Remarks by President John J. DeGioia
Faculty Town Hall Fall 2009
September 29, 2009
As always, I’m grateful for the opportunity to meet with you today. Since we last met, our nation—and our university—have weathered a time of almost unprecedented economic challenge, uncertainty, and difficulty… a time that has left virtually no institution, academic or otherwise, untouched, unaffected or untested.
It was a year ago—in mid-September—that the collapse of Lehman Brothers led into the worst recession the United States has experienced since the Great Depression.
The crisis is far from over—as demonstrated by the highest unemployment rate in more than 25 years…and five million people out of work for six months or more—more than at any time since World War II. With the continued intensity of the recession in many quarters, it’s impossible to know how things will unfold in the near future. But I know that I share with all of you the hope that some of the promising signs—the increases in the Dow…and the rise in the Index of Economic Indicators for five straight months—are signs on the road to recovery.
In a moment, I’ll focus on the lingering crisis, and our ongoing response. But I want to first discuss a few other important developments that underscore how our community has demonstrated its resiliency despite very real challenges and difficulties.
Perhaps nothing highlights the dynamism that has continued on our campus, even during this crisis, then the formal opening two weeks ago of our new building for the McDonough School of Business. In July, we announced that we had received a $20 million gift to name the building in honor of the late Rafik Hariri, a former Prime Minister of Lebanon…a dedicated supporter of higher education…and a Georgetown parent. For the first time in 51 years, our MSB community—staff, faculty, undergraduates, and graduate students—are all together under one roof.
A truly exciting development, the opening of this extraordinary building is only one of our recent highlights, and I want to thank Dean George Daly; Reena Aggarwal; and all those who helped with the development of this project through construction to completion. I hope you’ve all had the opportunity to visit the building.
I’m also very glad to report that, despite the difficult economic climate, strong demand continues for our undergraduate and graduate programs. We received more than 18,600 undergraduate applicants for this year’s Freshman Class of 1,580. This holds steady with last year’s record number of applicants. We also had an acceptance rate of 18.7%, making Georgetown, once again, among the most selective universities in the nation. Our yield held steady—with 43% of those accepted positively responding.
We also continued to experience record numbers of applicants for the Law Center, and strong applications for our Medical School and other graduate programs.
We’ve started the planning process to develop the next ten year campus master plan, as required by DC law. As you know, every decade we need to present a plan that describes the capital expansion of our campus. Our next plan covers the period 2010-2020, and we expect to have it ready for public review later this year.
As part of the plan, we will also address ways to improve pedestrian safety and build on our efforts to promote sustainability. For a number of years, we’ve been working to promote energy efficiency and to build sustainable practices. To that end, I’m happy to report that we’ve reduced our carbon footprint by 16% from our 2006 peak, and we’re committed to reducing it by 50% by no later than 2020. We’ll also be designing any new facility, and undertaking major renovations, to LEED standards…converting our GUTS fleet to bio-fuel…and enhancing our overall campus recycling program.
As some of you may know, late last semester we launched a diversity and inclusiveness initiative to review a range of issues across our community. This initiative, which is composed of three working groups, is coordinated by our Vice President for Institutional Diversity and Equity Rosemary Kilkenny, and Provost Jim O’Donnell.
The working groups are:
1. Working Group on Academics: This group is examining questions of how we can best and most appropriately facilitate cross-cultural learning, dialogue, and understanding in the classroom and through the curriculum. I would especially like to thank Professor Sam Mujal-Leon and Professor Veronica Salles-Reese for their leadership co-chairing this group.
2. Working Group on Student Recruitment and Admissions: This group is looking at how the University community can ensure that all high school students considering Georgetown understand that we seek students who will contribute to, learn from, and always respect the University's multicultural community. The group will also be working to ensure that a larger number of our cohort of minority candidates choose to come to Georgetown.
3. Working Group on Student Life: This group is examining student life—especially Georgetown's co-curricular approaches to preparing students to live and interact in a multicultural community. The working group will identify improvements that we can make in New Student Orientation, Residence Life programming, and leadership development and mentoring for student clubs.
All three groups have been meeting over the summer and continue to make progress. I expect to receive initial recommendations by November.
