The College’s budget shortfall has had financial consequences for students and organizations alike. Visible effects include a five percent tuition hike and OSCA’s standoff over its rent contract with ResLife, as well as delayed plans to build a “black box” theater, an addition to the art building and even a rumored Conservatory annex.

The push for a new Islamic or Arabic Studies department has also met increased skepticism due to the extreme budget constraints.

The budget decreases are largely due to diminished endowment returns, which provide more than $30 million of the school’s revenue. The sparse economic climate has drained the endowment in recent years.

The endowment consists of a diverse portfolio of stocks and mutual funds and is suceptable to market forces. The Board of Trustees determines what percentage can be spent in a given year.

In lean times, the maximum of six percent of the endowment is drawn for the operating budget. Because the endowment has decreased in value from $622 million in 2000 to $540 million this year, the amount the College has been able to draw on for operating expenses has also decreased. Since the College bases its endowment calculations on a 36-month “weighted” average, the immediate future is even bleaker, since the past two years — the depths of the recession — will be counted into the allotments.

The endowment shrunk in value to $519 million in 2001 and $522 million increase in 2002, lowering the “weighted” average.

Controversy exists regarding whether OSCA’s rent should be raised by five percent next year, the same rate that ResLife is increasing dormitory living expenses. Many in OSCA feel that since one of co-ops’ chief advantages is its relative affordability, rent should increase at a slower rate.

Concern has been raised that an increase in OSCA’s rent might lead to a decline in the number of low-income students on campus.

Recent discussion about major construction, such as the “black box” theater and an art building extension, are considered investments, so they cannot be funded by the operating budget.

“The ‘black box’ theater is a recognized need that can only be built if we have significant gifts,” Vice President of Finance Andrew Evans said. “When and if we receive those funds, then we’ll move towards the construction. We’re not going to put a shovel in the ground until the money is in hand.”

The estimated cost of a new theater would be between $3-$5 million, Evans said. The College has raised roughly $1 million of the cost, mostly from a donation by alumnus and sitcom Cheers producer Jim Burrows.

The new student housing proposed last fall on the Johnson estate would not have been funded through the College’s General Fund or the endowment directly. Since the investment would have yielded quick rewards, it was considered less risky than other proposed construction and could have been funded by a loan or bond issue, Evans said.

That said, the bond issue that was floated by the College for housing tied the College into paying roughly $300,000 more in interest than the administration wanted after the Johnson site was nixed.

Earlier this semester, faculty petitioned for a higher salary increase cap than the two percent proposed by the College.

“What we know is that the College is in a budgetary crisis and it will last for another year or two,” politics professor Marc Blecher said at the time. “This is not just the faculty whining for more money but also about the College being able to recruit and keep the best faculty.”

Many students are concerned that the budget constraints will have a negative effect on their financial aid. However, increased financial aid payouts next year will outstrip increases in tuition, according to College officials.

Financial strain is likely to continue in the foreseeable future. Dye acknowledged that Oberlin is in the third of six “hard” years.