Macalester and the Economy

FAQ: The Economy and Macalester

How is the economy affecting Macalester?
What measures is Macalester taking?
How will all of this affect my student experience?
How will faculty and staff be affected?
Why isn’t Macalester taking more drastic action now?
How has Macalester’s endowment fared?
How does the economy affect Macalester’s building projects?
How is the economy affecting giving overall?

Q1: How is the economy affecting Macalester?
A: Our three most important sources of revenue: our endowment, tuition, and philanthropy are all impacted. Our endowment lost about 15 percent of its value in the last six months of 2008 and as a result of the decline it will generate less support for the operating budget. While we are ahead of goal in our capital campaign, philanthropic contributions have also slowed. At the same time, many students have greater need for financial aid as their families feel the impact of the economy.

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Q2: What measures is Macalester taking?
A: The college will reduce spending, starting with the fiscal year that begins June 1, 2009. Our priorities are to sustain the quality of the student experience and to ensure continued access.

• We are increasing budgeted financial aid by 12 percent, or $3.5 million. At the same time, our comprehensive fee increase of 4.4 percent is the lowest in nearly a decade.
• We do not anticipate faculty or staff layoffs. While we are not budgeting for additional positions, we will replace open positions after review to ensure that they are needed.
• Faculty and staff salaries will remain at current levels. We will provide a $400 across-the-board increase to lower-salaried faculty and staff to help offset rising costs. In addition, faculty members promoted next year will receive a salary increase so they are not disproportionately impacted by the suspension of raises.
  

These decisions are based on the best information currently available. The final budget for 2009-2010 will be set by the Board of Trustees in May 2009.

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Q3: How will all of this affect my student experience?
A: Macalester’s top priority is maintaining our academic quality and student experience. Budget decisions for 2009-2010 are not expected to impact the student experience at Macalestersignificantly. In future years, the college will need to identify additional savings and/or revenue opportunities. Students, and the broader campus community, will have opportunities to participate in conversations that will inform such decisions. The emphasis will be on sustaining, and even strengthening, the programs, activities, and services most central to the Macalester experience.

Q4: How will faculty and staff be affected?
A: Faculty and staff members play a key role in making students’ experiences both excellent and enjoyable. For that reason, Macalester’s emphasis is on retaining current faculty and staff, compensating them fairly, and sustaining morale. The college does not anticipate layoffs this academic year, but is reviewing vacancies before filling them and is not adding positions in the near term.

For the 2009-2010 academic and fiscal year, salaries will not increase for most faculty and staff will experience a freeze in salaries, and some administrative and program budgets will be reduced. The college is striving to avoid across-the-board cuts. Instead, the goal is to focus resources on activities that most directly support Macalester’s academic quality, character, and accessibility. Discussions about how to do that will involve the entire Macalester community.

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Q5: Why isn’t Macalester taking more drastic action now?
A: Careful fiscal management and well diversified investments have put Macalester in a better position than many colleges to weather this crisis. Macalester operates with a conservative budget even during good times, maintains an efficient staffing level, and has taken on only modest debt for special projects. For these reasons, the college does not have the cash-flow problems that have forced other institutions into emergency actions.

In addition, the formula by which the college spends money generated by the endowment softens and delays the impact of a stock market downturn, providing time for thoughtful planning. The most significant impact from the decline in value of the endowment will occur in fiscal 2011 and beyond.

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Q6: How has Macalester’s endowment fared?
A: Macalester’s endowment has lost value at about half the rate of the markets.

The endowment is well diversified. In recent years it has outperformed the markets and most peer college endowments, during both up and down periods. After reaching a high of $700 million in October 2007, the endowment had lost about 20 percent of its value one year later; the U.S. stock market declined by 40 percent during the same period. In the last six months of 2008, Macalester’s endowment declined by 15 percent, compared with an average decline of 24 percent among peer institutions.

Macalester’s trustees limit the spending of funds generated by endowment. Each year Macalester draws 5 percent of the market value of the endowment, based on the average of the most recent 16 quarters. As a result, the effect of any dramatic market change on Macalester is spread over many years.
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Q7: How does the economy affect Macalester’s building projects?

Of the three major projects, two are fully funded and one is in the planning stages:

Macalester recently completed the Leonard Center athletic, health, and wellness complex, which opened in August 2008. The project was funded with college and philanthropic funds. Fundraising for the project exceeded our goal, and the project was completed under budget. The college portion of funding was borrowed at a favorable fixed rate spread over the next 23 years.

This spring, Markim Hall--the new home of The Institute for Global Citizenship--will open. The project, which is designed to be LEED Platinum certified, is fully funded with no debt.

Finally a renovation and expansion of the Janet Wallace Fine Arts Center is in planning stages, and work will begin when a significant share of gifts is firmly in place.

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Q8: How is the economy affecting giving overall?
A: In the past few years, giving to Macalester has been growing dramatically. Giving from all sources reached record highs in three successive years. Alumni participation in the Annual Fund has been edging upward, thanks to a dramatic increase in volunteer fundraising activities.

In addition, the Step Forward campaign launched in October 2008 having already raised more than two-thirds of its $150 million goal. While the pace of new large gifts has slowed, alumni and friends have made clear their intent to support Macalester as soon as they are able.

The Annual Fund is the college’s broadest fundraising vehicle, and our challenge is to sustain high rates of participation and generosity in order to support financial aid, faculty activities, and other programs by which Macalester carries out its mission.

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