NEW YORK: General Theological Seminary Faces Financial Crisis

July 7, 2008

Ward B. Ewing, dean and president of The General Theological Seminary, has issued an open letter to the school's constituencies and the Episcopal Church at large on the current state of affairs at the seminary.

The 2500-word letter outlines the seminary's financial condition citing specific figures, summarizes the school's fundraising and marketing activities, and describes new initiatives such as the seminary's conference center and the progress made in heating and cooling the campus using renewable energy.

Setting the seminary's current situation within a "time of church-wide concern about the landscape of theological education," Dean Ewing describes General's challenges with candor, but says he is optimistic about the institution's future. The letter was sent to seminary trustees in an email on July 2 and was subsequently sent to faculty, students, and staff. The letter is also being mailed to donors and alumni/ae. A landmark in the Chelsea district of Manhattan since 1822, General is the Episcopal Church's oldest seminary.

Dean Ewing recently celebrated his 10th anniversary as dean and president. The complete text of his letter follows and is available in the Newsroom section of the GTS website at www.gts.edu.

An Open Letter to General Seminary's Faculty, Staff, Students, Friends, Alumni/ae, and the Church at large

from Dean Ward B. Ewing

In recent months, as many of you are aware, three of our Episcopal seminaries have undergone profound and historic changes, including the outright sale of property, radical downsizing of faculty and the suspension of core degree programs. The reasons are particular to each institution, but seminaries of virtually all denominations face similar challenges. Chief among these are increased fixed costs, over-reliance on a limited endowment, deferred maintenance, a decline in denominational support, and a decline in the ability of students to commit to a three-year residential program. Periodicals such as The Christian Century, In Trust, and The Living Church have all published articles on the serious problems seminaries are facing. I felt it was important in this time of church-wide concern regarding the landscape of theological education to summarize where General Seminary stands today as an institution committed to providing leaders for the church in a changing world. I will state at the outset my belief that the challenges which face us, while serious, are not insurmountable. The immediate future of General Seminary is not imperiled. Decisive action, however, is not simply called for but demanded. At our May board meeting, the trustees of GTS committed to a three-year plan to address the challenges the Seminary now faces. Let me begin by summarizing the challenges, then the plan.

The Seminary's Financial Condition

For most of the current decade, the Seminary's annual expense budget has held steady at around $8 million per year with annual revenue of just about $5 million. The difference is made up by withdrawing funds from the Seminary's endowment. (This is known as "the draw." Most schools, including seminaries, rely on the annual draw to fund programs). The majority of the withdrawn funds are designated for certain purposes such as scholarships and faculty positions, and they support the budgets of those areas. Our endowment of $20 million is too small to fund everything we need to do and it would be wrong to spend it down further. Over the past ten years, GTS has significantly reduced the draw, but not yet to the generally accepted level of 5% of the total endowment. We have contained spending-the proposed budget for fiscal year 2009 is less than actual spending in fiscal year 2003-but with spiraling increases in insurance and utility costs each year, it is clear that additional measures to contain costs are needed. Clearly, increasing revenue is the key to a thriving future, and toward that end this year we have set aside about 10% of our Seminary apartments for market rate rentals. To increase our program income we commissioned an extensive market research study (funded by special grants as discussed below). The study demonstrated that there is very sizable demand in the metropolitan New York area for programs on religion, faith, and spirituality, especially for part-time students. Early implementation of the findings has resulted in an increase in the incoming class for this fall above what we expected in May. Working with a committee of trustees, we are completing a 3-year plan to increase annual revenue significantly. This in turn will enable us to invest in our academic programs, as I discuss below.

A decade ago two facts were clear. Our property was our greatest financial asset­­--which we would need to leverage to improve our fiscal situation--but it was also our greatest liability in that we faced a rapidly deteriorating plant with over $100 million in deferred maintenance. This decades-old deferred maintenance was urgent and could no longer be delayed. After attempts to share space with other church agencies were exhausted, we decided to fund a portion of these investments using the proceeds of a ground lease of our Ninth Avenue property (which ultimately yielded $34 million). The other sources of funding were to be the capital campaign and debt. Unfortunately, community opposition to our Ninth Avenue project resulted in a building that was less than half the size of what we had proposed, resulting in a loss of about $10 million in anticipated revenue. There has also been a 10% cost overrun in the over $64 million of capital improvements that we are now completing. We will borrow additional funds to cover the shortfall. In total, GTS will have borrowed $30 million against assets of almost $200 million. The debt will be serviced by the proceeds from the Tutu Center, rental properties, and eventually $500,000 per year in savings from the conversion to geothermal heating and cooling.

