The assumption is widespread: Prosperity and
largesse go hand-in-hand with prestige and selectivity for the likes
of a venerable private liberal arts college such as Oberlin. A sizable
endowment--$618 million at its 2001 peak--and a generous alumni
body work hand-in-hand to buffer any economic downturn. Unfortunately,
this assumption is false.
The reality is that no college or university is immune
from financial pain in our country's current economic climate. Oberlin's
administrators, like their colleagues elsewhere, are faced with
a difficult task: how to balance a $150-million operating budget
that has been hit with rising costs and falling revenues. Yet, while
the next few years will surely test the College's resilience, the
mood on campus is one of confidence and optimism. Institutional
goals reinforced by President Nancy S. Dye and the Board of Trustees--to
retain strategic gains in competitiveness in admissions and financial
aid, faculty recruitment and salaries, and curriculum development
while remaining committed to a richly diverse campus--are steadfastly
intact. These gains, plus others in scholarship and bricks and mortar,
are expected to help sustain Oberlin through the years ahead. And
good news lies in the support of Oberlin alumni. While fund-raising
totals have plateaued or fallen for other colleges and universities,
the New Oberlin Century Campaign is on target with more than $150
million raised toward its $165 million goal.
But the stock market downturn that began in 2001 introduced
a new scale of vulnerability to college endowments, and even the
by Jennifer Stoffel most prosperous of institutions are reacting
to new economic realities. Duke and Stanford announced sizable budget
cuts last November. Harvard plans to close the Washington office
of its Kennedy School for Government. Hiring and salary freezes
are in place at many colleges and universities. Public institutions--with
their reliance on battered state budgets and their own shrinking
endowments--are faring even worse. At Ohio State University, administrators
eliminated 600 positions recently and announced a 19 percent tuition
hike; more cuts and hikes are expected.
Few people could have predicted the suddenness or
the degree to which the economic environment would change. A 10-year
cycle of growth in America between 1991 and 2001 was replaced by
a post-September 11th recession, news of corporate scandals, and
political instability--which translated into low investment earnings
for colleges. Oberlin's endowment fell from a $618-million high
in 2001 to $519.6 million in June 2002. "Twenty-five percent
of our budget revenue comes from the endowment," says Andrew
Evans, Oberlin's Vice President of Finance. "You can't have
a substantial decrease in endowment performance and not have a substantial
impact on the overall budget. And yet, we have to preserve and continue
to enhance the excellence of our academic programs."
Adding to Oberlin's problems were rapidly escalating
health care costs for faculty and staff. The College faced $9.5
million in claims in 2001--nearly double the $5 million amount in
1999--due to catastrophic illnesses and rising costs of doctors'
visits, diagnostic tests, hospitilization, and prescription drugs.
Compounding the cost was an unusually generous, open-choice policy
for employees. "It's the same story everywhere--all institutions
are facing health care costs that are out of control," Evans
The financial picture is nothing less than sobering.
Oberlin ended its 2002 fiscal year last June 30 with a budget deficit
of close to $5 million. Oberlin, like its peer schools, found itself
asking some agonizing questions. Should the College violate its
rules on endowment spending, perhaps at the expense of future generations
of students? Increase student enrollment and tuition at the expense
of exceptional classroom instruction? Reduce financial aid packages
at the expense of a diverse and inclusive student body? Resort to
layoffs and staff cutbacks? Of the few options on the table at any
college, none has been universally popular.
"Fortunately, we've been a little bit ahead of the curve,"
Evans says. "We have a president who believes that if she sees
a problem, she wants to address it--immediately."
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