On Planning and Prudence
by Brian Rosenberg
More than two years into the ongoing global economic downturn, the members of the Macalester community have many things about which to feel some mixture of gratitude and relief.
This has been an unpredictable period for admissions offices across the country, yet enrollment at the college is at its highest level since 1971. We have continued to welcome outstanding students, and by most measures our recent classes have been the most geographically, racially, and economically diverse in our history. Retention and graduation rates are without question our best on record and rank us among the finest colleges and universities in the United States.
The college’s finances are extremely sound, and we have continued a longstanding pattern of managing to balanced budgets every year. We have cut our controllable program costs prudently but not dramatically. We have asked our faculty and staff to make sacrifices— most clearly through a salary freeze in 2009–10—but, unlike many of our peers, we have not have been forced to lay off any personnel or eliminate any major academic or co-curricular programs. Our endowment is well off its 2008 high, but, measured against virtually any benchmark, its performance has been among the best in the country.
It is probably fair to say, however, that in many respects our most challenging times lay ahead of us. No one has proven particularly adept at predicting the future, and conventional wisdom has a consistent tendency to be wrong. Yet the following scenario, if not inevitable, is certainly plausible enough for us to take very seriously in our institutional planning:
1. Slow endowment growth: Given the formula we use to determine our spending draw from the endowment and the magnitude of the downturn in 2008 and 2009, we know already that the amount we have to spend from the endowment will probably be about the same three years from now as it is this year. We cannot know what future growth will look like, but most economists are predicting a protracted period of returns that are below historical averages. Revenue from the endowment accounts for about a third of the college’s operating budget.
2. Rising financial aid: During the past two years, the rate of growth in financial aid has been several times the rate of growth in our posted tuition. Macalester is one of only about 70 colleges nationally that meets the full financial need of all admitted students, and the level of that need has risen sharply. The competition for those students whose families can afford to pay full tuition has also become increasingly intense; many are opting to attend less expensive public institutions or institutions that offer large “merit aid” packages.
3. Smaller comprehensive fee increases: Macalester’s comprehensive fee increases during the past two years have been the smallest on a percentage basis in many years, and given economic realities and various downward pressures on pricing, it is likely that fee increases in the future will continue to be in this lower range. Since income from tuition and fees accounts for more than 60 percent of our revenues, the combination of faster growth in aid and slower growth in price is likely to prove challenging.
The economic vicissitudes of the past several years have reminded us of some important truths that will be helpful as we navigate through these waters. First, an economic model in which expenses grow more rapidly than revenues is not sustainable. Second, careful planning matters. Perhaps the chief reason for Macalester’s strength during this downturn is that we anticipated in advance its possibility (if not its depth) and structured our finances accordingly. We were prudent in our decision-making and that prudence has made the difference between a challenge and a crisis.
I believe that planning will serve us well once again as we move forward. This fall I established a task force of staff and faculty whose charge is to consider possible responses to a protracted period of slow growth. This spring that work will expand to include a variety of committees and other campus groups. The central goal is not to diminish Macalester; on the contrary, it is to figure out how we can be both a better and a more efficient college. Given the quality of people at Macalester, our record of careful planning, and the powerful collective desire to do whatever is in the best interests of the institution and its students, I have no doubt about our ability to become stronger tomorrow than we are today, regardless of the difficulties we face. Such progress has been in many ways the central story of Macalester for most of its remarkable history.
BRIAN ROSENBERG, the president of Macalester, writes a regular column for Macalester Today. He can be reached at firstname.lastname@example.org.