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Remarks by President John J. DeGioia

Faculty Town Hall Spring 2010

January 22, 2010
Gonda Theatre

I. Introduction
As always, I'm extremely grateful for the opportunity to meet with you today, and to provide a sense of where we are as a University community at the start of this new semester. Given the times in which we live, I will spend considerable time this afternoon talking about the economic environment in which we are situated, providing a sense of the questions that define this moment in the life of our community.

But before doing that, I want to discuss a few other developments that underscore how our community has demonstrated its resiliency and vibrancy during a time of extraordinary change and challenge.

II. Campus Developments
Response to Haiti
Perhaps nothing speaks better to the spirit-and strength-of our community than the outpouring of sympathy and support we've witnessed as a result of the devastating earthquake in Haiti. Events such as this often touch the lives of the members of our community, and this moment is no different.

In response to this humanitarian crisis, Georgetown has responded in numerous ways. Our Center for Social Justice Research, Teaching and Service has set up a fund to support the humanitarian assistance and disaster relief work that is currently happening in Haiti. Donations can be made through the CSJ web site, and, as of yesterday, over $26,000 in cash and on-line donations have been raised from the Georgetown community.

Last Friday, we held an interfaith prayer vigil on the steps of Healy Hall with students, faculty and staff, and on February 2nd A Catholic Mass of Remembrance will be held for the people of Haiti in Dahlgren Chapel. Next week, Susan Martin, Herzberg Professor of International Migration in the Institute for the Study of International Migration, will moderate a panel discussion to educate the campus on the political, social, and economic conditions in Haiti prior to the earthquake, and how they have been impacted by the disaster. Additionally, the "Jesuit Universities Humanitarian Action Network" convened at Georgetown yesterday to consider ongoing advocacy and service opportunities. We will be hosting the Network's summer conference where a further dialogue will take place on how the Network can support Haiti.

One member of our community was also involved, in a unique way, in recovery efforts in Haiti. Dr. Ranit Mishori, a family medicine physician in our School of Medicine, was able to respond to an urgent call for help from a medical journalist in Haiti, who had come across a young Haitian in premature labor. Thousands of physicians are in a "media contacts database" compiled by ABC, but on Sunday morning, Dr. Mishori was only one of a few who happened to be online when the distress call arrived via e-mail. She texted relevant questions, and helped guide the people on the ground until they were able to make their way to a hospital set up by first responders. Although they will face challenges, mother and baby are apparently doing well.

That story speaks to the resiliency of the Haitian people in face of unimaginable destruction-and the remarkable generosity—the willingness of our community to open their hearts and lend their hands to those in need throughout the island nation. Our deepest sympathies go to those who have lost family and friends-and for those who await news of their safety. And as we keep the victims in our prayers, we will also continue to explore opportunities to develop educational programming and service opportunities related to the relief and reconstruction efforts in Haiti.

Diversity Initiative
As we come together in a tremendous outpouring of support for Haiti, we are reminded of the responsibilities that come with membership in our academic community. As most of you are aware, twice in the past year very poor efforts at satire by student publications have caused pain and distress for many in our community. The first, last spring, involved an April Fools edition of the student newspaper, The Hoya. The second took place shortly before the Christmas break with a website managed by Georgetown students.

Following the incident with The Hoya, last spring we launched a diversity and inclusiveness initiative to review a range of issues across our community. Co-led by Provost James O'Donnell and Vice President for Institutional Diversity and Equity, Rosemary Kilkenny, this initiative established three working groups focused on key areas of concern: academics, student life, and undergraduate student recruitment and admissions.

As I outlined in a letter which I sent to the members of our community last Wednesday, the working groups worked through last summer and fall. In early December, I met with the chairs of the working groups.

The group on undergraduate student recruitment and admissions was co-chaired by our Dean of Undergraduate Admissions, Charlie Deacon; Senior Vice President for Strategic Development, Dan Porterfield, and student Ryan Wilson (C'12). They presented a final report that Jim O'Donnell and I have accepted, and we will ensure the necessary steps for implementation are taken. The working group on student life is co-chaired by Vice President for Student Affairs, Todd Olson and student Joshua Guzman (F'10) and the working group on academics is co-chaired by two veteran members of our faculty, Sam Mujal-Leon of the Department of Government and Veronica Salles-Reese of the Department of Spanish and Portuguese. These two working groups will resume their work this semester, and Jim and I look forward to receiving their recommendations. I also want to thank all the members of the working groups for the time and effort they've given to promote a respectful and inclusive community in and out of the classroom.