The Redevelopment of Chelsea Square

Over the past ten years we have sealed the critical outer "envelope" of 9 of our 17 historic buildings-without which many would have become uninhabitable. We have completed full-scale remodeling of six of our historic buildings. Our resident community has accepted the disruptions of construction with great fortitude, and visitors have shown a generous willingness to accept inconveniences. One key result is that this work reduced annual expenditures on facilities, from 40% of our budget in 1999 to 23% in 2008. By creating the Desmond Tutu Center out of three deteriorated buildings, we have turned a liability into an asset that enhances the Seminary's educational mission. By introducing geothermal heating and cooling to the Close, we are also responding to General Convention's call to promote a sustainable global environment by eliminating our dependence on fossil fuel once the effort is complete. This is the largest geothermal project in the Northeast, and we are fast becoming a model "green" institution for the Episcopal Church and others.

The Seminary has also invested in its technology infrastructure by dramatically increasing the capacity of its local area network to create campus-wide accessibility both wired and wireless. This summer, network security was significantly enhanced to make access easier and to reduce the influx of spam. All of the major business applications were upgraded this past year and an overhaul of the website is underway and will debut this fall. The new website and Internet portals will enable faculty, students, alumni/ae and staff to participate in an online GTS social network. In recognition of the widespread use of multi-media in presentations and the classroom, two conference rooms, four break-out rooms in the Tutu Center and the refectory were enhanced with new a/v systems. Creating a new library for GTS and preserving our historic collection is a major task that remains before us. A team of experts has been enlisted to advise our trustees and assist our staff in determining the Seminary's actual needs and how they can best be fulfilled.

Advancement and Capital Campaign

The recent Leaders for the Church campaign raised $19.2 million, exceeding our goal by $4 million and raising twice as much as the Seminary's last campaign. After a late June flurry of gifts, most LFC pledgers have made their final payments: over 90% of pledge dollars have now been collected. The campaign provided $5.1 million for the new Desmond Tutu Center and other capital projects, $7 million for our endowment, and $7.1 million for the Annual Fund. The success of this campaign represents the confidence of our constituents in the future of this institution. Many needs remain, however, including the renovation of the West Building and the Chapel of the Good Shepherd. We also need to seek new endowments for faculty chairs and scholarships. Each of these components is crucial: the annual fund, capital projects, and the endowment. They all affect the annual operating budget directly.

We are currently in the early planning stages for the next capital campaign, and the annual fund is the primary building block. The annual fund supports our core activities as a seminary: teaching and learning. It consists of all gifts not earmarked for special purposes and is a critical third source of income for the Seminary, the other sources being our endowment and the revenues received as tuition and fees and room and board. At $900,000, the Annual Fund covers 11% of expenses each year. Our goal is to increase it to $1,000,000 in fiscal year 2009, with further increases in 2010, and 2011. These are challenging goals. To achieve them will require the help of alumni/ae, parishes, and friends. In light of developments at three of our sister Episcopal seminaries this spring, we want to make sure that all of you know that the time to help General Seminary is now.

The Desmond Tutu Center

Opened in September of 2007, the Desmond Tutu Center is an educational facility with sixty guestrooms created by the repurposing of three historic buildings. There are two large conference spaces and four seminar rooms, which, together with our refectory and 60 new guest rooms, allow the Seminary to respond to the educational needs of today's church with short term programs, workshops, and conferences. Utilizing the Tutu Center, GTS can dramatically expand its offerings to those who wish to study issues related to theology, Christian Spirituality, and other traditional subjects, as well as humanitarian causes such as peace, reconciliation, and social justice, but who do not wish to enroll in a degree program. Three major conferences at the Center this past year-on global peace and reconciliation, the Anglican covenant, and the relationship between church and politics-drew participants from around the world. When not used for GTS events, the Center brings together other church-related and non-profit groups for inter-disciplinary dialogue on reconciliation, peace-building, and social justice, with the aim to bridge theory and practice. Average occupancy to date exceeds 75% and revenues have exceeded projections resulting in a positive cash flow to GTS in just the first year of operation, 22 months ahead of what was scheduled in the business plan.

