Financial Overview
From Chief Operating Officer Amy Sebring M.P.P. ’95
In stark contrast to the successful completion of our For the Bold campaign, William & Mary started FY21 with a level of uncertainty not faced by the university since the early 1900s. After shifting courses fully to remote delivery modes in spring 2020 in response to the global pandemic, the university started the new fiscal year on July 1, 2020, with a commitment to bring students back to campus in person safely to the extent we were able. During those first few months of FY21, the real unknown as we prepared for the fall 2020 semester was whether we could bring students back successfully and
if not, what the financial ramifications would be for the university given that historically its business model has relied on students being physically on campus.
Our early modeling suggested that we would likely face a budget shortfall between $30 and $100 million — through a combination of revenues being below budgeted levels and expenditures being higher. For an institution with operating revenues near $500 million, the prospects were daunting.
We grappled with how best to protect the core mission, to do so safely, and if possible to do so without laying off employees. In reality, the budget shortfall ended up falling just under $40 million and we were able to effectively close that gap in order to meet William & Mary’s legal obligation as a public institution to finish the year with a balanced budget.
How did we do it? First, we doubled down on the cost containment efforts we began in spring 2020. Across all schools and units, we limited expenditures to core items — saving an estimated total of $17.6 million. Second, we thought critically about how to manage core expenses differently, pushing payments into the future where we could. To that end, we restructured the university’s debt, and deferred expenses to future years, resulting in a net gain of $15.4 million. Third, we received one-time funding and COVID-19 relief support from the commonwealth and federal government along with increased managerial flexibility that closed the rest of the gap. Among all of these efforts, philanthropy remained essential in securing our financial foundation.
We accomplished all of that while also preserving jobs and repurposing staff to support new services that were essential to our success, like COVID-19 testing, contact tracing and case management.
It is also important to note that we did not need to tap into the proceeds from the university’s first independent bond sale last year. Faced with a bleak forecast and high levels of uncertainty in fall 2020, the university issued general revenue pledge bonds to provide us with short-term cash flow if we needed to dramatically scale back operations as a result of the pandemic. We navigated FY21 without having to tap into those funds.
FY21 Overview
At $484.8 million, operating revenues for the university and its affiliated entities remained virtually flat in FY21 compared to the prior year. However, operating expenses were held below prior year levels at
$461.3 million, resulting in a net gain of $23.6 million for the year. In addition, gains in non-operating revenues were substantial. As of June 30, 2021, the market value of W&M’s total endowment was $1.28 billion. Of the endowments held by the university, the 1693 Partners Fund and other components of the consolidated W&M endowment the gains over the prior year were 34% — the largest single year gain in the university’s history — due to significant investment returns.
In FY21, the university completed three projects: the Reveley Garden, repairs at One Tribe Place and improvements to the W&M Law School patio. Construction continued on the Fine & Performing Arts, Phases I and II, the Sadler West Addition, Hearth: Memorial to the Enslaved and the Swem Library Side Deck. Once fully completed, we anticipate the Commonwealth of Virginia will have provided $132.4 million in state general fund support for Fine & Performing Arts project. The project is on schedule to be completed in late calendar year 2022. The projects have been supported through a mix of university funds and the generosity of donors. We expect the Swem Library project will be completed in late calendar year 2021, with the memorial following in spring 2022 and the Sadler West Addition opening in advance of the start of the 2022-23 academic year. What’s more, on the Virginia Institute of Marine Science campuses, project planning and construction is underway for a new research facility to replace Chesapeake Bay Hall, the Eastern Shore Laboratory Complex and a new state-of-the-art oyster hatchery.
*Naming opportunities are still available.
Positioning Ourselves for the Future
Although uncertainty remains as we continue to battle variants of COVID-19, the university ended FY21 on strong financial footing. In September 2021, the Board of Visitors took action to establish a $60 million quasi-endowment from the general revenue bond sale last fall. In doing so, the university will be able to invest those funds in a manner that provides income to cover the incremental debt service payments without pushing those costs on future students and while also potentially creating a long-term source of new annual income to support university priorities.
The president mentioned that in the coming months the university will launch Vision 2026 with specific actions and initiatives that will allow us to expand W&M’s reach, educate for impact and evolve to excel. Over the last year, we learned a great deal about our community’s tenacity and heart. We also realize that the work ahead will be challenging. The needs of our students and the expectations of our faculty and staff will be different. As we look to expand our reach, we know that W&M can and must be a leader in finding solutions to the most pressing issues facing the commonwealth, the nation and the world. We know that increasing access to a W&M education is more critical than ever for exceptional students facing financial burdens. We also know that excellence is an ever evolving goal and that we must evolve in ways to ensure our margin of excellence.
Shepherding Our Resources
As we transition past the crisis of a pandemic into new modes of learning, research and work, we recognize that it is more critical than ever that we are good stewards of current and future resources. FY21 reinforced the importance of all private support to the success of William & Mary, including restricted expendable, unrestricted expendable and endowed funds. For example, restricted expendable funds are the driving force behind the planning and design of two important capital projects: the W&M Athletics Complex, which includes the revitalization of Kaplan Arena and establishment of a new Sports Performance Center; and the renovation and construction of The Martha Wren Briggs Center for the Visual Arts — the home of the Muscarelle Museum of Art. We continue to fundraise for these projects and rely on the support of donors to ensure completion of both projects.
The growth in scholarships support has strengthened the university’s ability to attract and retain students who would otherwise not be afforded the opportunity to attend W&M. After more than a year of pandemic, we see those needs in our current and prospective students even more acutely. And, although often the unsung hero, unrestricted expendable funds — or immediate-use funds — go to support strategic needs of the university, including our ability to sustain and increase philanthropic giving at William & Mary. Finally, shrewd management of our endowments allows us to build income that supports our educational mission and enables us to convene great minds and hearts to meet the most pressing needs of our time.
Above all else, we recognize the importance of every single person in our community to go All In to ensure the financial health of our entire academic and athletics enterprise. With private support representing 13% of the university’s operating budget, we are enormously grateful for the continued generosity of all our donors.
Amy Sebring M.P.P. ’95
Chief Operating Officer
