As you may know, our endowment provides nearly 70% of the annual income for our operating budget. This means that changes in market conditions can have a direct and significant impact upon our annual budget. Our investment advisors are projecting lower market returns in the coming years that could compromise our long-term financial health if we do not make significant changes now in the amount we spend each year from the endowment’s income (called the “endowment draw”).

4/5/17

Dear Seminary Community,

For more than two hundred years, Princeton Theological Seminary has been dedicated to the mission of educating Christian leaders for ministry in the church and in the world. In every generation, the Seminary has had to adapt in various ways in order to most faithfully serve this mission in the present time and place.

Our generation must also consider how the Seminary can best serve its sacred mission in our day, while ensuring its health and vitality for generations to come. This is the goal of any long-range planning process, and several groups have been hard at work in the last year to consider how to improve our residential model of student formation so that it embodies a covenantal community that is grounded in Christian practice. The Mission Driven Task Force has been studying ways to promote a community life that offers a more transformative experience for our students, and a campus master planning group has been evaluating how our facilities can better serve our mission. Both of these groups have heard clearly from students, staff, faculty, and alumni that a sense of community is a primary value of life at PTS. Yet there are many ways that we can deepen this aspect of our life together so that the covenantal community will flourish. We would benefit from upgraded facilities and more spaces that foster community interaction. Some of our aging buildings like the Mackay Center, for example, no longer serve the needs for which they were intended.

At the same time, the Seminary is facing certain financial realities that require careful planning and prudent stewardship. We must realize our aspirations for deepening community life and renovating our facilities in a way that does not jeopardize the long-term financial health of the Seminary.

As you may know, our endowment provides nearly 70% of the annual income for our operating budget. This means that changes in market conditions can have a direct and significant impact upon our annual budget. Our investment advisors are projecting lower market returns in the coming years that could compromise our long-term financial health if we do not make significant changes now in the amount we spend each year from the endowment’s income (called the “endowment draw”). The board of trustees has set a goal to reduce over several years the rate of the endowment draw from our present level of 4.89% to no more than 3.6%, which is equivalent to a reduction of $13 million each year from our current annual operating budget of $50 million. This is a particularly challenging goal since we are already spending one percent of the draw paying for construction debt.

We must be faithful to our mission while addressing both our financial realities and our aspirations for enriching community life. Part of the solution will come through our enhanced fundraising efforts as we invite others to participate in our mission. But even the most ambitious fundraising campaign cannot resolve this problem. It will also require an appetite for courageous change.

At their January meeting, the board of trustees endorsed studying a proposal to address this reality. The contours of this proposal are as follows:

• Implement a comprehensive campus master plan that unifies living and learning spaces on one campus in Princeton
  • Build apartments for married and single students on the main campus
  • Renovate Hodge Hall and Brown Hall to include private bathrooms
  • Replace or renovate the Mackay Center to create a true campus center
  • Renovate Alexander Hall as an intellectual commons, including office space for the entire faculty and some administrative departments
• Monetize the CRW and Witherspoon apartments, while retaining the Tennent-Roberts campus, in order to finance other campus improvements and reduce the endowment draw
• Reduce the size of the student body by 30 – 40% for a period of 8-10 years

This proposal will also have implications for the size of our workforce. We believe that downsizing would be accomplished over the next several years through normal attrition and by reconfiguring jobs to support the mission more faithfully. In other words, extensive layoffs are not part of this plan.

In the coming months, we will be studying the feasibility of this proposal. Implementing this proposal would have implications for every aspect of our operation, and the board has asked the administration to assess these implications from every angle. It is also important to remember that implementing this proposal would take many years. Any potential long-term lease of CRW, for example, is not likely to affect current students.

While the scale of the proposed changes may seem surprising, we have come to realize that only such bold solutions will enable us to ensure the seminary’s future financial stability while at the same time enhance our mission in the present. I believe it also offers some exciting opportunities to realize a vision of covenantal community. For example, it would be a blessing if we no longer divided our community between married and single students on two different campuses. A smaller student body would allow us to shape the composition of each entering class with greater intentionality for diversity in its manifold forms, including race, gender, and denomination. Renovated dormitory facilities and new apartments on the main campus would provide more modern living spaces that better enhance our residential experience. Common office space for faculty would facilitate a sense of scholarly community, and we could redesign Mackay to create a welcoming space more conducive to building relationships among students, faculty, and staff.

There will be several opportunities for you to learn more about this proposal and to offer your feedback in the weeks and months to come. We will soon announce several listening sessions for faculty, staff, and students, and you can also submit comments to: [email protected]. I want to emphasize that this proposal needs a lot of work before we are certain of its viability, and we welcome your feedback in that process.

As we consider these opportunities before us, I pray that we will remain faithful to our mission and to the God who has called us to this work.

Faithfully,
Craig Barnes President