The College is bracing for its second deficit in three years, expected to be in the $1.4 million range, as healthcare expenditures continue to inflate at an average of five to seven percent per year.

The deficit could be much higher, administration officials warned, if the College does not reel in projected medical cost increases of 15 percent next year, or if an aggressive fundraising campaign falls short of its optimistic goals.

The endowment, which will contribute $1.4 million less to the College’s general, operating fund next year, is cited as the primary reason for the projected deficit.
However, a resurgence in endowment value during the recent economic recovery has instilled hope in College officials that next year will be the worst of the budget crisis, and that a year from now, in 2005, the College will see increased endowment returns.

For the time being, however, the administration is crossing its fingers that faculty and staff health care costs can be contained. The major hurdle comes this summer, when both of the College’s large union’s contracts expire.

Cost-cutting measures during the past two years have left very little to be trimmed.

“Hopefully, we’re at the trough next year,” Associate Vice President of Finance Ron Watts said. “There are not a lot of things you can do without.”

Besides inflation, which increases total expenditures by roughly 1.5 percent a year, the College is also facing a $300,000 increase in utilities and steep workers’ compensation coverage increases.

Watts stressed that the budget, which will be approved by the Board of Trustees during their June meeting, will not include cuts to academic programming. The College will try to control the sabbaticals that professors take so that fewer visiting professors have to be hired.

Fundraising is the key to hemming in the deficit for next year. While the Campaign for Oberlin wraps up in June, Watts hopes that the current level of giving will continue. The Campaign raised more than $160 million for the College, though much of that was earmarked for paying off the Science Center construction and scholarships.

“Alumni have to be conscious that everyone needs to contribute to the annual fund of the College,” Watts said. “They need to give.”

Besides the general increases across the board, the College is also paying off $2.5 million a year in bond interest money that was used to build the Science Center, and an undisclosed amount spent to finance the purchase and renovation of Firelands.

The new Union Street dormitory construction is being paid for out of a separate bond issue, and will not affect the general fund until the construction is complete. Because ResLife will be able to draw money from student board once built, the project is counted on as a net gain for the College financially.

“[The delay of construction until 2005] is not saving the College any money,” Watts said.

He pointed to the phone system implemented this year and reworked printing contracts as other sources of savings for the College. A hiring freeze on all non-essential employees, excluding professors, will also continue throughout next year.

The College last ran on a deficit of more than $1 million in 2002, but before the current economic downturn, the last significant period in the red for the College was in the mid-1970s.

The College will benefit from the five percent increase in tuition next year, which will bring the total full-priced annual cost of Oberlin to more than $40,000 per student.

The endowment registered at $565 million on December 30, the best total in three years, and a huge increase from the $522 million a year before. The year 2000 was the high water mark for the College, when the endowment reached $620 million.