Thanks to campus-wide efforts over the last three years, Williams has weathered what we hope will be the worst of the financial storm.

The dramatic market downturn that began in 2008 required the college to reduce the amount we draw from our endowment to support annual operations. We cut spending in response. From its peak in 2007-08, our non-payroll spending on operations declined almost 20% by 2010-11, a savings of $9 million per year.

The market rebounded in 2010-11, and the nominal value of the endowment has now returned almost (though not quite) to its early 2007-08 level. (For more on last year’s performance, see the 2012 Williams Investment Report.) But the real value of the endowment, adjusted for inflation, remains nearly the same as it was ten years ago. Over that period, our reliance on the endowment has increased substantially. Each year Williams spends $80,000 per student but the average student pays $30,000. The $50,000 difference, multiplied by 2,000 students, leaves a $100 million annual gap that is closed through endowment earnings and the generous philanthropy of Williams alumni, parents, and friends. Ten years ago the gap was $70 million. Consequently, we now rely on the endowment and gifts to provide 57% of our revenues, in comparison to 52% a decade ago. The college is thus more vulnerable to market fluctuations than ever before, while market volatility is at an all-time high.

In this period of constrained resources, the college remains fully committed to educational quality, affordable access for students from all backgrounds, competitive compensation for our employees, and well-maintained facilities. You can view this year’s expenditures here and spending trends over the past decade here. The college’s audited financial statements are available here.

• In the last ten years we have increased the size of the faculty by 20%, in order to diversify the curriculum and maintain small class sizes.

• Financial aid has increased more rapidly than any other element of the budget, reflecting our principles of admitting students without regard for their ability to pay and meeting every student’s full demonstrated need. The cost of financial aid has grown over the last decade from $16 million to $48 million per year.

• After freezing employee salaries in the worst year of the financial crisis, we have returned to offering competitive raises, in order to attract and retain the most talented faculty and staff.

• Salaries and benefits now account for 63% of college spending, in comparison to 57% ten years ago.

• The capital renewal budget was hardest hit in response to the financial crisis, suffering a cut of nearly 50%. The generally outstanding quality of our facilities enabled us to choose to defer $5 million of maintenance per year, but we must now increase this spending to preserve the quality of our physical assets.

To protect these top priorities — and avoid another round of painful cuts — we are committed to sustaining the spending discipline that all of us at Williams have established over the past three years.