Frandsen: College’s Financial Trajectory Unsustainable
The College’s financial situation is unsustainable without substantive cuts, administrators say, and by filling out a survey, College community members will help decide where those cuts will fall.
Vice President for Finance and Administration Mike Frandsen said in a research management meeting last Friday that Oberlin’s current financial model is unsustainable, and would leave the College with an increasing deficit in the coming years if the financial system stayed the same. Frandsen’s reports showed a projected deficit of $3.1 million in 2017 that then increases to $5.7 million by 2021.
The Resource Management Working Group, an implementation committee for the 2016–2021 Strategic Plan, sent out a survey Tuesday asking students, staff and faculty for their input on what areas the College could save money and what areas students and faculty see as too valuable to cut.
“Everything we do here is implicitly for you — it’s for your education,” Frandsen said. “We’re making some decisions about what we think is important in that, and you need to trust us some in our experience in that, but you can also help us some by saying what’s not important, what really wouldn’t make a difference to you if we didn’t have it and can stop doing. And we also need to think about how we can generate new revenue.”
The working group also released a 53-page document detailing the financial status of the College and has been holding information sessions for specific groups on campus. Seven students attended last Friday’s student information session.
Frandsen explained that around 80 percent of the school’s revenue comes from student tuition, and that two-thirds of the school’s income goes toward employee salaries. Tuition increased by 2.8 percent in 2016, a smaller tuition increase than the 3.9 percent hike of the previous year. While revenue streams are getting smaller, the College is only increasing the amount of spending, both out of the operating budget and the endowment.
“The board has directed us to reduce the [endowment] spending,” Frandsen said during a resource-management presentation. “Five percent is pretty typical of institutions, and we’ve been spending six. The projection for investment returns as we look ahead is far lower returns than we’ve had in the past.”
In addition to affecting specific departments at the school, these financial challenges could also influence which student initiatives are approved and pushed by the board. College junior Naomi Roswell, one of the student representatives for the working group at Friday’s meeting, said the College’s financial situation could affect how different student endeavors, such as divestment from fossil fuels, are received.
“There are constraints that the Board of Trustees feels like they are under that would make divestment very, very hard,” Roswell said. “There are a number of other huge things going on on-campus, for example, finding a new president. And the amount of time and conversation that has to be devoted to making a decision like divestment is not going to be a priority to the board this year in all likelihood, and anything that has a semblance of the possibility of hurting our endowment funds is not going to be received well.”
The survey will close Dec. 2, after which the Resource Management Working Group will begin to analyze it to make recommendations to the Board of Trustees and the General Faculty Committee about where the College should look to cut funding.