so many signs of uncertainty in the national economy, I thought it might be helpful to offer a perspective on the University's financial position and readiness to respond to further economic change.
Georgetown's financial platform is strong. We raised the largest amount of cash donations in University history during fiscal year 2008, which ended in June. Thus we finished the fiscal year ahead of budget projections for the fourth year in a row. The University continues to enjoy positive cash flow despite market fluctuations, but we are watching economic conditions and our fundraising efforts closely.
A boost to our financial strength came in September, when the credit rating agency Standard & Poor's increased our credit rating. S&P cited our experienced financial management team, solid fundraising and strong student demand as contributing factors to its decision. Already, as a result of these factors, we have enjoyed the financial flexibility to spend $78 million on strategic capital projects, including the construction of a new home for the McDonough School of Business and a much-needed new student information system.
This does not mean that Georgetown has been untouched by the recent upheaval. As has been widely reported, the financial crisis could affect the financial health of colleges and universities across our nation, potentially in the form of reduced endowment returns, philanthropic gifts and federal grants. We should expect to be limited in our ability to access credit for University projects at interest rates comparable to those of recent years. We may also find that more students qualify for financial aid and that some students have difficulty securing student loans.
We are taking steps now to ensure our continued ability to carry out our mission at the highest level and to pursue the University's strategic imperatives. At the University level, we are avoiding quick-fix responses and managing our investments for the long term. We are working to restructure our debt to minimize rising interest costs. We are also monitoring the student loan market and developing the capability to become a direct lending institution, should that be needed to give our students continued access to affordable credit.
In regard to campus operating budgets, Provost Jim O'Donnell, Law Center Executive Vice President Alex Aleinikoff and Medical Center Executive Vice President Howard Federoff are being proactive and planning conservatively. In partnership with Senior Vice President and Chief Financial Officer Christopher Augostini, the campuses are implementing steps to give Georgetown even greater fiscal flexibility in the event of significant changes to our revenue or expense projections. Safeguarding cash balances is essential in a period when access to credit may be unpredictable.
During times of challenge, we always draw strength from Georgetown's academic mission as a Catholic and Jesuit university in the nation's capital. I have encouraged our faculty to take the time to explain aspects of the financial crisis in class as well as in public forums and have asked both faculty and staff to marshal the University's resources to meet needs in our community and beyond. Some of these resources, including videos of expert commentary from our faculty on the crisis, are currently available on our website. Many schools and programs are working to ensure that students and alumni have access to faculty expertise and career counseling as they make decisions about their futures. Several panel conversations are taking place with alumni throughout the country. Our career centers are in touch with employers and recruiters and coordinating advisory sessions for students here as well.
The volatility of the national economy can be discouraging and unsettling. Even so, the Georgetown community has rallied together to create an outstanding year thus far. We will continue to engage in prudent financial planning as we develop our budgets for fiscal year 2010. Working together, we will secure the promise of Georgetown's future.
John J. DeGioia