Projected
to Gain in 2002, Endowment Slips 3.7 Percent
By John Byrne 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.”
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