College releases annual report

This past month the College released its annual report which showed a significant loss in the endowment but few other major changes.

According to the Audited Annual Financial Statements from June 2002, the College lost approximately $150 million dollars on its endowment from June 2001 to June 2002.

“The big news in the budget, in the financial performance of the College over the last couple years, has been what we all see out there in the stock market,” said Richard Myers, associate provost and director of budgets. “Those kinds of changes dwarf everything else that you see in these numbers.”

Despite the significant loss in the endowment, the College actually increased spending in a number of key areas from 2001. For example, during 2002 the College spent approximately $23 million on land, buildings and equipment, while in 2001 the number was closer to $18 million. In 2002, the College spent almost $48 million on instruction and research; in 2001, the College spent $43 million. The latter change, Myers said, was largely the result of steadily increasing professor salaries.

These increases in spending, Myers said, were made possible by the long-term financial planning of the College during the peak of the bull market. “We take a long term view of the College’s finances,” he said. “Our financial plans and models run essentially 20 years. So what we’re trying to do is maintain sustainability and equilibrium across a 15 – 20 year period, so that, when we have 50 percent returns on the endowment, like we had a couple of years ago. . .you are not spending all that money.

“Just as when things turn south, you’re in a position that you don’t have to cut budgets or make radical changes to program of the institution to be able to live in an environment where you have negative twenty percent returns or negative ten percent returns.”

One area of the budget that has benefited from the College’s past planning is financial aid. In 2001, the College awarded approximately $13 million in financial aid grants, and in 2002, it awarded slightly more than $15 million. “Financial aid has been going up year after year,” Myers said, for two reasons.

Though the number of students at the College has remained the same, rising fees have corresponded to an increase in financial aid. Also, the College has made its financial aid policies more generous: “It will go up if we make our policies regarding financial aid more attractive, and over the last three years we’ve certainly done that.”

Although the College is still in a relatively safe financial position, Myers said that the effects of the struggling economy may have some impact on the College’s operation in the next few years. Because the College has allocated substantial sums of money to several major programs – such as the renovation of Baxter and the Adams Memorial Theatre – it must be careful not to allow unchecked growth in other areas of the budget.

“We’ve got a very aggressive strategic planning process underway at the College,” Myers said. “We’re talking about building a lot of buildings. . .in order to afford those things, we need to be cautious about the kinds of inflation that we have in other areas of the College’s budget. We can’t have both.”

Over the last several years, Myers said, the budget has grown at an annualized rate of six to seven percent.

So far, the sputtering economy has not reduced the number of alumni and parent gifts. In 2001, the College received approximately $13 million; in 2002, the number reached almost $14 million.

Myers stressed that it is too early to tell how much of an effect the economy will have on the College’s development efforts, but said that thus far the institution is performing relatively well compared to its peers.

“We’ve seen a lot more buoyancy in our giving than many other institutions have,” he said. “Certainly, we haven’t revised our projections downward on what our gifts are going to be.”

Myers did acknowledge that if the economy fails to rebound within the next few years, it will almost certainly become necessary for the College to reevaluate its financial position.

“If we’re in a bear market that looks like the 1970s, and it goes on for six, seven years, and we don’t see the type of rebound that we hope to see. . . if you’ve got sustained difficulty on the investments, and we see this continuing to go down for a few more years, then we’re going to have to make some decisions,” he said.

Myers declined to elaborate on what exactly those decisions might entail.