Dear Members of the Campus Community:

As I write this letter, there’s a feeling of hope and optimism that is spreading over our country, carried on the shoulders of our new president. The belief that change is overdue is more than an ideological issue to many of you. I understand your concerns.

To our students and their families, I realize that you may be worried about how current economic conditions will affect your ability to pay for tuition and room and board. You may be worried about career prospects after graduation in a country where 11 million people are currently unemployed.

And to our faculty, staff, administrators and alumni, I know these issues are just as real to you. You, too, are concerned for our students’ welfare, the welfare of your friends and family and the welfare of this university.

I wish I could tell you that Bloomsburg University and our 13 sister institutions in the Pennsylvania State System of Higher Education (PASSHE) have been untouched by current events. Unfortunately, that is not the case. Gov. Ed Rendell asked PASSHE to return $22 million of state funding to address an expected budget shortfall during the current fiscal year. The $22 million is equal to 4.25 percent of the nearly $520 million PASSHE expected to receive and, for BU, it equals $1.6 million from our budget allocation. I want to assure you that we are doing everything possible to minimize the impact of these budget cuts on our mission of teaching and learning.

PASSHE also directed that 128 management positions remain vacant during fiscal year 2008-09 and froze the salaries of non-union employees. At BU, six vacant positions will not be filled right now, including the dean of the College of Business, the Web and portal manager, director of library services and director of planning and assessment. The good news is that we do not anticipate any layoffs.

We will move forward with hiring a vice president for advancement, a critical, revenue-generating position in this time of economic uncertainty. Scholarships remain our top priority, and this new vice president will have the primary responsibility of bringing in the external funds necessary to grow scholarships and provide support for research, equipment and improved facilities. I encourage all of our students to learn more about available scholarships at the financial aid Web site, http://departments.bloomu.edu/finaid/ , and submit applications by the Feb. 6 deadline. And I remind our alumni and friends of the vital importance of scholarships and ask you to continue to support BU’s tradition of excellence.

We also are moving forward with renovations to Bakeless Center for the Humanities and Nelson Field House. Both projects were approved and funded by the Commonwealth before the recent turn of events. We are proceeding, as well, with the renovation of the original portion of Hartline Science Center, which is being funded with reserves saved over several years and maintenance funds we receive from the state. When completed, these renovation projects will enhance our students’ experiences at BU and, just as important in the near term, they will provide and preserve current jobs in related construction fields. I’m happy to report that the bid on the Nelson Field House renovation project came in more than 20 percent less than budgeted which, we hope, will free funds for other campus construction projects. It also is possible that the federal economic enhancement package will replace some or all of the funding for these capital projects.

We also may be able to renovate Sutliff Hall earlier than anticipated. If, as expected, Governor Rendell releases funds to encourage local economic development and create jobs, we will be able to improve facilities for students enrolled in the College of Business in the near future. We expect to hear soon whether we may move forward with this project.

Other upcoming construction projects will provide far-reaching financial savings. For example, facilities projects completed under the Guaranteed Energy Savings Agreement are expected to save about $100,000 per year through increased energy efficiency. These projects include replacing two coal boilers in the steam plant with a biomass boiler and a natural gas boiler, upgrading the heating and air conditioning systems in Carver Hall and Scranton Commons and installing energy-efficient lighting across campus. We arrive at the expected savings of $100,000 by comparing the cost of energy-efficient renovations and the energy savings with the cost of making only routine repairs.

We continue to move forward to meet the campus’ technology needs, constantly providing the most current infrastructure, equipment and software possible. Ever-changing technology becomes more ingrained in our lives each day, not only on our campus but also in our society. We know we cannot cut back in this area that is so integral to learning and communication.

Over the past five years, PASSHE’s overall tuition and required fee increases have been the lowest among all public college and university systems in the United States, according to the Washington Higher Education Coordinating Board. A report issued by the College Board indicates that the average total cost of attending a PASSHE university – including tuition, fees, room and board – is $539 below the national average and $2,459 below the average charged by other four-year public colleges and universities in the Middle Atlantic region. I am confident the PASSHE Board of Governors will be cognizant of existing financial constraints when tuition is set in July for 2009-2010.

