Macalester and the Economy

Campus Community Discusses Macalester’s Proposed 2009-10 Budget

As in past years, Macalester Vice President for Administration and Finance David Wheaton this week held a series of meetings to discuss the college’s proposed 2009-10 budget with faculty, students and staff.

Overall, Wheaton said, the college is financially sound. However, the college has been impacted by the global financial downturn: the endowment has lost $200 million in value, fundraising is more difficult, many families are facing financial difficulties and students are relying more heavily on work study and other aid.

In developing a balanced budget and making difficult choices about new investments and reductions, Wheaton said five strategies guided the college’s decision-making:

• Support the student experience
• Keep the tuition increase low
• Defend student access to our programs by increasing financial aid
• Support our people (avoid layoffs)
• Make changes to resource allocations purposefully (avoid across-the-board reductions)

Consistent with those strategies, Macalester’s 2009-10 budget includes targeted expense reductions to offset new investments, primarily in financial aid.

Specifically, the college is increasing student aid by $3.5 million, or 12 percent. This represents the largest year-over-year expense increase. At the same time, the college has implemented the lowest tuition increase in a number of years, which reduces overall revenue. As a result, Wheaton said that for the first time in many years, net revenue from tuition will not increase from the current year to the next.

College expenses are increasing in student work study, which is growing by three percent to accommodate an increase in the minimum wage and increased demand as off-campus employment opportunities and family support continue to be constrained by the economy. The last area of significant cost growth is employee benefits, primarily health care costs, which will increase 11 percent, mostly due to more people enrolling in Macalester’s benefit programs.

To meet these challenges, the college is not increasing faculty or staff salaries or adding positions next year. As well, program cuts averaging 5.5 percent will be implemented across the college. To protect the student experience, program reductions are higher in Advancement and Operations than in the Provost Office, Student Affairs or Admissions.

Specific reductions that Wheaton said leaders believe will have minimal impact on the student experience are reducing the number of issues of the alumni publication, Macalester Today, from four to three next year, reducing advertising and sponsorships and holding operational costs (building maintenance, security, utilities, etc.) flat.

Future Outlook

Wheaton cautioned that while the 2009-10 budget is balanced and Macalester has not had to take steps as dramatic as many institutions around the country, there are more difficult decisions ahead.

The change in the global economic climate has reduced the college’s revenue projection for 2014 by about $16M. Because that projection was based on a balanced budget, similar adjustments to expenses will be needed. Wheaton noted that the 2009/10 budget addresses about 2/3 of that gap, leaving a gap of about $5 million between revenue and expenses by 2014. Over the next three years, the college will need to continue to reduce costs and explore new sources of revenue to close this gap. Student enrollment and financial aid and financial market performance will be the key drivers of future plans.

“It is critical that we each take personal responsibility for managing costs and being prudent stewards of the college’s resources,” Wheaton told audiences. “We all should be asking questions about why we do things the way we do, whether there are better, more efficient ways to work and how we can reduce costs.”

The final budget will be presented to the Board of Trustees in May. Macalester’s fiscal year begins on June 1.