In addition to our Diversity Initiative, and in response to the most recent incident, Vice President for Student Affairs, Todd Olson, will be holding a forum on satire and civility in early February. Faculty and students will participate in a panel to discuss these issues.

Both of these incidents remind us that we must continue our efforts to educate and inspire students to sustain the most dynamic, inclusive and respectful community possible. I believe deeply that the best approach is not to limit speech and expression - but rather to commit ourselves as educators, week in and week out, to challenge and inspire students to reach the highest standards of civility with one another.

As we face our challenges-and opportunities-as a community, I'm happy to report that admissions-the desire to join this remarkable community-remains strong. Undergraduate applications through Georgetown's non-binding early action program have equaled our record breaking numbers from last year-with over 6,000 applicants seeking a place in the Class of 2014. Early indications are that the pool's quality is, once again, extremely strong this year. And although we have no final number, yet, approximately 18,000 regular applications have been received.

Campus Plan
As we plan for our new classes, we're also finalizing the next ten year campus master plan, as required by DC law. As you know, every decade we need to present a plan that forecasts the growth of our campus and the potential impacts on the surrounding community. The last plan has served us very well, providing a framework for the largest capital expansion in our history. A full discussion of the issues can be found on our Campus Plan website.

As we contemplate changes to our campus-we're also experiencing changes in our community. I'm very pleased to say that our leaders and search committees are working hard to manage these transitions in the best possible way.

As you know, Dean Alex Aleinikoff has been appointed United Nations Deputy High Commissioner for Refugees, effective February 1st. Since becoming Dean of the Law Center in 2004, Alex has worked to significantly enhance its international and transnational profile, and his efforts have made a significant difference and contribution to our community. Judith Areen, Dean Emerita of Georgetown University Law Center, has kindly agreed to serve as interim dean of the Law Center, and Professor Patricia King has agreed to chair the search committee for a new dean.

In addition, Bette Jacobs will be concluding her eleven years of service as Dean of the School of Nursing and Health Studies, and at the end of the academic year she will assume a fulltime faculty role as Professor of Nursing and Health Studies…and as a Distinguished Scholar in the O’Neill Institute. Howard Federoff, Executive Vice President of the Medical Center, and I, are working together to appoint and charge a search committee.

I'm also happy to report that the searches for permanent leadership of the School of Foreign Service and the Georgetown Public Policy Institute are well under way. I'm grateful to Carol Lancaster for her service as Interim Dean of the School of Foreign Service, and to Angela Stent for chairing the search committee for the new Dean. I also want to thank the members of the committee for their on-going efforts. Additionally, I want to thank Bill Gormley for his service as interim dean of GPPI. I charged the search committee last semester to recruit a new Dean of Public Policy, and the committee is chaired by longtime faculty member, and former Dean of Georgetown Law, Robert Pitofsky.

I also want to note two administrative changes. As I announced last week, we’re managing a transition in the Office of Advancement. To lead our advancement work during an interim period, I have asked R. Bartley Moore (F '87 and Rhodes Scholar), and Paul O'Neill (C'86, G' 96) to oversee the Office of Advancement. Bart will serve as interim Vice President for Advancement, and Paul will serve as interim Chief Operating Officer. Both are Georgetown alumni with significant private sector experience and accomplishments, whom we recruited back to the University in key leadership roles within the last 18 months.

Finally, I'm pleased to welcome Stephanie Tsacoumis as our new Vice President and General Counsel. She comes to Georgetown after most recently serving as a partner at Gibson, Dunn & Crutcher. I know that she will be an asset to our community, and I have already received her advice and counsel on a wide range of issues.

I want to thank everyone, particularly those serving on search committees, for their work to help make these transitions as smooth as possible.

Science Building
I am very pleased that we are moving forward on the construction of a new science building on the Main Campus. As you all know, this was the first impact we felt as a result of the global financial crisis. We had intended to begin construction in October, 2008. But when the credit markets closed, when additional philanthropy became more uncertain, we made a decision to slow down the construction of the new building.

As most of you are aware, we recently received a $6.9 million dollar grant from NIST, the National Institutes of Standards and Technology, to support construction of the Science Building. This is a "stimulus grant" for "shovel ready" projects, and, in particular, it's meant to support the research of our scientists in an institute working on "soft matter," or materials that exist between traditional solids and liquids, such as petroleum products or various plastics.

