June 01, 2009

 

 Balancing the AVMA budget

 

posted May 16, 2009

 

Did the AVMA Executive Board cut costs in the 2010 budget partly to prevent an increase in member dues?

Dr. Bret D. Marsh,
AVMA treasurer,
responds:

 Dr. Bret D. Marsh

 

 The Executive Board and the board's Budget and Financial Review Committee felt very strongly that we needed to pass a balanced 2010 budget without increasing member dues. We recognize that our membership across the country has experienced various impacts from the economic downturn. Some veterinarians practice in areas where unemployment approaches 18 percent, so their client base has undergone dramatic change.

 

 

The Executive Board said, "We need to come up with a balanced budget that shows AVMA's good faith effort to respond to the economic downturn." It would have been simpler to say, "We need more money, so we're going to ask for a dues increase." On the other hand, the owners of veterinary clinics and other small businesses are having to take a hard look at their bottom lines. The Executive Board said, "Let's see how we can support our membership during these down times, just as they've supported us when times were better."

With the 2010 budget, we will be able to carry out the mission and goals of the AVMA. Not only the country but also the international community has been met with some unique fiscal challenges. The AVMA is not immune to those. As our nation's president and others globally continue to work on the fiscal challenges out there, we're hopeful that conditions will turn around soon, and we hope we'll be the benefactors of that as well.

How has the economic downturn affected the AVMA's income from sources other than member dues?

As we've experienced during past recessionary periods, income from JAVMA classified and page advertising has dropped. We may see changes in registration for the AVMA Annual Convention, although registrations for Seattle are running ahead of registrations last year. The change in investment income is a little new to us this time because in 2005 we started a new investment portfolio that changed our overall exposure to the markets—so we've seen decreases in that portfolio as the markets have adjusted.

Of course, we had many years when the returns from investments and the income from classified and page ads were over our expectations. We were ahead of budget for many, many years. We built reserves for the years when things weren't as good. My view on 2008 and 2009 is that we've had some difficult years, like the overall economy, but that's why we built reserves into the system.

We continue to work closely with sponsors because those outside sources of income are extremely important to the AVMA. They've been very supportive of the veterinary profession in the past, and we expect no different in the future.

How did the AVMA approach cutting costs?

The general approach was to take a look at the overriding expenses for the AVMA. Everything was on the table. Each division of the AVMA did a great job in coming up with things that maybe we don't need to do while we're going through some tougher economic times. The budget proposal went to the Budget and Financial Review Committee—which reviewed the proposal line by line, program by program, division by division. Then the recommendations from that committee went to the full board in April.

The Publications Division is changing the paper that the AVMA uses for printing the journals to reduce costs. It's a lighter paper, so it also will reduce our postage expenses. The Convention and Meeting Planning Division has done a good job finding economies in putting on the convention. The Convention Management and Program Committee tried to make sure to have the highest quality speakers, but not necessarily the same quantity.

The Executive Board spent a great deal of time trying to evaluate what travel is essential. In addition to the expense of travel is the time commitment of our volunteer leadership. How do we more efficiently and effectively travel as an association and still carry out our mission and goals? Can committees, councils, and task forces conduct business without holding face-to-face meetings each time? In response to these questions, the board made substantial changes to travel policies for volunteers and staff members. The changes will not only reduce the expense of travel but also allow us to use our time more efficiently.

Hiring staff, in my view, is the prerogative of CEO W. Ron DeHaven. The AVMA is filling only mission-critical positions during these economic times. It's important for us to make sure we're properly staffed so we can cover those issues that are important for our members. Staffing is constantly being evaluated by Dr. DeHaven and the board. Recently, we also revisited the health care plan for employees and changed that offering to reduce costs.

How do you think the investment policy has served the AVMA? How do you feel about drawing down the reserves?

The investment policy has worked out really well. Of course, we're in a down period now, so we're seeing the downside. On the other hand, we had years when the investment policy was very good for us. We're going to see fluctuations in markets—which is why I think it's important that we maintain about 60 percent of our income from dues, that we are not relying on the market to run the AVMA.

We have the reserves for when times are difficult. The Executive Board has a policy that says we are to maintain between 50 percent and 150 percent of the AVMA's operating expenses in reserves. Over the years, we've run about 100 percent, a standard for association management. In the last year or so, yes, we've dropped under 100 percent. The last figures I saw were right around 75 percent. But as things improve in the future, we expect that to come back up.

Only about a third of our reserves is in equities in the marketplace right now, in long-term investments, and we've moved the rest into cash and cash equivalents. We made those adjustments as the market has changed to make sure we haven't unnecessarily exposed ourselves. We're hopeful that this economy turns around, but we're prepared if it does not in the near term.