While the issues facing us are complex, I know our campus community will continue to flourish. We will build on our strong reputation of excellence that, each year, draws more applicants from nearby communities, around the region and around the world. We will find creative solutions to today’s challenges. As President Obama said in his inauguration speech, “Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America — they will be met.” We will certainly be successful in meeting the challenges we face at Bloomsburg University.

I thank you all for your commitment to Bloomsburg University.  Your continuing dedication and support means so much to the university and to our students.  I welcome your comments, suggestions and ideas as we move forward together. Please feel free to contact me at president@bloomu.edu. 

View a video synopsis at http://www.youtube.com/user/BUTVCH8.

Sincerely,

David L. Soltz

President

Both candidates have detailed plans and proposals for helping fix the economic crisis we find ourselves in today.  For example, Obama is fighting for lower taxes for working families, tax relief for small businesses and start-ups, and is fighting for fair trade.

McCain on the other hand is working towards a proposed student loan continuity plan to keep the credit crisis from hurting college students. And he wants to keep Bush’s corporate taxes, and says he’ll keep overall tax rates low, especially for entrepreneurs.

This election is a historic one.  Many people on campus are first time voters and have strong opinions about the credit crisis.

Megan Kusko, a senior said she was supporting Barack Obama because “he would be better for the economy.”  When asked why she was supporting him, Kusko said “Obama is representing change and new ideas.  What we don’t need is a Republican who could follow the Bush agenda.”

Megan continued, saying “In order for us to get out of this situation, we need to stop being afraid to put their money into the market again.  The media is scaring people and stopping them from feeding the economy.”

On the other hand McCain supporters are voting based on experience.  Jackie Parrish, a junior, believes senator McCain could better run the economy because he has had experience with the issue.  Parrish believes that, “We need some government regulation in the market but not as much as Barack Obama will put into place.”

With the economy at its lowest point in years, hopefully the next president will help with an upswing.  But ultimately, it is up to the voters. 

Economics professor, Dr. M. Halim Dalgin sits down with BU Now on Oct. 9 to explain the details of the Economic Crisis.

Q: Is the sole cause for the crisis we’re in the sub-prime housing mortgage agreements? Were there other players, and if so, who were they?

A: We are having a financial crisis as a result of the bursting of the real estate bubble. Why was there a bubble in the rst place has a lot to do with the imbalances the world economy had for so many years. By this I mean that in the world economy, production and consumption was not equally or about equally shared by all the countries. The United was the consumer and the East Asian countries, especially China was the producer. To give you an example, the U.S. consumes 70% of its income, whereas China only 40%.

This naturally led to led to a “savings glut” in the world outside the U.S., as the chairman of the Federal Reserve, Ben Bernanke called it. (He was not the chairman then.) Those countries in turn lent all their savings to the U.S. Moreover, the Federal was following an easy monetary policy leading to lower interest rates. (remember they loved Alan Greenspan for this and revered him like a patron saint of nancial markets.) Consequently, when there is a lot of money sloshing around, it has to and a cause for itself and this usually goes to the real estate.

Before we say who burst the bubble we should also ask who inated the bubble. For some years, starting with the Clinton administration and continuing with the Bush policies, house ownership has been encouraged and subsidized. On top that, Fannie and Freddie, Government Sponsored Mortgage Companies, have been required to lend to low-income to middle-income families with no down payment. Clearly this is very risky. But it was not really Fannie or Freddie who went to excesses. It was Wall Street who came up with the idea of sub-prime lending. (This really means lending to riskier groups.) Perhaps nothing novel about it, but the real novelty they were bringing was the way they hid the risk involved by slicing and dicing securities. They were claiming that , by doing so, were diversifying and spreading the risk, but basically they were very cleverly hiding it.

