November 2, 2009

Dear alumni, parents, and friends,

For most of us, here at home and around the world, it’s been quite a year. Record declines in global financial markets. Massive unemployment. Collapsing housing markets. Ballooning mortgage defaults. Government bailouts of Wall Street and Detroit. Stimulus packages. Mushrooming government debt.

Economic downturns have a way of focusing one’s attention. In particular, they force tradeoffs that nobody wants to make. I’m reminded of that old stalwart of Economics 101: guns or butter. Which will it be?

In debates about higher education, the counterparts of guns and butter seem to be quality and access. Quality includes investments in faculty, research, and academic facilities, so as to improve the academic program. Access means investments in financial aid and ongoing support of students outside the classroom, so as to attract and retain an academically gifted and diverse student body.

In recent decades, fed by fatter endowments, increased donations, and growing applications, educational institutions have been able to invest in both quality and access simultaneously. Reed has been no exception. For example, during the past decade we were able to make the following quality investments:

• We increased the size of the faculty (in full-time equivalents) by 18%, resulting in the expansion of 15 of Reed’s 24 academic departments.
• Through new construction and renovation, we expanded space devoted to the educational program by over 50,000 square feet.
• We increased the volumes held in the library by 30% and, through membership in a consortium of Northwest libraries, provided 24-hour access to some 22 million volumes.
• We tripled direct institutional support for faculty and student research, helping to produce an impressive increase in numbers of publications, papers presented, and professional meetings attended.

Over the same period, Reed made the following investments in access:

• We increased expenditures on financial aid by 115% (from $7.7 million to $16.6 million), pushing up financial aid’s share of the operating budget by six percentage points (from 22% to 28%).
• We increased the percentage of the student body receiving financial aid from 49% to 52%.
• We increased the stock of on-campus housing by 29% (from 744 beds to 961 beds).
• We significantly expanded services to students in the areas of health and counseling, sports and extracurricular activities, and academic advising.

By all accounts, these investments are paying off handsomely. As an illustration, over the past decade we have seen the following changes:

• The total number of applicants for admission to Reed has doubled (from 1,716 to 3,485).
• The academic abilities of our students have steadily increased. As one indicator, the average composite SAT score of the entering class improved by 38 points (from 1343 to 1381). The best evidence, however, comes from the reported observations of the teaching faculty, particularly those who teach Hum 110 and thus have an ideal perspective on the academic abilities of successive incoming classes.
• The student body has become more diverse. In the entering class, the percentage of U.S. students who are self-reported members of minority groups more than doubled (from 12% to 26%), and the percentage of foreign students has also doubled.
• Retention has steadily improved. The four-year graduation rate has increased from 47% to 59%; the six-year graduation rate has increased from 65% to 77%.

Can this progress continue? Events of the past year have sorely tested the ability of every educational institution—including Reed—to maintain the guns and butter strategy that has produced results like these. Last year, across the entire sector, endowments tumbled, charitable giving dropped, and demand for financial aid shot up.

Reed’s experience during the past fiscal year has been relatively typical in some respects. For example, the investment performance of our endowment was down 22.7%, overall cash gifts for all purposes fell, and demand for financial aid, from both continuing students and qualified applicants, swelled. In other respects, however, Reed swam against the tide: Annual Fund receipts increased by 10%, and the Centennial Campaign made impressive progress, thanks especially to an $18 million bequest from author David Eddings ’54.

In the midst of recent financial pressures, I have been both challenged and heartened by the ambitious aspirations of faculty, students, alumni, parents, and friends, as voiced in the gatherings that launched our centennial last year. These aspirations include reaching a 10:1 student-faculty ratio with lower enrollments and a larger faculty; becoming fully need-blind in admission; and constructing a new building for the dance, music, and theatre departments.

I am confident that these aspirations will eventually be realized, but they must be achieved in a way that preserves and strengthens the college’s long-term character. Above all, educational institutions like Reed need stability. We need to provide a consistent level of service and support to each student over a four-year course of study. We must honor the long-term commitments to faculty, staff, and the campus on which our very identity rests. In order to maintain stability during times of economic turmoil, we must maintain a mutually reinforcing balance between quality and access, so that we continue to offer an education that nurtures independence and creativity to a group of students most able to take full advantage of that opportunity regardless of financial circumstances. Our job right now is to ensure that we can provide access at least at the current level, while also ensuring that we can also maintain quality at least at the current level—all the while, looking for opportunities as they present themselves to strengthen both.

This is why the recently announced Centennial Campaign is so crucial to the college’s well-being. The Centennial Campaign seeks to raise funds to support and enhance both quality and access in a balanced way. And it seeks to do that primarily by building up the college’s long-term assets. Those assets include the endowment and the physical plant. But they also include what I sometimes call the college’s human endowment—that is, the cadre of supporters who provide not only financial resources but also a wide array of volunteer services to the college. Our human endowment has helped us to tell our story, through the oral history project, and to preserve our natural endowment, through assistance in canyon restoration. That human endowment helps screen applicants for admission and counsels current students on occupational and career opportunities. And that human endowment defends Reed, we hope, in the court of public opinion.

So I start my eighth year as Reed’s president, and Reed starts its 99th year of operation, with a sober awareness of our challenges, but also an undiminished sense of our opportunities. I hope you will join us in helping to navigate the challenges and grasp the opportunities.

Sincerely,

Colin S. Diver
President