Keeping APA financially secure

By Raymond D. Fowler, PhD
APA Chief Executive Officer

At the end of September, with great fanfare, President Clinton announced that for the first time in over a generation, the federal government is operating within its income. I?m pleased to say that APA has been operating within its income for some time now and has every intention of continuing to do so.

Last month?s Monitor reported that the Council of Representatives approved $3 million in cutbacks in APA?s 1999 preliminary budget and projected reduced expenditures for the next three years. The Council, heeding the recommendations of the Finance Committee and the Board of Directors, wisely decided that it is better for APA to cut back on activities than to raise the dues. By doing so, the budget was brought back into balance and the association has headed off financial problems down the road while avoiding an increase in member dues. This month, if you?ll bear with me, I?d like to explain why this action was necessary and why it is a responsible step to ensuring a secure financial future for the association.

A period of transition

First of all, I?d like to assure you that APA is not in a financial crisis. Few professional associations are as financially stable as APA. We have substantial assets, an excellent credit rating and extraordinary member loyalty. What APA is facing is not a financial crisis, but a period of transition. Our major sources of revenue, dues and publications, have leveled off, while expenses continue to rise. Why has that happened?

Over the past 10 years, many associations have seen a drop in their membership but as a result of vigorous membership campaigns, we have continued to grow at the rate of 5,200 members each year. We have an enviable membership renewal rate of 94 percent (most associations average 75 percent), but we are still running hard to stay in place. In addition to the 6 percent who do not renew their membership, about 300 of our members pass away each year and another 700 retire and move into dues-exempt status. The largest growth surge in APA was almost 50 years ago. We expect a full 25 percent of our members to become dues exempt over the next 10 years, which means fewer paying members to support the association. New members also pay a lower dues rate for the first few years, so they bring in less revenue than the retiring members they replace.

Subscription revenues, which have grown steadily over the past decades, have also leveled off. Institutions are facing cutbacks in library budgets, and journals are particularly affected. We?re working overtime to maintain leadership in the development of electronic publications, but these have high development costs and take time to start making a profit.

Leveling off our expenses

The bottom line is that when your income isn?t growing, your expenses shouldn?t be growing, either. If expenses had continued to grow at the rate they were growing, we would have faced increased dues or deficit financing, neither of which is acceptable. The APA staff, the Finance Committee and the Board of Directors worked hard to reduce expenses equitably. In reviewing each program, we did not find 'fat,' but we did find things we could do less (travel) or postpone (new programs) or eliminate (activities that were no longer productive). Cuts were evenly distributed across all constituencies; virtually every aspect of the association?s activities are affected, but none disproportionately.

Finding new sources of revenue

While the association must do some belt tightening for the next few years, we are also exploring new sources of revenue that hold promise. The American Psychological Association of Graduate Students (APAGS) is growing rapidly and should attract many new members earlier in their careers.

Our second building is now 90 percent leased and should begin to spin off about $1 million a year in profits, after the initial investment in reduced rates and space renovations needed to attract and keep long-term tenants.

And I am confident that our publications program will successfully adapt to changes in the publishing industry. Our books program has grown from publishing 12 books annually to more than 50, and we are now exploring producing three to four high-quality trade books a year. If they turn out to be profitable, we will publish more.

Finding new sources of revenue calls for hard work and creativity. Using restraint requires some sacrifices on all parts of the association: governance, members and employees. But the actions we are taking today will help us ensure a bright?and financially secure? tomorrow.