In response to the increasing numbers of H1N1 influenza cases across the nation, our emergency response team has been in touch with federal and local public health officials throughout the summer…and it has been meeting regularly to develop a series of measures aimed at reducing the risk of infection on campus and providing support for those who become ill.
The American College Health Association reports that 91% percent of the 267 colleges and universities participating in their H1N1 survey reported new cases in the last week. The nationwide illness rate was nearly 25 cases per 10,000 students. We are consistent with this trend, as approximately 320 students have sought medical advice or evaluation for influenza-like symptoms since the beginning of this Semester. We’re monitoring these cases carefully, providing support and resources to our community, consulting with federal and local public health officials, and encouraging individuals to take precautions to stay healthy.
There is a wealth of information on H1N1 and our ongoing response on the home page of our website. I would like to thank Dr. Jim Welsh, Assistant Vice President for Student Health, and Todd Olson, Vice President of Student Affairs, for their ongoing efforts in this area.
We are currently undertaking searches for an Athletic Director and a new Dean for the School of Foreign Service. I’m very grateful to Dan Porterfield for accepting my request to serve in the role of Interim Athletic Director, as we continue our search. I’m also grateful to Carol Lancaster who has agreed to serve as Interim Dean of the School of Foreign Service. Jim O’Donnell and I have appointed the search committee that will lead our efforts to recruit the next Dean of SFS, and Angela Stent has generously agreed to chair the search committee for the new Dean.
Additionally, I also want to thank Bill Gormley for agreeing to serve as interim dean of GPPI. I will be charging the search committee on Friday to recruit a new Dean of Public Policy. The committee will be chaired by longtime faculty member, and former Dean of Georgetown Law, Robert Pitofsky. This search is important because the person we choose may need to provide leadership in what we hope will be the transition from our Graduate Institute to a new School. And we continue to seek philanthropic support for developing a new School of Public Policy.
This is all good news but, of course, it’s all happening against the backdrop of the nation’s continuing financial crisis. Given this—like last time—I want to focus the bulk of my remarks on our continuing efforts to address the financial crisis.
Specifically, I wish to discuss three things:
• Steps we’ve taken to address the crisis;
• The University’s current financial state;
• And looking forward.
Addressing the Financial Crisis
At the end of last year, we expected that, what’s now being called the Great Recession, would have considerable impact on universities—and Georgetown would not be immune. We took early and strong action, and began to focus particular attention on the effects on giving, financial aid, and endowment income.
The five point strategy that we put together in the depth of the recession—and that I shared with you last January—proved adaptive and responsive to our needs.
This approach continues to guide our efforts, and I’d like to discuss this in greater detail.
First, we remain committed to ensuing access and affordability. To that end, across the University we aggressively limited tuition—with a 2.9% increase in undergraduate tuition, the most modest increase in 37 years. We also increased financial aid by ten million dollars, in order to meet our commitment to undergraduate financial aid, especially as the economic downturn increased financial pressure on many of Georgetown’s families.
Second, we extended the time frame between salary increases for faculty and staff—looking to enact the June 2009 increases six months later in January 2010. Although we had this plan, you know how volatile the financial environment has been…and you all had questions and concerns about our ability to go forward.
I’m happy to say that, thanks to our actions, and an improving macro-economic environment, salary increases effective January 1, 2010 for faculty and staff will go forward, and the salary pool will be 2.5%. We expect to see the next salary increase take effect on January 1, 2011, and then to make a determination about returning to the normal cycle.
Also, at last week’s Board of Director’s meeting, Wayne Davis presented his analysis of our ten year Campus Faculty Salary Plan, and we’ve exceeded the benchmarks at all ranks by more than 10%. Additionally, Jim O’Donnell, Wayne Davis, and Chris Augostini are developing a new faculty salary plan that will help ensure that we remain competitive with our peer institutions—and so enhance our ability to retain and recruit talented faculty.
As to the third point of our strategy, we took a very conservative approach to spending. This resulted in the delay, or in some cases, the halting of capital projects that rely on cash and outside funding sources.
In particular, last year we decided to delay moving forward on construction of the new Science Building due to several factors. These included the continuing work on the Main Campus financial plan – and its ability to absorb the nine million dollars, per year, for operating expenses when the building is completed…and the emerging credit crisis. Since that time, we’ve submitted a grant application for stimulus funds from the federal government to help with construction…and we’ve been seriously pursuing philanthropic dollars for this project. I expect we’ll be in a position to make a decision regarding when to move forward with the construction of the building in the Spring of 2010.
