FAQ on STC’s financial problems

STC is using surplus chapter funds to make up for 2009 losses. Here’s a question that’s come up several times:

Q: Next year there will be no more chapter funds to draw upon. What is your plan going forward (2010) to ensure that this kind of financial crisis doesn’t happen again?

A: The economic meltdown was a once-in-a-lifetime event that we don’t think will happen gain any time soon. Nevertheless, next year’s budget, approved in principle, is extremely conservative, and avoids unexpected shortfalls in membership renewal and conference attendance, our two primary sources of revenue, which is what significantly eroded our cash position this year:

• We will increase dues to fully fund ongoing operations. We did this reluctantly and only after examining all the alternatives, but doing so restores equilibrium to a business model that had grown perilously out of balance.
• We created a zero-based, balanced budget for 2010 that assumes extremely conservative rates for membership renewal (60% versus the 70% historical average) and conference attendance (only 600). Zero-based budgeting is recommended by the Internal Revenue Service (IRS), and it’s what we asked chapters and SIGs to do as well. The 2010 budget funds continuing operations from dues, which is a fundamental change in our business model. For next year, we are hoping for the best, but planning for the worst.
• We have rebalanced our investment portfolio to reduce our exposure to equities and adopt a more prudent risk profile.
• We have reduced our costs significantly. (You will hear more details soon!)

The bottom line? The 2010 budget, without drawing on further chapter resources, includes a modest surplus that will allow us to begin rebuilding reserves next year and into the future.