As we look back on the first semester of this academic year, it is difficult to describe how different the world now looks -- from a financial perspective -- than it did in early September. The recent turmoil experienced by financial markets throughout the world has dramatically illustrated our global interconnectedness -- even as we ponder what impact the current financial crisis will have on our own futures.

A number of colleges and universities have recently announced plans to reduce expenses through cost-saving measures that include freezing budgets, salaries, and hiring, and postponing planned capital projects. These measures have been made to counter dramatic endowment losses that have severely impacted the funding of their operating budgets.

Providence College -- a relatively young institution at less than 100 years old -- has a modest endowment compared to its cohort schools and other prominent liberal arts institutions. Our endowment funds are well-diversified and wisely managed. Though no sector has escaped the financial downturn, our sound investment strategy has minimized our losses. While other colleges have reported losses as high as 40-50%, our endowment has declined over the past 14 months by approximately 25% or $40 million. At this writing, the endowment stands at approximately $120 million.

Unlike many other colleges and universities, Providence College does not draw upon its endowment to support day-to-day operations. Use of endowment funds is restricted either for donor-directed purposes or for non-recurring, one-time capital projects. We also adhere to conservative budgeting practices; for example, we fully fund deferred maintenance to ensure that needed repairs and improvements to the campus infrastructure are made on an annual basis. This approach has enabled us to maintain a moderate level of debt.

While Providence College is not as endowment dependent as our cohort schools, it is more tuition dependent. More than 80% of the College's annual operating budget is derived from tuition income. With this income model, any negative change in the tuition base would adversely impact both our current students and our operating budget. That is why we are carefully monitoring a number of key economic indicators in the areas of student enrollment and retention, financial aid, and fundraising that we believe will alert us to any emerging problems.

At this very early juncture, our admission activity is encouraging, with applications for September 2009 ahead of last year. Retention rates for current PC students -- a performance outcome I am proud to point out is among the highest in the nation -- remained stable throughout the fall semester. We also are monitoring delinquent student accounts and increases in the average outstanding balances on tuition, room, and board payments. To date, most of these indicators are not reflecting unusual student financial distress.

However, one indicator we are watching very closely is the number of appeals for additional financial aid. In the first five months of the current fiscal year, the College has already received 77% of the total number of appeals we received during the previous year.

The most critical indicator we are watching is the number of current students who decide they must withdraw from the College for the second semester because they and their families are having difficulty finding funds to continue their education here. Given our mission as a Catholic and Dominican institution, we are committed to helping current students in unanticipated family financial distress complete their studies at Providence College.

In response to the financial exigencies of this unusual time, we are carefully monitoring our current operating budget. As we finalize the budget for the coming 2009-10 academic year, we will redouble efforts to identify cost efficiencies and concentrate spending priorities on critical strategic goals that promote student formation and advance academic excellence. While a slowing economy may impact the pace of implementing certain strategic initiatives, those deemed critical to support student development will stay on track. As is our standard practice, all short and long-term financial planning, as well as decisions on tuition, room and board, construction, and new programs, will be made in conjunction with our board of trustees. I will communicate to you in the New Year regarding any additional actions we plan to take. 

The current uncertainty and financial anxiety come at a season of the year when we reflect on God's loving providence in human history and in our own lives. More than ever before, we need to believe that our future lies in God's powerful hands, and take to heart the words of comfort from the prophet Isaiah in the beautiful reading of the Second Sunday of Advent: Here comes with power the Lord God, who rules by his strong arm… Like a shepherd he feeds his flock; in his arms he gathers the lambs, carrying them in his bosom, and leading the ewes with care. Trusting in God's grace, the generosity of our donors, and our own financial vigilance, let us all work together to ensure that Providence College's future is as bright as her past. May God bless you and your family with the peace heralded by the angels at the birth of Christ in this holiday season.
 
Rev. Brian J. Shanley, O.P.