Faculty and administrators quickly got to work. For a year, senior administrators, the faculty benefits committee, the general faculty planning committee, and the general faculty council scrutinized expenses and revenue sources in all corners of the campus. Departmental discretionary budgets for equipment, supplies, and printing were trimmed by 20 percent. Several publications were eliminated or transferred to the web. The College rolled out a more affordable health care plan that increased employees' premiums. And, 78 positions were eliminated--the vast majority of which were vacant due to a 2001 hiring freeze on all non-faculty positions. All in all, the moves shaved $9 million from the College's operating costs. The current budget will end this June 30 with a modest planned deficit of close to $1 million.

To ensure a balanced budget next year, the College will increase revenue by $6.5 million. Campus auxiliaries will generate one-fourth of that amount, in part from new and renovated campus housing. The goal, part of Oberlin's strategic plan to build a stronger on-campus community, is to move 300 of the 900 students living off campus into new, more apartment-like College accommodations. The new construction will be the first new campus housing in more than three decades.

Tuition, Oberlin's largest source of income, is also on the rise. In 2002, the cost of attending Oberlin rose to $34,894. This coming fall, tuition and lodging will rise 5.8 percent to $36,938. A modest increase of 30 students will bring Oberlin's total enrollment to 2,891. All in all, the tuition changes are expected to generate an additional $5.7 million.

Oberlin's 2003-04 budget, which begins July 1, is balanced.

Protecting the Future

Some Oberlin insiders, uncomfortable with any cuts to the budget, wonder if the College should have been more prudent during the boom years of the 1990s--a decade of huge returns for the endowment. Just as the market's out-performance drove up corporate growth and consumer spending, some of Oberlin's current budget woes stem from spending choices made then, such as added faculty positions, more competitive salaries, increased financial aid, and the construction of the new science center. Many colleges, in fact, saw the '90s as the ideal time to reach for long-term goals.

"The income that the endowment growth generated in the past six years, along with unprecedented success in fund raising, allowed us to address many long-standing needs of students and faculty and to make strategic improvements in our academic programs," Dye says. "Now, we need to consolidate and secure those gains and build on our accomplishments."

Given those gains, others on campus have questioned why Oberlin's half-billion dollar endowment can't be tapped to fill in current yearly operational shortfalls. In fact, Oberlin's Board of Trustees, did--as did many other institutions--vote to override its own spending policy for a limited period of time. Each year, some portion of the endowment's income--typically 5 percent in recent years--is transferred to the College's operating budget. This year, in an action viewed as necessary but temporary, trustees voted to withdraw an additional $5 million to contain the budget shortfall. But continued dipping into the endowment income above the allotted amount, says Evans, would only jeopardize its value for future generations--the very reason the spending policy was originally put in place. "At any college, the principal role of an endowment is to provide a sustainable spending stream to support the institution's educational mission in perpetuity," he says.

While no one has a crystal ball, this is certainly not the first budget problem weathered by Dye or the College. As recently as 1994 when Dye took office, the College faced escalating financial challenges. Quick action then, as now, inspired confidence. It also sparked a turnaround.

Dye looked then to a future that would reinforce the school's core goals. "Oberlin remains true to its mission," she says. "And Oberlin remains and will remain one of the strongest institutions in American higher education. Working together, we can and will emerge from these temporary difficulties as a stronger and better college than we are today."

Jennifer Stoffel has written about business, personal finance, and real estate for The New York Times, Chicago Tribune, and Money Magazine.

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