For various reasons this was very pro-table and Fannie and Freddie felt the urge to jump on the bandwagon so they also started lending recklessly. Clearly in this saga we see the culprit as the subprime mortage market and bad debts incurred in this market. But this is not enough to justify the magnitude of the crisis we are going through now. Because this is a crisis enveloping the whole world whether developed or developing. The reason for this worldwide contagion is the sophistication and integration of nancial markets across the world. The rest of the world is now holding about half of its income in the U.S. assets and the U.S. is also holding about the same amount in the rest of the world assets. Only 10 years ago the corresponding amounts were around 15%. But still the reason why defaulted subprime mortgages are causing not so proportinate amount of influence is through the balance sheets of companies balanced on a knife edge. Therefore, a smallest disturbance to the asset values are throwing them off and contagion through the world highly efficiently integrated markets taking care of the rest. Sometimes e_ciency works in the opposite direction.

Q:

Who do you feel is more so responsible – The housing mortgage companies, or the citizens who signed the agreements they couldn’t afford to pay?

A: I am not sure how much it helps to pinpoint who did it. Simply, there were incentives to do so and people respond to incentives. Yes, lack of oversight, deregulation, greed by the wall street bankers all contributed to the cause. The fundamental reason is the imbalances in the world economy and this is a harder problem to solve.

Q: In your opinion, could this crisis have been foreseeable, or preventable?

A: It is easy to say yes with hindsight 20/20. If you look at the Case-Shiller housing index, an index that tracks real estate prices, it is at up to mid-1990s and then it starts gyrating. But people are very inventive coming up with wonderful reasons to justify “it is different now,” in other words to claim that the fundamentals are different now. And then they had wonderful reasons to justify higher real estate prices in terms of zoning laws, government regulations, etc. Yes indeed there were a few dissenting voices but they were summarily discarded as doom-sayers. The funny thing is this is not the first financial crisis, nor is it the last one. Only at the end of the 1990s, people were talking about new economies, changes in fundamentals again, and then there was the stock market crash again.

Q: How do you feel about the new bailout plan?

A: The new bailout plan was not welcome among the economists nor among the public. First of all it was not really clear what the treasury would do with this money and whom it would save, as well as there was a lack of oversight. The real problem is asset valuation: we are not sure how toxic assets are toxic on banks’ balance sheets. Buying up those toxic assets will not solve the problem or repair the damage on the balance sheets. A better way is to do what Britain is doing now: injecting capital into companies and assuming stakes.

Q: How will the crisis affect businesses, particularly in Bloomsburg?

The problem with the crisis, that it will impact the local economy, is so called “contractionary dynamics” as a result of credit crunch. Firms which need credit to invest and expand but cannot find credit, cut back on production, lay off workers, who in turn cut back on their consumption. Moreover, falling house prices creates weaker household balance sheets reducing their expenditures and reducing aggregate demand. Hence, this will slow down the economic activity along the lines of the local economy.

Q: What does this crisis mean for students who are:

* Looking to get loans and looking to payback loans soon?

A: As the credit dries up in the nation students should feel this effect in the short run, but this should not be a big problem. Paying the loans back will of course depend on their ability to get a job and generate income. As I say below this is really not a great time to be in the job market.

* And graduating soon and about to look for jobs?

A: Students graduating at the end of this teaching year will probably feel the pinch of the slowing down economy. I believe it will be a bad time to look for a job. So far the crisis did not hit the real economy yet although we are starting to hear news about dropping sales and rising unemployment.

Q: What are your recommendations for students and business owners who are trying to survive the crisis?

A: These are really hard and once-in-a-lifetime events, mostly beyond the individual’s control. I guess we should all get ready for a hard ride.

Interviews With Local Managers

The financial pipes are clogged, and last week the Bush Administration announced their confidence in the $700 billion bailout plan to get loans and investments flowing again. Small businesses are hoping this means that customers will be flowing through their doors as well.

When the real estate bubble burst last month, the country realized that economic crisis had been looming within the interest rates of the sub-prime housing mortgage agreements, and the burst has doused the confidence of just about every facet of the American economy – banks are afraid to loan, and consumers are afraid to spend and invest.

Among those taking a hit and struggling to stay above water are small businesses. Sixty-seven percent of small business owners say they’ve been impacted by the credit crunch, and so far this year there have been 28 thousand fewer small businesses than usual who received loans, according to an article on CBS Broadcasting Company’s website.

