Budget includes tuition increase

Payout to be decided by Trustee consensus

The Board of Trustees is expected to approve the projected $109 million preliminary 1997-8 budget at their meeting this weekend.

Vice President of Finance Andy Evans said he could not release the budget figures before the Board approved them. However, he said the budget will continue to improve the financial health of the College. "We tried to keep student charges as low as possible and still increase spending wisely and strategically," Evans said.

Financial aid and faculty salaries are two areas Evans said were targets for strategic spending increases. According to budget planning assumptions approved by the Board in December, financial aid will see an additional $1.35 million, an increase of 6 percent.

The same planning assumptions projected a faculty salary increase of 7 percent, the same increase as last year. Faculty salaries and financial aid account for around three quarters of the College's budget.

The planning assumptions approved in December projected a four percent increase in tuition, which would make the figure $22,282.

Because of the Board's request to discuss and come to a consensus on the payout rate, a preliminary figure for it has not been developed by Evans. The payout rate was the only figure not approved by the Board at its December meeting.

The payout rate is the percentage of the endowment spent each year.

"I am hopeful we will reach a consensus; it is important to have agreement," Evans said. "What we are trying to do is have increased endowment growth, but also have continued increase in the stream of endowment spending."

The issue will be discussed extensively by the Board's committees on Development, Budget and Finance and Investment in a joint meeting. All three components-gifts to the College, the College's investments and the budget-build the endowment and its payout rate. According to Evans this is the first time the three committees will discuss the rate together.

The endowment is the market value of sellable investments held by the College. In February the endowment was $326.6 million, a figure which placed Oberlin 80th among 466 schools according to The Chronicle of Higher Education . Evans said the top 32 schools on the list were large universities and Ivy League schools with many more students and alumni to draw from.

The payout rate is the percentage of the endowment that the College spends in a year. It is a complex computation, figured using a three-year moving average. Last year's rate was 4.82 percent, the highest rate in the last five years.

In 1992 the Board resolved that the rate should not exceed 4.2 percent, which is a standard the College has never adhered to. When the Board passed the limit, the payout rate was 4.3 percent, the closest it has been to the goal. At the time the Board wanted to keep a conservative payout rate to sustain the growth of the endowment.

Evans does not see the limit as a realistic or clear-sighted goal. "You could have done that, but at what price?" he said. He said the payout rate could be as low as 4.2 percent if the College slashed financial aid or faculty salaries, but he questioned the institution's desire to do that.

Evans said a policy of strictly adhering to the 4.2 percent goal would in effect disadvantage present students and faculty compared to future generations. He said keeping the rate's effects constant in real terms-which are adjusted for inflation-is very important.