The Center for Peace and Reconciliation is a GTS-program that will offer short courses, conferences, workshops, and seminars in the Tutu Center. Key to the development of these programs will be the hiring of a director of the Center who will also serve as Professor of Church and Society in the Rt. Rev. Herbert Thompson Chair. The search for this uniquely demanding position began with the creation of a task force that refined the job description and established the formal search process. A small pool of qualified candidates has been identified, and the search process is continuing.

Faculty and Staff Transitions

In addition to the Professor of Church and Society, a search for the H. Boone Porter Professor of Liturgics will be launched in the fall of 2008. Both of these chairs are funded through restricted endowments. In particular, I am very pleased to announce that the estate of Professor Emeritus Thomas J. Talley has added nearly $700,000 to the value of the Porter Chair, enabling the Seminary to fund the position almost in full from the restricted endowment. In the fall of 2009 a search will commence for the John Henry Hobart Chair in Christian Ethics. The addition of these full-time faculty positions affirms the Seminary's commitment to academic rigor, especially in the hallmark fields of liturgics and ethics.

Given the economic realities outlined earlier, the Seminary will be downsizing its staff and part-time faculty by at least seven positions. For the most part, these reductions will be achieved by attrition and retirements. As part of implementing this policy, I regret that the Seminary is no longer able to afford to have a full-time Sub-Dean, a position currently held by the Rev. Dr. Titus Presler. Sub-Dean Presler has made valuable enhancements to the Seminary's program in his time here, and we thank him for the many achievements of his tenure. Our plan had been to have this new administrative position supported by revenue from new academic programs, but it is now clear that we need to return to our tradition of appointing existing tenured faculty to serve as Sub-Dean. I expect to announce soon who the interim Sub-Dean will be in the fall semester.

Market Research and Strategic Planning

In spring 2007, a professional research organization, Insight Research Group, began the first of three phases of a study of the Seminary's educational programs and its relationship with students, prospective students, alumni/ae, benefactors, bishops and others in authority in the Episcopal Church. The first phase consisted of a series of focus groups geared toward students not seeking ordination. Phase two asked for the views of those who were seeking ordination. A total of more than 100 people participated in these focus groups, which provided very helpful perspectives on the strengths of the Seminary's programs and shed light on areas where the Seminary can both improve its existing service to the church and introduce new programs that would serve unmet needs in spiritual and religious study.

Phase three consisted of an online survey of three groups: New York metro area residents, Christians nationwide, and alumni/ae. Just as in the focus groups, the respondents appreciated GTS' traditional emphasis on academic rigor and formation in community through worship. However, respondents also felt that GTS should offer courses and workshops that addressed more contemporary religious and educational needs. The researchers identified this dichotomy as one between two highly valued qualities: timelessness and timeliness. The Seminary will seek to develop new programs and enhance its existing ones in a way that incorporates these findings. The study was funded entirely by several trustees and three foundations, all of which were associated with GTS alumni/ae. There will be a major presentation of the results on Friday morning, October 17, 2008 at the Tutu Center as part of Alumni/ae Days.

General's Third Century

In nine short years, General Seminary will enter its third century of service. I hope this summary of the present "state of the Seminary" has been helpful to you. We face major financial and programmatic challenges. We must respond to the changing needs for theological education that come as our world and our church change. If you wish to respond to what you have read here, please use the enclosed envelope for questions, comments and suggestions. General Seminary in 2017 will be a very different institution than stood here in 1917 and unrecognizable from the quiet apple orchard that occupied this spot a century earlier, when GTS was founded and our nation itself was less than fifty years old. One thing remains unchanged and that is the dedication of the teachers and learners who have been a part of this place, and their steadfast determination to serve the needs of the church in their own day. Great strides have been made at GTS in recent years, but many challenges remain. We all have a role to play in this important enterprise. I am grateful especially for the hard work of our staff and faculty, the steadfastness of our students, and the deep engagement of our trustees and Alumni/ae Executive Committee. The role that we play in assuring the health and vitality of GTS demands the very best we have to give. Thank you for your support and prayers.

Faithfully,

Ward B. Ewing
Dean and President