Small businesses owners are wondering for how long consumers will stay home and pinch pennies. Bloomsburg economics professor, Dr. M. Halim Dalgin said that the credit crunch presses on small businesses from all sides.  “Firms which need credit to invest and expand cannot find credit, cut back on production, and lay-off workers, who in turn cut back on their consumption.”

“Moreover, falling house prices create weaker household balance sheets, reducing their expenditures and reducing aggregate demand. Hence, this will slow down the economic activity along the lines of the local economy,” he said.

During these hard times, owners are forced to re-think staff size, employee health care plans and pay, merchandise prices, and not to mention business expectations.

Bloom Businesses—Not Quite Booming

Shops in Bloomsburg are no exception to the economic downfall. “Business is down a little. I think the main thing is the inconsistency of the business,” said Steph Severn, manager of Steph’s Subs, who estimates that business has decreased by 15 to 20 percent since January. When customers come into her business these days, Severn said they definitely pay more attention to the prices.

Start-up businesses right now are hoping to defy economic gravity and open their doors successfully despite the crisis. There are two such businesses in Bloomsburg—Ready, Go, Burrito which opened this summer, and Good Fellas Pizza in September.

Unlike Steph’s Subs and other businesses that have been around for a few years, the managers of these places don’t have a history to compare to. “Being new, it’s like wearing a blindfold,” said Shawn McNally, manager or Ready, Go, Burrito. “I would expect a little more action.”

“It’s a lot harder to start out now when it’s down,” said Bob Conrad of Good Fellas. “Ten years ago, it wouldn’t have been a big deal. Gas is up, flour’s up, cheese is up, everything is up right now.”

Some managers in Bloomsburg feel that the college town atmosphere will pull them through the down economy, though. Adam Gladish of Campus Beer says that the only slow he has experienced was probably a result of the recent increase in college party busts this fall. Prices have also had to be raised to accommodate for rising costs. In addition, many locals have begun going for the cheaper beers than their usual Miller Light, but Gladish does not foresee a significant decrease in sales.

He is especially looking for business to remain steady because of the ever-growing student population at Bloomsburg. “It really makes you want to invest in this college.” As a former marketing major, Gladish knows all about appealing to the appropriate consumers.

McNally agrees that the Bloomsburg market can counter some of the problems of the economic crisis. “I think a college town is a different animal. I don’t think I could have picked a better town, but I could have picked a better time.”

Some managers are hoping to raise money from special events to help even out the hits from the crisis. Good Fellas is one of three local pizza shops who contribute to the once-a-month Midnight Pizza events on campus, the next one being scheduled for Friday, November 7th in the Kehr Union.

Ready Go Burrito attracted a crowd of forty people with a music event a few weeks ago, featuring local music talent, Mystery Fire. “It’s fun to be a part of an artistic college community,” he said. “When this sort of thing happens, you have to think a little creatively. What can we do to change it up?”

Finding a Way Out with a Bailout

A controversial bailout plan to rescue the economy was announced in September, but it went through revisions after being rejected by Congress. On October 3rd, the new bill was passed, but Dr. Dalgin said that the plan still was not welcome among economists or the public. “It was not really clear what the treasury would do with this money and whom it would save, as well as there was a lack of oversight.”

Last week, though, the country was given a clearer idea of where some of the money will be going. $250 billion will be available for buying up stakes in several US financial institutions, including Citi, JP Morgan, Bank of America, and Fargo. Two brokers, Goldman, Morgan Stanley, and two processing banks, Bank of New York and State Street, as well as some other smaller banks will also be receiving boosts. The plan to bolster the banking sector mimics the recent financial action of the British and European government. In a press conference last week, Treasury Secretary Henry Paulson said that if the plan succeeds, then the shares can be sold for more than the government paid, making a profit for the government and shareholders.

Many citizens have been startled by the huge number of tax dollars being contributed to this bailout, but according to Paulson it is a responsible bill protecting tax dollars to the maximum extent possible, and the investment will cost families far less than the alternative.

