Thu 5 Mar 2009
From a financially savvy reader:
I cannot believe that your EphBlog readers still believe that construction on a new library is going to begin next year. They don’t get it. The low hanging fruit of budget cutting cover the Fiscal Year starting in July 2009. The real bloodbath doesn’t start until July 2010.
Here are the operating budget numbers from the June 2004 and June 2008 financial statements:
June 2004: Operating Expense of $137,351,974 plus fin. aid discounts
of $18,543,227.
June 2008: Operating Expense of $176,523,523 plus fin. aid discounts
of $29,284,650.
I agree that these numbers highlight the magnitude of the problem. It is not just an issue of not hiring visiting professors or not hiring a new volleyball coach or canceling the Bolin Fellows program or postponing goo-goo green spending. The College will, eventually, need to do all those and more if it is to have any hope of avoiding lay-offs and maintaining financial aid.
The $30 million in operating expenses that the College added from 2004 to 2008 must be cut back. Every single penny. The first $10 million and cuts have been made, but that was the easy stuff. No more trips for dinner to Mezze with the students. Boo-hoo! The real carnage comes with the next $20 million.
Two quibbles, however: First, I think that there is a chance that the new library goes forward next year. After all, the College has, more or less, committed itself to that plan. It is too late (?) to stop the work. So, it might as well happen now, ideally with a major new donation picking up the $80 million tab. I would bet that unstarted projects, like Weston renovations, won’t go forward for years.
Second, I think/hope that we will get some blood sooner rather than later. The Ad Hoc Advisory Committee on Budget Priorities (call it AHACOBP, pronounced A-ha-Cob-P) is meeting for a reason. The 2010 budget (starting July 1, 2009) has yet to be approved by the Trustees. The financial markets have gotten much worse. With luck, the Trustees will force the College to make some hard choices now. The longer we wait, the worse the pain.
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11 Responses to “Don’t Get It”
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jeffz says:
David, two comments. First, those links are not working.
Second, I went to those dox and see where the next 10 million can come from — additional tuition revenue. Net tuition revenue went up about 8 million from 04 to 08. Projective to 2010, figure that will be more like a net gain of 10 million given that there are two more years worth of increased costs, plus an extra 20 students in the class of 2013. By 2012, that may be closer to 12-16 million extra with 80-90 extra students total and, again, tuition rates increasing at historic rates. So I don’t see a need to cut all the way down to 2004 spending levels just because the endowment has returned to that level …
March 5th, 2009 at 7:22 amrory says:
plus, how much harm would be caused by bumping the avail rate up by 5 mil a year? that’s 15 million (plus interest) out of the endowment.
i’d take anonymous condescending emails more seriously if they weren’t misleading.
March 5th, 2009 at 8:31 amDavid says:
1) Links fixed. Thanks.
2) “80-90 extra students” Where do you get that number? First, I thought that the addition for next year was 15 students, taking the class from 535 to 550. But, I have seen no official word from the College. Do you have a link? Second, I have seen no discussion anywhere of making this change permanent. Have you? In terms of decreasing the quality of student life, I can’t imagine much worse that forcing 80-90 students who currently live in singles to live in doubles. So, although the increase will add some more money in the short term, I think that it is explicitly designed to be temporary. At least one year. Maybe 2.
3) It is true that tuition revenue is part of the picture. See this post for more details.
This analysis leaves out some details, but the shortfall gives a sense of the magnitude of the problem. In terms of net financial wealth, the College is at least as badly off as it was in 2000. Tuition revenue has gone up since then but not nearly as fast as operating expenses (which leave out new buildings and the like). So, the shortfall has almost doubled. We are in a huge hole.
March 5th, 2009 at 9:51 amrory says:
yeah, the college was really “badly off” in 2000…
March 5th, 2009 at 10:17 amfrank uible says:
The College should cut all the fat before it starts cutting any muscle. Having the luxury of living in a single is fat. Having dining halls open at broad hours is fat. Having a student center is fat. Having a chapel is fat. College paid overnight tripping is fat. Importing entertainment, lecturers and other dog-and-pony shows at College expense is fat. Etcetera, etcetera.
March 5th, 2009 at 10:22 amcurrent eph says:
Many students are living in singles now that were doubles as recently as 3-4 years ago. Some of these rooms are huge, and most were originally designed/renovated to be doubles. Converting these back to doubles is only going to change the quality of life in the sense that there are a number of students currently living in far more luxury than their peers, and this won’t be the case anymore.
March 5th, 2009 at 10:30 amsophmom says:
David:
“Financially savvy reader” sure sounds familiar.
Current eph:
March 5th, 2009 at 11:04 amWhere are those big singles you mention? A particular building, or spread around?
Parent '12 says:
David’s 2) @ #3: The last 2 incoming classes (expected grad’n of ‘11 & ‘12) were each 240. The waiting list was used, so perhaps the “extra 5,” based on Dave’s assumption of a class of 235, were added for revenue, such as full-pay or development cases.
My memory, which could be faulty, is that Morty suggested at the parents’ presentation in October an increase of 10 students or so each year, which would mean a target of 250 students for the class of 2013.
March 5th, 2009 at 1:06 pmaparent says:
“i’d take anonymous condescending emails more seriously if they weren’t misleading.”
“’Financially savvy reader’ sure sounds familiar.”
That’s rich — hwc bids ephblog adieu but then continues to post through missives to David.
March 5th, 2009 at 2:25 pmwslack says:
The college is taking it more seriously than your writings would suggest.
March 6th, 2009 at 1:20 amKen Thomas '93 says:
Haven’t read the comments here, except to scan. Seems obvious to me that the library project is on indefinite hold and was (at least) (a partial boondoggle.)
RRO on our our goals in Mexico in ‘06: “all that can be done, is to avoid disaster.” I see that as the global situation today– take the measures necessary to avoid disaster, at all cost. All in.
Not impressed by the Obama economic team and the understanding they have displayed of the situation, to date.
“Batten down the hatches” metaphor is okay, but poor– if every institution battens down the hatches, as David recommends– every ship in the sea will certainly sink. Need better explanations.
Europe: fracturing, losing unity; the Union may collapse. Less threat to the US– momentarily– but–
March 6th, 2009 at 2:31 am