Achieving this grant required the efforts and support of many members of our community, and I'd like to especially thank: faculty members Dan Blair, Steve Metallo, Jeff Urbach, Ed Van Keuren, and Dick Weiss; Deans Barbari and Gillis; Associate Provost Marjory Blumenthal; Associate Dean Ali Whitmer; and Director of Federal Relations, Scott Fleming.

With the receipt of this grant, we have made the decision to move forward with this project. It is now underway. We will soon have a formal ground breaking for the building and I look forward to celebrating with all of you. It is our hope that the new building will be ready by the fall of 2012.

Of course, financing and operating this new building will challenge us in many ways, and our Chief Financial Officer, Chris Augostini, is working with Provost O'Donnell to prepare a main campus budget that will enable us to absorb the incremental operating costs that the building will annually require.

This is a good segue to the comments I wish to provide regarding our financial context.

III. Financial Context
As you know, in response to the crisis, we took early and strong action. We focused particular attention on the crisis' effects on philanthropy, financial aid, and endowment income. And we formulated an adaptive and responsive five point strategy. This strategy called for:

(1) Reaffirming our commitment to ensuring access and affordability by aggressively limiting tuition growth to the most modest increase in 37 years, and increasing financial aid budget by ten million;

(2) Extending the timeframe between salary increases for faculty and staff;

(3) Taking a very conservative approach to spending, which resulted in the delay or halting of capital projects that rely on cash or outside funding sources;

(4) Placing special emphasis on fundraising gifts that immediately
benefited our operations, including faculty support;

(5) And reallocating investments to increase liquidity in the endowment.

Thanks to this strategy and the commitment and cooperation of our entire community, Georgetown managed well during the depth of the recession, and the University's performance, including endowment value and operating loss, was significantly better than planned, and better than that experienced by many of our peers.

To place the experience of Georgetown in perspective, I'd like to share with you some context for higher education.

The crisis is being experienced in very different ways across higher education. Everyone is being impacted. Significant attention has been given to the impact of the financial crisis on "public higher education." It is important to remember that nearly 80% of everyone enrolled in post-secondary education is in public institutions.

I believe the significant story in the public sphere is the impact of the economy in the state of California which has received considerable attention. The Board of Regents for the University of California announced a 32% mid-semester tuition increase. That increase combined with an unemployment rate in the state of California of 12.4% has made this among the most challenging contexts in our country.

But let me focus on private higher education, and here there are four trends that are important in our context:

The first is a decline in asset values, specifically declines in the value of endowments and in the defined benefits investment pools. Let me focus on endowments.

For many elite private colleges and universities, the most immediate impact has been the effect of endowment losses on operating budgets. The spending rules at most universities call for an annual payout from the endowment based on a rolling average of endowment performance over a previous period, with a maximum number that is not to be exceeded. For example, at Georgetown, we use a five-year average. (Slide 1 Chart of Georgetown's payout rates over the past 10 years).

This is the area that has received significant media attention, due to the high profile of the institutions impacted:

Harvard has suffered a loss of 30% on an endowment of $36.9 billion (June 30, 2008). For the Faculty of Arts and Sciences, the flagship school of Harvard, this has meant budget reductions of $52 million for this fiscal year and another $50 million for next fiscal year.

Princeton saw a decline of 30% on an endowment of $16.3 billion (June 30, 2008) and has embarked on a two-year effort to reduce their operating budget by $170 million ($86 million in FY 09 and $82 million in FY 10).

Yale experienced a decline of approximately 25% (from June 30, 2008) and now has approximately a $17 billion endowment. Endowment supports 44% of the University annual expense base ($2.7 billion). Yale projects an annual budget shortfall of $150 million a year for the next five years.

Dartmouth cut $72 million for FY 2009 and 2010, and faces a $100 million spending cut by 2011 (projected operating losses of $50 million a year).

These institutions are relying on cash reserves and borrowing to meet operating expenses to cover the time period in which it takes them to reduce operating expenses.

I have joked that I never thought I would be extolling the virtues of tuition dependency, but with an endowment of approximately $1 billion before the global financial crisis, the impact for Georgetown is not commensurate with our peers. Harvard funds 35% of its operating costs from its endowment …Yale funds 44%...Princeton funds 52%--while we fund only 6% of our operating costs from our endowment. Our endowment had a return of 8% this past year, which brings it back to $957 million as of December.