He affirmed that this bailout includes steps to increase confidence in the system and address the underlying weakness of the economy: illiquid mortgage assets (assets that are not easily converted to money) that lost value and are choking credit. “Money and capital should flow between houses and businesses to pay loans and investments,” said Paulson, who pointed out that lax lending processes over the past 10 years has resulted in five million homeowners who can’t afford their mortgages and are now delinquent or in foreclosure.

Business managers think that eventually customers will be confident enough in their economic security to visit their shops more often, but they’re not sure if it’s the bailout that will save them. “Things will change. You just got to tighten your belt a little bit,” said Severn.

Obama or McCain—Who’s Better for Business?

Both presidential candidates have openly supported the bailout plan, and they have offered up many opinions in the recent debates about how government can help relieve the pains of small businesses.

Visiting their campaign websites, it’s clear where the main difference lies between Barack Obama and John McCain’s economic plans. While the latter believes in the effectiveness of the trickle-down method, Obama pays little attention to the system of globalization and proposes a greater emphasis on feeding the economy from the bottom up.

The only real similarity between the two on small business policy is the push for alternative energies which will in turn make it cheaper to run a company. McCain plans to increase domestic production of oil and natural gas, and to build 45 more nuclear power plants by the year 2030. In addition, he wants government to contribute $2 billion annually to research the possibilities of coal usage. Obama plans to invest $150 billion over 10 years to catalyze private efforts to build a clean energy future, and he wants to make sure that 10 percent of electricity comes from renewable sources by 2012, and 25 percent by 2025.

There is a lot of focus from both campaigns on the affordability of employee health care plans. Obama promises to help small businesses compete in the global economy while still providing quality health insurance. He wants 50 percent of health tax credit on employee premiums to be paid by employers. McCain says that this “Pay by Play” method will discourage companies from hiring or increasing pay to their employees, and instead he promises $5,000 for health insurance to every family, supporting small businesses who seek to offer insurance but can’t.

McCain’s small business tax plan includes keeping the top tax rate at 15 percent, maintaining 15 percent rates on dividends and capital gains, and a phasing out of the Alternative Minimum Tax. He also plans to reduce the corporate tax rate to 25 percent. The current rate of 35 percent is one of the highest in the world. Obama also wants to lower the corporate tax on businesses, but his campaign site does not make it clear by how much. Both candidates want to make Research and Development tax credit permanent. Obama plans to reduce the burdens of the double taxation that several business owners are forced to pay, and to eliminate capital gains taxes for small businesses. To stimulate the economy, Obama promises to cut the taxes for the middle class, assuring that no family making less than $250,000 a year will see their taxes increase. His site points out that according to the Tax Policy Center, his plan provides three times as much tax relief for middle class families than the McCain plan.

On his site, McCain calls further globalization an “opportunity,” and his plan is to purify the system even more by reducing the influence of protectionism (the barriers such as steep tariffs which impede a complete Free Trade). He also plans to encourage more Free Trade agreements, which will allow more American firms access to sell abroad. In addition, McCain’s plan includes a first year deduction on equipment and technology costs.

Obama’s plan mentions nothing along the lines of a purification of Free Trade, but instead encourages the creation of a national network of public-private business incubators, which facilitate the work of entrepreneurs in creating start-up companies. The Obama plan is to invest $250 million a year to increase the number and size of incubators in disadvantaged communities throughout the country. Also mentioned in his plan is the goal to eliminate special interest loopholes in the corporate tax base.

The Heart of the Economy—Small Businesses—Are Hopeful

Conrad said that despite the financial state, things are actually looking better for him since opening. “It’s getting better everyday. That’s all I hope for, even if it’s a dollar more a day.”

Severn has had to increase her prices, as Campus Beer did, to accommodate rising costs of production. She said that small business is probably the least helped of all in these economic turmoils. To keep business from unnecessary expenditures, she works a lot more hours herself in the shop so as to spend less on payroll. “It’s just that you need to spend a lot of time in the business and if you’re not willing to do that then you just won’t survive.”

She remains hopeful though. “I do think things will change eventually. They says it’s going to get worse before it gets better, but we can all hang in there.”