Oberlin College is in for a little less champagne this year. As the nation’s economy soured, so has Oberlin’s endowment performance.
The endowment, projected to hit $554 million on June 30, 2002, actually came in at $515 million. This projected loss of 7.0 percent, threw the College’s budget out of whack.
“We projected a positive return,” Vice President of Finance Andrew B. Evans said. “Then the market fell apart.”
And, because the College uses a 36-month weighted average to smooth the ups and downs of the market, the loss will be felt for at least the next two years. Over fiscal year 2002, which included the effects of Sept. 11 and resultant downturn in the nation’s economy, the endowment shed 3.7 percent overall.
The College’s General Faculty Councils are at the budget drawing boards again, after the endowment fell $45 million more than expected, from $550 million in May, to about $515 million today.
Senior administrators indicate that this “second round” of budget cuts may be serious, as the College relies heavily on the endowment’s returns to meet operating expenses. Only tuition provides for more of the College’s operating budget.
“Operational expenses will be cut indeed,” Dye said. “We have begun to talk successfully with a number of our vendors about lowering fees.”
Dye stressed that students’ scholarships and financial aid packages would not be affected by the College’s budget difficulties.
She explained her endowment and budgetary concerns in an interview with the Review Wednesday.
“This year we are spending $33 million out of the endowment,” she said. “Next year we will spend $30 million out of the endowment.”
The trouble is, Dye said, that the endowment is currently losing money in the stock market, on top of the amount the College’s budget requires.
“We are in for a tough year,” Dye told the faculty.
To the Review, Dye said, “We would very much like to avoid layoffs.”
Currently, the College has a selective hiring freeze, and has sought to eliminate positions as they become vacant.
“We have 55 positions frozen, and we have eliminated 9 positions,” Dye said.
Over the summer, Dye eliminated two positions: an assistant to the president and an associate dean at the Conservatory. Those previously in these positions have filled other slots created by retirements or departures.
Yet while Oberlin’s endowment has lost quite a bit of ground since a peak of more than $600 million, it has lost less percentage-wise than many of its peer schools and the Ivies, including Harvard University.
A grave President Dye publicly announced the endowment figures at the College’s General Faculty meeting Tuesday. Faculty were unusually quiet during the event.
“This summer obviously saw changes in our [endowment] that we had not anticipated in the spring,” she declared. Students can expect to see services streamlined in the next year, as profligate expenditures in all areas of the budget are examined for relevance to the College’s mission. Everything, it seems, is on the table. Many colleges and universities across the country are slashing budgets again this fall as endowments stagnate and alumnae donations diminish.
Endowments are a central feature of providing services at colleges and universities, which end up spending more per student than the actual tuition figure. Endowment gains in the stock market are counted upon for a given percentage of annual College operating expenses. When these expectations are not met, institutions can do nothing but cut programs, sharply raise tuition or begin draining the endowment, which is frowned upon in the long term.
An anxious faculty listened attentively to Dye’s comments about the new budget talks and discussion of a new healthcare plan. The College was spotlighted in an unprecedented article by The Chronicle of Higher Education over the summer for its budget woes, particularly in the area of healthcare.
The Chronicle noted that Oberlin’s munificent healthcare plan provided unlimited psychiatric benefits for all employees, as well as coverage at the esteemed and extraordinarily expensive Mayo Clinic. Unfortunately for the College, several professors and staff members were seriously ill or passed away in the last year. Healthcare maintenance organizations (HMOs) have said that 80 percent of cost of care comes in the final 30 days of life.
Dye devoted an inordinately large amount of time at the meeting to budgetary announcements. The first GF meeting of the year is typically devoted the introduction of new faculty and staff.
Of the new healthcare program in the works, which has been said to contain heavy deductibles, such that faculty will pay more out of pocket for care and the College less, Dye said, “I don’t think that anybody will find it unworkable, unlivable, Draconian or radical.”
Attune to the rumors about a radically different healthcare plan, Dye sought to quell discontent by outlining the key objectives of the new plan.
“It is important to protect the quality of people’s healthcare,” she said. In the discussions of a new plan, “quality of care has been essential and absolutely central.”
“So has equity,” she continued. “It is important, I think...that we put together a new healthcare plan that everbody at Oberlin College can afford.”
Paramount to Oberlin’s future success, Dye said, is that Oberlin has made major strides in several areas, including admissions, faculty salaries and the recent addition of ten tenured faculty positions by the Board of Trustees.
“It will be absolutely essential to hold onto the improvements we have made,” she said.
She also called on the faculty to put the current budget situation into perspective.
The College, she said, has “been through a good number of tougher times than what we are in.”
Much of the budget discussion will be written, and also take place online, Dye said.
“There is a lot of talking that we will be doing over the next few weeks,” she said. “Suffice it to say, there will be a great deal of written communication.”
“There will be a [web]site that people can click on,” she added.
Aware that her own office and the administrative tier has been under attack for mushrooming during sunnier days, Dye has eliminated one of her assistants to the president. Kathryn Stuart, one of Dye’s closest confidantes, will take over the office of Student Academic Services, replacing Dean Hershisher, who retired last year. Stuart’s new title is Dean of Academic Affairs.
Though obviously distraught over the College’s depressed budget situation, which is tied to her own salary, Dye managed to find humor and get the faculty to laugh on several occasions. She is optimistic about the future.
“I know that we can move with grace and confidence through this time,” she concluded. “We’ve pushed our budget since 1833.”