In the ongoing need-blind debate, some students assert that the current admissions policy can be retained by cutting costs and raising funds.

According to President Rosenberg, however, these students lack a fundamental grasp of the college’s financial operations and realities.

“There’s no one who has a good understanding of our operating budget and of fund-raising who’s made that claim,” said Rosenberg, who supports a shift to need-aware admissions that was endorsed by the faculty on Wednesday.

While some undoubtedly disagree with Rosenberg’s stance, few would disagree that a basic understanding of the money flow is an important part of the debate, and one that the larger part of the community lacks.

Aside from short-term grants for department-run programs that only last a few years, much of the school’s spending can be understood in relation to the college’s two budgets.

“You can basically divide the budget into two categories, the operating budget and the capital budget,” President Brian Rosenberg explained. “Capital budget is the money that pays essentially for large, one-time purchases. So a building that you build, or you buy a new computer system, those are capital expenses. Operating expenses are all your ongoing expenses.”

The operating budget, which typically changes minimally from year to year, covers the college’s day-to-day expenses. The current 2004-2005 operating budget totals $86.3 million, more than a quarter of which is spent on financial aid.

“[After financial aid], we have $65 million that we’re planning on expending this year,” said Director of Budget and Finance Doug Rosenberg.

The largest operating expenditures are salaries, including $16 million in staff wages and $13.5 million for faculty. Add in student salaries and employee benefits and the salary total comes to $40 million. That comprises 63 percent of the total budget after financial aid is removed.

Remaining operating funds pay for various non-personnel expenditures such as heating and electricity, office supplies, travel, technology, equipment and maintenance costs, as well as the debt incurred on capital projects.

According to budget figures, the major sources of revenue are interest and dividend earnings from the endowment and net tuition, which provide $24.4 million and $26.3 million this year, respectively. These two major sources account for more than three quarters of all income. Other sources of revenue are government grants, gifts to the annual fund and income from residence halls and dining.

Nationwide economic troubles have reduced the value of the endowment in recent years, forcing the college to adopt a cost-cutting approach and to draw increasingly on other sources of revenue. While the overall budget did not shrink, it grew at a slower rate.

The tighter financial situation resulted in fewer offered classes, larger class sizes and general cuts across all departments.

While faculty salaries have continued to grow, the rate of increase of around 3 percent each of the last two years is lower than the 5 percent increases the college would like to see. Faculty salaries have fallen relative to Macalester’s 40-school comparison group, which may hurt the school’s ability to attract and retain top faculty, said Vice President for Administration and Treasurer David Wheaton.

Recent financial conditions have prompted the long-term financial viability of maintaining the current admissions policy.

Financial aid is not only one of the school’s largest expenditures, but it is also the most unpredictable part of the school’s budget. Because of the school’s need-blind admissions policy and full-need financial aid policy, which guarantees that every admitted student’s demonstrated need is met, it is impossible to determine exact aid costs until students enroll.

The more than $20 million the school spends annually on financial aid is essentially a coupon on tuition that decreases the amount that students pay. In the operating budget, financial aid is simply subtracted from tuition and fees on the revenue side of things instead of counting as an expense.

“[Switching to need-aware is] basically a step of adding financial aid to an expense that can be managed,” Doug Rosenberg said of the proposed need-aware admissions policy.

Recently, the college has used larger tuition increases as one way to compensate for the reduction in the endowment earnings. This year net tuition rose 8.7%, compared to 5% increases the last two years.

While the annual fund has grown more profitable, it brought in only $2.5 million in revenue a year ago. That is not much relative to the total size of the budget, President Rosenberg said.

“If you include financial aid, our operating budget is probably close to $85 million, and about two and a half million of that comes from the annual fund,” President Rosenberg said.

The capital budget, on the other hand, generates a large portion of its revenue through donations.

“Typically for large capital projects the two main sources of money are fund-raising and borrowing,” President Rosenberg said. “So if you build a new building when we built the campus center for instance it was partially funded by gifts and partially funded by loans, and that’s the way virtually every college does a major capital project.”

The current capital budget, designed to cover a three-year period, allotted more than $16 million for a number of residence hall renovations that are mostly completed.

While capital campaigns typically focus on capital projects, they usually raise money for a variety of others projects as well, President Rosenberg said.

“Our next capital campaign will definitely include a component for scholarship support, and a much larger component than we’ve ever had before,” he said. “But it will also include components for things like building projects, things like endowed professorships, student-faculty research, interesting academic programs.”

It is unlikely that there will be any significant capital costs in next year’s budget, Doug Rosenberg said, but a large capital campaign for the new athletic building and fine arts complex is already underway.

According to President Rosenberg, students often fail to understand that fund-raising for the two budgets are not simply interchangeable.

“They’re also totally different funding sources,” President Rosenberg said. “It is true here, and it is true at virtually every college and university in the country, that the largest gifts tend to come in for capital projects.

“It’s not just a spigot that you open,” President Rosenberg said. “There seems to be a sense that some people have that if we just try harder we can raise unlimited amounts of money for whatever we want to raise it for. People have been trying pretty hard here for 130 years.”

The Task Force on Budget (TFOB), which meets weekly throughout the fall semester, is made up of vice presidents, deans and directors of various programs and offices on campus, as well as two representatives from the Resource and Planning Committee.

Last year President Rosenberg charged TFOB with prioritizing academic programs, admissions and fundraising. Rosenberg also prioritized funding for recruitment of students of color and for programs taking advantage of the college’s urban location.

After estimating available funds, the task force members implement the allocation of money based on previous budgets and strategic priorities given by the president. The president then reviews the budget before passing it on to the Board of Trustees for approval at the Board’s March meeting. The new budget is implemented on June 1 of each year.