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Must We Have Layoffs?

The head of the Association of Alumni, John Mathias, put forward the notion the other day in the D that the College does not need employee layoffs to extricate itself from its financial difficulties. He said, “I certainly do not favor laying off people as the answer — [it is] very simplistic and not at all correct.”

We can set aside the idea of mannered correctness. But let’s simply ask: are layoffs necessary? Below is my abbreviated transcription of the College’s Statement of Operating Expenses for Fiscal 2009 (Page 4 of the Audited Financial Statement). We need to find $100M in savings somewhere in these spending figures in order to meet President Kim’s budget targets. These cuts amount to 13.6% of the budget.

Dart 2009 Operating ExpensesI.jpg

First off, we can see that about 10% of the budget is non-compressible. President Kim has affirmed that we won’t touch Fellowships and Student Support as a matter of policy. Depreciation is a non-cash expense (the accounting of past expenditures on assets that wear out over time), so we can’t save anything there. And unless our lenders are willing to forego payments of interest and principal (ha!), there is nothing we can do about Interest and Amortization.

Utilities, Taxes and Occupancy might be the source of some savings. Of course, we can’t change our taxes, but limited savings are possible in utilities — though the College has been making progress on energy efficiency since at least the oil crisis of the 1970’s. Closing Dartmouth between Thanksgiving and New Year’s would save some money, but let’s not get too optimistic; you can’t turn the heat completely off in a building when it is unoccupied.

If we try to follow Mr. Mathias’ advice and avoid being simplistic, we must leave Salaries and Wages and Employee Benefits untouched. But those categories constitute almost 60% of the College’s total annual expenses. So how much spending does that decision leave us to work with?

In fiscal 2009, the sum total of the four remaining cost categories — a) Materials, Equipment, and Supplies; b) Purchased Services; c) Lodging, Travel, and Similar Items; and d) Other Expenses — which are the only non-layoff budget items where savings of consequence are possible, was only $180.9 million. Do you think that we can find almost $100 million of saving in these areas? Not a chance.

Mr. Mathias seems unaware that President Kim has said in his three public budget meetings that we need deep cuts in personnel in order to get the College’s budget in order. Denying the need for cuts, as Mr. Mathias has done, is the sort of out-of-touchy-feely attitude that got us into the present fix.

Note: I believe that Mr. Mathias’ above comments mark the first time that he has publicly criticized a Dartmouth President. While his new-found intellectual independence is admirable, it is sad that he is self-evidently wrong on this particular issue. Dr. Kim is many things, but he is not being simplistic in developing realistic solutions for returning the College to fiscal health.

Okay, Okay. I know that Mr. Mathias intended to call me simplistic in the D article and not President Kim, but isn’t it amusing to use a litigator’s trick on Attorney Mathias. And besides, given that President Kim and I have taken an identical position on the issue of personnel cuts, to criticize my position on this matter is to criticize President Kim as well.

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