macalester college summary: proposed 2009-10 operating budget april 2009

Macalester College

Summary: Proposed 2009-10 Operating

BudgetApril 2009

2009-10 Operating Budget

Key messages

• The college is financially sound

• External circumstances have dictated a rethinking of previous assumptions about revenue growth• Anticipatory planning in the last couple of years has helped prepare for this

• The 2009-10 budget takes some significant steps towards realigning revenues and costs

• Absent some really good economic news, there will be more work needed to complete this realignment in 2010-2011

Background• A most unusual year for budgeting • The circumstances that make it unusual are still evolving • Our budget process paid significant attention to future years• We have focused on several important strategies:

o Support the student experienceo Keep tuition increase lowo Defend student access to our programs with financial aido Support our peopleo Make changes to resource allocations purposefully

•Financial markets and student enrollment and retention will be important guides

Objective: Create an outstanding and sustainable student experience


Key assumptions—external:Global economic downturn will continue into 2010Slump will affect economic activity everywhereFinancial markets will remain depressed for some timeHigh school graduation level is peakingStudents and families will continue to see importance of B.A. Some may broaden their view of where to obtain that degreeMany will still seek a degree from a high quality collegeThe cost of a degree will continue to feel challenging to many

families placing upward pressure on financial aid


Key assumptions—Macalester

We are trending toward a student body target of about 1,800 [2009/10 projection is 1,829]o Raising that number modestly will likely be the subject of future discussions

Financial aid discount levels will rise and remain high Endowment value =$475M on 2/28/09

o Down from $675M on 6/30/08

Fundraising will remain challenging


Revenue assumptions

Student body size - 1,829 FTEo Budget built on 1,810, which is long-term goal

Financial aid discount - 47.4%o $3.5M increase in aid; $2.0M in a normal yearo Discount rate is still at least 8% above peer medians

Net tuition per student - $20,127o Financial aid grows faster than tuition in this budgeto First drop in net tuition this decade

Endowment draw – no change in formulao Effect of financial market decline comes in 2-4 years

Annual Fund –$3.3M; 08-09 forecast = $3.1M

Other revenue up slightly from budget, mainly due to summer use of campus


Expense assumptions

Faculty salary poolo Only increases are for lower paid employees [$400] and promotions o No net new positions

Staff salary poolo Increases mainly due to $400 increases and union contracto Small pool for promotions and required range adjustmentso No new positions created in 2009-10

Student employmento Largest % increase besides benefits

Wage increase, higher usage is expected Some additional positions in Admissions, Student Services, Academics


Expense assumptions (continued)

Benefitso Very large increase mainly related to health care coverage (15.9% rate

increase; +38 participants)Program budgets

o Overall decrease of 5.5% vs. plan Advancement and Operations -7% Academic, Student Affairs, Admissions -5%

Study awayo Head count 235 [compared to 247 in 2008-09]

Fall enrollment lowest in many years

Capitalo Ongoing capital consumption flat from 08-09o No new borrowing during fiscal year


Risks and longer term issues

Response of peer institutions – larger student bodiesLonger, deeper domestic or global contractionRecovery of financial marketsAvailability of credit for families

o Effect of credit on families

Student/family perception of the variety of higher education choicesRecovery of donor income statements and balance sheets


What’s different?Direct aspects of the student experience will feel similar to 2008-09Some slowing in progress on campus repairs and maintenance backlogReductions in program budgets, travel, frequency [e.g., Macalester Today

is being reduced from four to three issues next year]

What’s next?Summer 2009 review 2008-09 financial performance; consider scenarios

based on more recent dataReview longer term ideas for revenues and expensesStudents, faculty, staff can look for ways to reduce costs

o Ask why we do thingso Ask why we do things in a particular wayo Ask why we don’t do other things


SummaryMacalester is managing through the economic crisis

o Other institutions have had layoffs, capital projects stopped, additional borrowing to meet cash needs, selling assets, eliminating programs

The downturn will continue to have a significant effect on our longer term planning

We are mindful of possible challenges going forwardo Student demando Financial aid demando Fundraisingo Longer term effect on endowment spending

We are also committed to building on our historic strengths to ensure a relevant, robust experience for our students going forward

2009/10 Operating Budget

macalester college summary: proposed 2009-10 operating budget april 2009

Documents