Fourth, while remaining prudent about our expectations for growth in philanthropy during a recession, we placed special emphasis on fundraising gifts that immediately benefited our operations, including support for faculty. FY 2009 proved to be our best fundraising year, ever, for both cash gifts and gift commitments. We raised $186 million in campaign commitments—surpassing our 12 month record by 27%...and we received $182 million in cash—surpassing our 12 month record by 68%. And even without the McDevitt gift—the largest in our University’s history—we still surpassed the prior record for cash  by 10 million.
The only negative is that the trend line for multi-year commitments is down, as donors remain uncertain about the state of their wealth…and the state of the economy.
The Annual fund also raised $25.5 million from nearly 29,000 individual donors. These numbers are down slightly from last year, reflecting the impact of the economic crisis, but are still high by historical standards.
Finally, under the fifth point of our strategy, we reallocated investments to increase liquidity in the endowment…and restructured our debt portfolio to minimize interest costs, and risk, and to stabilize payment plans. In the past, Georgetown had been heavily weighted in auction rate securities. As the crisis hit, however, investors were finding that they could no longer sell their debt, so we moved towards a fixed-rate debt structure. Currently, our debt is 65% percent in fixed rate, a percentage that positions Georgetown very well to manage both risk and opportunity.
Where we are now: Our Current Financial Status
Over the past year, working together to implement these steps as a community—under the leadership of our Chief Financial Officer, Chris Augostini, with our Board of Directors, our faculty leaders and administrators— I’m very happy to tell you that with the audit almost complete for FY 2009, the University’s performance was significantly better than planned.
By the end of FY2009, the endowment was just below $900 million—and as of today, it stands at approximately $940 million, a 15% decline from where it was at its peak. We’ve done as well—or better—than any of our peers. Our performance is in the top quartile of all institutional investors. [Measured by BNY Mellon.]
We were also able to finish an extremely challenging FY2009 with a $12.5 million operating loss—almost all due to the higher costs of debt and debt restructuring. This is less than originally anticipated, and sets the stage to break-even as the economy slowly begins to recover.
Finally, during the past summer, we again went before the rating agencies, and I’m glad to report that, despite the macro-environment, they felt sufficiently comfortable with Georgetown, its management team and student selectivity, to reaffirm our Standard & Poors rating of A- and our Moody’s rating of A3.
The combination of what we undertook, and the signs of increasing stability in our national economy, now allow us to look to the future.
We’ve recently announced that, having been engaged in the quiet, early, phases of our Capital Campaign for the last three years, we plan to move into the public phase in the Campaign next September. To date, we have already raised $525 million in Campaign Commitments.
One key part of the campaign is that it builds upon our 30 year history of combining commitments to need blind admissions and full need financial aid. To continue this tradition into the future, we recently announced our new 1789 Scholarship Imperative. The Imperative will build on the outstanding leadership of Charlie Deacon and Pat McWade, as well as the hundreds of generous and engaged alumni who have given to Georgetown Scholarship Program…and it calls for raising funds which will provide 1,789 scholarships over the next five years. This will allow us to strengthen academic competitiveness while ensuring that the most talented and meritorious students will have access to Georgetown.
Another cornerstone of the campaign will be strengthening our faculty…and as we prepare for the public launch during the next year, our three Executive Vice Presidents, and academic deans, will be working with Jim Langley and me to position all three campuses for investment in faculty and research excellence.
As we look to the future, we know that, although the current economic environment may be improving, there’s still much uncertainty and volatility. To that end, we remain extremely cautious and conservative in our outlook.
Above all, we’ll continue to respond to the lingering effects of the Great Recession by seeking stability for everything we’ve all worked so hard to build over the decades at Georgetown...and by identifying those opportunities to strengthen our university; to fulfill our mission; and to pursue our strategic imperatives.
While we cannot know the manner of financial—or other—challenges that may lie ahead, we recognize that with the exceptional talent that is present in this community…our location in Washington…our global reach…and our extraordinary tradition, there will be remarkable opportunities that will present themselves to us in the future—and we will be fully prepared to meet them…and become an ever stronger and better Georgetown.
Thank you, and now I’d be happy to take any questions you may have…