By Steven Jackson
Beloit College is going through changes. Strong Stadium has new turf, paint and track, and the lacrosse program is revving its engines. Buildings on campus are being repaired and renovated. Grounds management was recently turned over to a private contractor. The revamping and possible outsourcing of food services is hot on everyone’s lips. There is talk of annexing an industrial building on the Rock River to use as an athletics and student activities center.
With such momentous times as a backdrop, the college budget may not seem like an exciting topic. But a knowledge of the budget can help us understand the programmatic changes that are occurring, and put our lives on campus in perspective.
What is the budget?
The operating budget of Beloit is the total funding necessary to keep the college running. Expenses include things like utilities, maintenance, employee compensation and financial aid. The bulk of our college’s expenses come from faculty and staff salaries at 33 percent, and financial aid at 33.1 percent.
Tuition, room and board and other student fees add up to 90 percent of Beloit’s operating budget. The budget for the 2010-11 academic year was about $56.5 million.
A college’s endowment is often used as a way to gauge financial health and security. Endowments are comprised mostly of specified gifts and donations from alumni and friends of the college. An endowment is essentially a savings account, but rather than sitting in a bank, it is held in a variety of stocks, bonds and other investments. Most endowment growth is the result of savvy investments on the part of financial managers appointed by the trustees. Most of the endowment is restricted; the bulk of it is not accessible for spending. Beloit’s endowment currently stands at about $108 million. Each year, the college can use about 4.5 percent of the endowment for operating expenses.
A Perfect Storm
Before the housing bubble popped and stocks worldwide took a dive, Beloit’s endowment was in good shape. We reached a historical high of approximately $134.5 million by year’s end in 2007. Sitting on such a healthy nest-egg, the college made the decision to move forward with phase one of the Master Plan. The Master Plan is a long-term project established in 2003 to revitalize the campus culture, mostly through environmental and facility improvements.
The costliest piece of phase one was the Center for the Sciences, a building with a $36.5 million price tag. Other projects included a new boiler system and more pedestrian space. After completing phase one, Beloit’s debt went from about $20 million to $60 million, which was significant, but seemed manageable with a healthy endowment.
And then the unthinkable happened. In the 2008-2009 academic year, Beloit’s endowment fell dramatically, from about $130 million to around $80 million at its lowest point. The crash can be attributed to bad luck and hard economic times in general. “We had a reasonably conservative portfolio,” said President Scott Bierman.
Then, in the fall of 2008, Beloit took another hit: the student body was smaller than expected by about 28 students. With 90 percent of our operating budget coming from student tuition and fees, this dip in the student body made our financial burden considerably heavier.
“The budget had been planned on an opening enrollment of 1325,” said Nancy Benedict, vice president of enrollment. “When you’re budgeting right up to an exact number like that, it has some implications. And unfortunately, that’s also when Wall Street collapsed.” That October, the Dow fell by more than 1500 points.
Beloit’s endowment has since recovered to $108 million, but our debt from phase one of the Master Plan continues to be a challenge. Our annual mortgage payment on the debt has jumped from $1.5 million to about $4.5 million.
On top of that, Beloit College has serious catching up to do in terms of faculty and staff compensation. On average, we compensate full-time faculty at a rate about 20 percent below the standard for colleges of our size and quality. “Relative to almost any other [college], we have not been good at keeping up with industry trends in the last ten to fifteen years,” said Bierman.
Another budget issue is the upkeep of our campus. With a physical plant value of $140 million, we need to budget 2 percent, or $2.8 million, per year towards our facilities and surroundings. Currently, we only have about $700,000 for this purpose.
These problems amount to what Bierman calls the “deferred maintenance of people and place.”
Stay tuned for later installments that more directly address Beloit’s budget challenges, and what we as an institution can do about them. For more information on the operational budget, endowment and other institutional statistics, visit Beloit’s Institutional Research, Assessment & Planning page.