College Eliminates Unnecessary Expenses, Protects Dwindling Endowment Endowment Loses 7.5% of Previous Value, Falls $150 Million Since 2001

Author: Tom Drescher

A declining endowment has prompted numerous cutbacks in the College's budget over the past few months. Underlying the cutback decisions is a desire to eliminate unnecessary expenses and a commitment to protect the most essential expenditures for students, faculty and staff.
According to Robert Huth, vice president of administration and treasurer, the endowment is down approximately $150 million from the 2001 figure of $714 million. Huth acknowledges that the decline would be considerably more serious "were it not for the generous alumni, parents and friends who have been donating $15 to $20 million annually in support of the College."
Since last year, the endowment fund has lost 7.5 percent of its value and approximately six percent of it has been spent on the operating budget. The college's policy is to cap endowment spending at five percent, but recent financial struggles have forced this percentage up significantly. Now, said Huth, "the College is being careful with its expenses to reduce pressure on endowment spending and is seeking to lower the spending rate below five percent over a several year period."
This is where the budget cuts come in. Initially, the Executive Council obtained suggestions from faculty and department heads for minimizing expenditures, and from students, who were most concerned with the preservation of a need-blind admissions policy and full financial aid. After gathering these suggestions, the Council outlined several guiding principles for the looming budget cuts to protect the most important expenditures.
Since then, the College has been cutting costs in a variety of ways. Winter
Term off-campus study courses were terminated, staff and faculty health care policies have been changed to reflect the current shaky financial situation, professors will receive new computers every four years, instead of every three, and faculty and staff raises will be marginally smaller than in the past. Additionally, the College Handbook will no longer be published and distributed to members of the college community but instead will only be posted online, the Snow Bowl shuttle will now only run on weekends in the winter, and there will be a reduction in funds for building maintenance and modernization.
Said Huth, "We have worked to become more efficient and reduce unnecessary expenses. We have protected the core academic program. When attrition occurs in staffing (retirement, relocation, etc.), we are looking to see whether or not jobs can be changed to reduce labor costs."
In the CCAL, for example, a new staff of student building managers will take over next year for Josh Dearborn, the current Student Center Manager. Dearborn's contract expires this month, and he is leaving for graduate school in the fall. Huth asserts that losses suffered by the endowment fund are "significantly less than those experienced by the equity markets. The endowment fund is invested in various asset classes such as equities, fixed income, hedge funds, and private equity. This provides diversity and reduces some of the investment risk."
Huth explained why it is so important to maintain the endowment: "the endowment subsidizes each student's education at Middlebury," said Huth, "and we need to ensure that it will be able to continue to do that indefinitely."
Besides reducing expenses, the College has expanded fundraising efforts for both capital and operating purposes. The Annual Fund next year has set a goal of over $10,000,000 (about $4,250 per student on average), explained Huth. Financial aid requests are on the rise, and overall investment returns are down. However, according to Huth, Middlebury's budget crunch is not all bad. Interest rates on the College's debt have declined, and the current economic situation has forced the College to reevaluate its budget, continue to support worthwhile expenditure, and eliminate unnecessary ones.