Durham, NC - Dear Colleagues,

I write to address the financial state of the university, a subject of concern in all corners of the campus, and to share news about compensation in the coming year.

Let's take a moment to remember where we have come from. Like the country at large in September 2008, the university faced as dire a set of circumstances as we had seen in a generation or more. Every indicator pointed in the wrong direction, and the combination of investment losses, a decline in private philanthropy and uncertainty about everything from interest rates to government funding helped create a significant challenge to Duke's ability to fulfill its ambitions. At that time, we estimated that Duke University could face a deficit of as much as $125 million from the anticipated budget for FY-2012.

After extensive consultation across the university, and with the support of the Board of Trustees, we chose to embark on a three-year "glidepath" to reset the university's budget on a sustainable base. As we did so, we pledged to uphold several guiding principles:

* Sustain momentum in academic programs, faculty quality and the student experience,

* Protect our financial aid commitments to ensure continued access to Duke for all students,

* Restore our financial equilibrium by sharpening priorities, tightening expenditures, and drawing savings from attrition and early retirement rather than mass layoffs.

Today, we see positive results from our efforts, results to which every member of the Duke community has contributed. Last year we had no salary increase and a one-time $1,000 supplement for faculty and staff making $50,000 or less. This collective sacrifice kept Duke's deficit from growing larger still, averting $18 million in added annual costs and protecting the equivalent of 200 jobs. Meanwhile, the return of the financial markets has caused our endowment to rebound quicker than we projected at the start of the collapse, bringing the deficit estimate closer to $100 million.

We have attacked this shortfall in a variety of ways. Some units have been able to identify innovative ways to raise new revenue. The DART process, a broad-based effort to identify cost reductions in administrative functions, is beginning to yield efficiencies that will result in significant long-term savings. The combination of early retirement incentives and careful vacancy management has trimmed the workforce by more than 450 positions without having to resort to the large-scale job cuts seen at many other universities.

The net result of steps taken to date is that we identified reductions of more than $50 million, or approximately half of our needed savings, in the first year of our three-year plan.

But we are not free to let up now. In order to assure Duke's future strength, we have to finish the task of working our way back to a sustainable budget base. And since almost two-thirds of the University budget involves salaries and benefits, we have to continue to exercise restraint in those areas to meet our goal of a balanced budget.

For the fiscal year running from July 2010 to June 2011, base salaries for faculty and staff will not be changed. However, Duke will provide all benefits-eligible university employees making $80,000 or less with a one-time payment of $1,000. Duke University Health System employees are covered by a separate policy that will be announced later this year, and employees whose positions reside within a collective bargaining unit will be governed under the terms of the respective contracts.

Let me make several remarks about this decision. First, we remain enormously appreciative of our employees, both for the excellent work you do every day and for your willingness to make a shared sacrifice to help meet our current challenge.

Second, Duke simply cannot make permanent salary increases at this time without aggravating our future budget problems and jeopardizing jobs.

Third, again this year, we have directed our compensation to those at the low and middle ends of our salary spectrum, recognizing they face particular challenges in these economic times. This year's $1,000 supplement will benefit a significant majority of our employees.

And fourth and very importantly, Duke's benefits programs will not change in the current calendar year. Our highly competitive benefits are an important part of the compensation we offer, and we continue to increase our investment in employee benefits even while salaries stay restrained. Duke is paying $25 million more in employee benefit costs this year than we did last year, and we expect to add that much again for benefits next year. Next month, all employees will receive a customized statement noting the value of each component of the benefits package.

While Duke has not been untouched by the current economic downturn, we have come through what I trust will be the worst of this crisis with our energy and ambitions intact. Our ability to set priorities and take a long-term view has been the chief source of our strength, and should be a source of pride for all of us. I am grateful to the members of the Duke community for your dedication to this great university. Please accept my sincere thanks.

Richard H. Brodhead

President