Lamont Weekly Report, February 6, 2009

Last Friday on the NPR Science Friday web site, the top three video stories, led by Rusty Lotti and Peter Demenocal talking about the Core repository - a great piece, were all Lamont.  Many thanks to Kevin and Kim for engineering all this.

Public visibility for the importance of our science is so important - especially as we are (at this very moment, on this very day) fighting against an amendment to the Federal Stimulus package (put forward by Senators Collins and Nelson) to delete all funding for NSF from the Bill.

The visit by NSF Division Directors Julie Morris and Bob Detrick went very well today, though, not surprisingly, their schedules were extremely hectic. Next Wednesday, Feb 11th, their boss, Tim Killeen, Assistant Director for Geosciences at NSF will be visiting and will be giving a talk in Monell in the afternoon. Perhaps we will know about the Stimulus package by then.

I was forced to miss much of Julie and Bob's visit because of the CU Senate meeting this afternoon - the last agenda item was discussion of our Research Professor initiative. Largely due to the determined leadership of President Bollinger a formal vote was taken - a quorum was present - and... it passed!  The University Senate has formally approved the establishment of Research Professorships at Lamont.  Specifically they have passed a recommendation to the Trustees to amend the University statutes to accommodate this.  The next Trustees meeting is in a couple of months.

I am sure many of you saw the email from President Bollinger talking about the impacts of the financial crisis upon CU - I thought it was important for me to make some comments specifically abut Lamont - I hope the few words below will explain a little about this difficult and uncertain situation. I will continue to keep you informed as best I can as the budget process moves forward.

Have a great weekend,


The Observatory and the Financial Crisis

I think it is time for me to make some remarks about the financial crisis, and its impact on the Observatory. We all read stories of rising unemployment, the failure of major businesses and the major losses that the nation's private University system is suffering as endowments plummet in value. What does this all mean for us?

Before I try to answer this, let me make two things very clear. First, this crisis WILL impact us in significant ways - we will have to make changes in our programs and we will have to make reductions in spending. Second, we are fundamentally strong and healthy and even though we will suffer some short-term pain, the Observatory will come through this difficult time without long-term damage.

The operations of the Observatory are supported (primarily) with three very different 'kinds' of money: the direct grant funding that pays researcher and technician salaries, supports research programs etc., that comes predominantly from NSF or NOAA (generally called Direct Costs); the Indirect Cost Recovery (ICR) or overhead, that is charged on these grants, that supports maintenance of the Campus, and pays for services like accounting, purchasing, security; and lastly, the income from our endowment, the majority of which goes to the Doherty salary plan, but also supports the post doc program, external relations, development, and, importantly, provides me with the small amounts of discretionary funding that I need for making new recruitments.

There are rigid fire-walls between these three different 'money types' - fire walls that are mandated not by LDEO or CU policy, but by federal accounting regulations.  That is, if there is a shortfall in the ICR budget we cannot use Direct Costs to cover it - or vice versa.  The only 'flexible' money we have is the endowment income - within sensible limits, we can spend that on anything we want. Unfortunately, among these three categories our endowment income is by far the smallest pot - less than ten per cent of our total budget (that being the sum of all three - around $53M).

At this time there exists a threat to only one of these three funding sources - and that is the endowment income. Our support from federal agencies remains strong, half way through the fiscal year our ICR income is within 2-3 per cent of our predictions. We see no reason to believe that the agencies from which we receive the majority of our research support (funding our Direct and Indirect costs) will suffer budget reductions. So our problems do not lie on the direct and
indirect costs side of the house. Our problems lie with the endowment income.

The New York Times reported earlier this week that on average across the nation private university endowments have fallen by 23 per cent.  As you saw in President Bollinger's announcement earlier this week, CU has done somewhat better than this.  Generally we are protected from the vagaries of stock market highs and lows because the University has
rigidly (and very sensibly) enforced a set of rules that calculates the payout from the endowment for any one year at a level that is less than the average of the payout from the previous few years.  In this way the capital of the endowment grows slowly and overcomes the impacts of inflation and the magnitude of the payout does not vary wildly from one year to the next. This scheme for calculating the endowment payout is called the 'spending rule'.  This year, in response to the substantial fall in the value of all the university's endowments - Lamont's included - the CU Trustees made the tough
decision (which I believe to be wise, though it is painful) to suspend the spending rules.  Instead, the payout from our endowment in the 09/10 fiscal year will be a fixed percentage less than that we received in the 08/09 fiscal year. In terms of dollars, for the Observatory, this translates into a reduction of close to $500,000 in our endowment income for 09/10.

We do not yet know how we are going to absorb these cuts. Active discussions have taken place at ExCom in recent weeks, and Edie Miller and I are working on a set of scenarios that will be further discussed with ExCom before decisions are made.  Our budget for next year must be submitted to the University in late March so we do not have much time.

Common sense requires that any budget cuts that we make do not impact our research operations.  The ability to continue to grow our research activities, and thus continue to grow our direct and indirect cost income, is fundamental to a healthy future. But we cannot cut $500,000 without there being noticeable impacts.  As we make progress with these tough decisions in the coming weeks I will make sure everyone knows what is going on.

As I said at the beginning, it is not going to be fun, but, compared with most organizations in this world we are in very very good shape.