In addition to the endowment, there is a second asset pool – the reserves set aside for a defined benefit plan. For Georgetown, this is our GURP plan for staff employees. We are required to sustain funding at specific levels, and the market declines directly impact these pooled funds. Fortunately, we were fully funded before the financial crisis, so the impact is specific to the experiences of the past fifteen months.

The second trend is increased costs for financial aid. For private colleges and universities, the average increase in institutional student aid this year was 9%. This was our consistent with our experience at Georgetown. We were just a little higher. The most common response throughout COFHE has been to reaffirm financial aid policies.

A third trend that is impacting higher education is a decline in gift income. I'd like to show you a slide - Slide 2 "Giving in FY09 versus FY08 - Carnegie I Private Institutions". Overall, giving was down year over year at Carnegie I Private Institutions by 11.4%. You will see some outliers here, the most notable being Georgetown. It is important to note that we did have the strongest fund raising year in our history, but nearly $70 million in cash came from two estate gifts, including the largest gift in the history of the university from the estate of Robert McDevitt. If we take out these two estate gifts, then overall, giving was flat.

And a fourth trend is the uncertain environment that will be emerging in the area of federally sponsored research. Here there are a number of changing dynamics. The federal stimulus package infused significant resources - for Georgetown alone we will see increased support of sponsored research through stimulus funding of $25 million over the next two years. But by 2012, the circumstances will change and we need to be sensitive to the potential for a new framework for sponsored research.

What actions have been take by our peers?

First, Private College tuition rates rose at the lowest rate in 37 years. This was also our experience. We had the lowest rate of increase since 1972. The average across the nation was 4.3% and for Georgetown, we were deliberately smaller at 2.9%.

The other responses are what you might expect in reaction to a decline in revenue - an effort to reduce expenses: Except in financial aid.

But among our peers the following steps were taken:

  • Salary freezes, layoffs, early retirement programs, benefits program reductions;
  • Reevaluation of capital projects including the deferral or delay of
  • Efforts to reduce other operating costs.

These were similar to the specific actions we took here at Georgetown. We delayed faculty and staff salaries until January 1. We slowed the development of the science building and all other capital projects. We reconfirmed our commitment to our need-based financial aid policy and launched the most significant fund raising effort - the $500 million 1789 Scholarship Imperative, which will support our commitment to sustaining our policy of need-blind admission and meeting full-need.

That is the context and our position in the context.

As we move forward, what are our concerns?

There are three key framing issues for Georgetown:

The first is a constrained revenue environment. We experience this in three ways. The first is the endowment. The following slide - Slide 3 "Pooled Endowment Payout Projection" - will show the impact of our spending rule over the next five fiscal years. As you will see, we will have less revenue coming from our endowment between now and FY2014.

The second is our pricing of tuition, particularly undergraduate tuition. Our tuition and fees are among the highest in the country, and I believe we will be in a very constrained environment.

The third source of revenue are gifts. Pricing and philanthropy fueled our growth over these years. Over the past five years, we’ve grown from a University operating budget of $711 million, to one of $970 million—a growth rate of 6%. On the Main Campus, the budget has grown from $276 million to $450 million, a 10% growth rate per year over the same time period. This growth rate has enabled us to increase the size of main campus faculty—from the fall of 2004 to the fall of 2009—from 652 to 767, almost 18% over five years.

Pricing and philanthropy also enabled us to absorb operating costs on the expansion of our facilities and supported our commitment to meeting full-need. As the chart I showed you earlier - I am concerned about the environment for philanthropy.

We are in a campaign - the fourth year of our "quiet phase." You can see from this slide - Slide 4 "Overview of Philanthropy 1999-2009" that we have a strong performance. But we are in very uncertain territory today. For most of the leading institutions in higher education, fund raising was significantly off for the first part of the year. Overall, through the first two quarters, we are down 17%, which is better than most, but still a source of concern.

The second framing issue for Georgetown is the implementation of a new faculty salary plan. This issue is defining our work at this time – it is the most significant issue that we are addressing at this time. Chris is working with Wayne Davis and Jim O'Donnell and others to ensure we are able to put into place a new plan. We successfully completed the implementation of the ten-year faculty salary plan for the Main Campus this past year. Now we need to implement a new plan that will ensure we can sustain competitiveness with our peers.

And third, we need to absorb the costs for operating the new science building. As I indicated earlier, Chris Augostini, is working with Provost O'Donnell to prepare a main campus budget that will enable us to absorb the new operating costs that the building will annually require.

These are the three most significant presenting issues for us today at Georgetown.

I hope this is helpful and I look forward to our conversation.

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