Student Examines SU's Budget

Written by Meredith Orf
Megaphone Guest Writer

[Editor's Note: This is the full version of Meredith's article about the SU Budget. If you wish to continue where you left off in the text version of the Megaphone, please click here.]

Table of Contents:
1. Introduction
2. Tuition/Room & Board Questions
3. Endowment Questions
4. Budget Questions
5. Cost-Cutting Questions


Like most students here, I used to take Southwestern’s budgetary decisions for granted, complain idly about tuition increases, and wonder at the mystery of student payroll regulations. At some point, though, your investment (financially, mentally and emotionally) in a school like this has to inspire you to take an active role in understanding — and perhaps improving — it. Otherwise, you’re paying for an education that you don’t really believe in.
I researched for and wrote this article after finally beginning to wonder what all of our fundraising was about, and why tuition kept going up, and why nobody else was asking enough questions to get the big picture. We hear snippets of information here and there, but I want to bring everything together so that students can have a comprehensive look at the way the budget (to which we contribute, and from which the material elements of our experience are procured) is actually organized. I talked to administrators like Jerry Brody, Richard Anderson, Ron Swain and Mike Leese; I took notes at the recent Town Hall meeting at which President Schrum and Tom Oliver explained various aspects of the budget; I read articles; I talked to Student Congress representatives Kacie Wilson and Alex Caple; and I solicited feedback on a draft of this piece from several of the aforementioned people afterward. I am immensely comforted and encouraged by the level of openness in the administration here, and the staff’s willingness to talk to curious students, so my grateful acknowledgement goes out to those who let me interrogate them on the matters below.

Rather than writing this Q&A from the perspective of an objective journalist or a subjective pundit, I’ve tried to frame my explanations in terms of my actual position – that of a graduating senior who has gone to great lengths to understand both the administrative and student viewpoints of the university’s financial situation. I hope that students who read this will discover the practicality behind many higher-level budgetary decisions that initially seemed upsetting or self-defeating, and likewise that administrators will continue to be receptive to the potentially brilliant suggestions of students who are analyzing the university with fresh eyes. This article should start such a dialogue, not conclude it.
The first section is on tuition, room and board and other student concerns like financial aid and payroll. The other three sections explain the endowment, the budgeting process, and cost-cutting attempts.

    Tuition, Room/Board

Why does tuition keep going up?
See the section on the endowment below; tuition is rising substantially every year to make up for reductions in the value of the endowment, which was reeling after Sept. 11. Other reasons that it rises, endowment aside, relate to keeping up with salary increases, the costs of job benefits, ascending energy prices and plain old inflation.

What does tuition money pay for?
It goes into the pool of operating money and becomes indistinguishable from other sources, but tuition makes up the largest percentage of immediate funds. See the budget section below for information on the management of this operating money.

Does the two-year on-campus housing requirement have anything to do with rising costs?
Maybe not directly. But, like preserving or slightly raising our enrollment levels, requiring students to live on campus for two years ensures that the university isn’t losing money by paying for facilities and services that few are using. Our residence halls are here anyway, so we may as well have students living in them. (Also, on-campus housing requirements at comparable schools are linked to improved student involvement and retention, which isn’t bad for keeping costs down either.)

Why is it more expensive to buy a student meal plan than to buy the same number of meals individually?
The cost of a meal plan relates to the service price negotiated with Sodexho for food and dining hall operations, but also general expenses. Again, the money is incorporated into the greater pool of University funds, so meal plan prices are set to subsidize a certain amount of the projected budget. Students with meal plans thus absorb more of the costs because they are more likely to live on campus and utilize the resources being paid for.

Can you put our tuition woes in perspective somehow?
The full cost to educate one student for one year at Southwestern is about $45,000. The endowment softens that to $32,000, the largest price that is paid by families who can afford it. The average student pays around $18,000 in tuition per year after financial aid and scholarships.
On top of that, Southwestern is among only 40 colleges in the United States that focus exclusively on undergraduate education, which means that all tuition money goes toward undergraduate programs. Even Austin College and Trinity University, which compete with Southwestern for undergrad students, have graduate programs to finance.
The tuition increases at SU may seem interminable, but they are about average among comparable private universities in this part of the country right now.

Does financial aid increase proportionally to tuition?
In some ways, yes. SU preserves a certain amount of money each year to help rising sophomores, juniors and seniors afford continued attendance. President Schrum says that “for the last two years, we’ve worked to help need-based aid go up [in proportion] to tuition increases using a 39 percent discount rate.” Merit scholarships stay constant, however, and SU doesn’t yet have the financial resources to create additional incentive-based merit scholarships for upperclass students, although it will potentially be doable several years from now.

What’s the status of student worker positions?
National implications aside, the continuous minimum wage increase is unequivocally complicating matters for the student payroll within this university. Over the next couple of years, as the minimum wage rises and SU struggles to work within a conservative budget, student worker money will necessarily be divided among fewer job positions.
Student wage money is budgeted separately from other departmental accounts each year, and University policy protects money from being moved between such accounts after the budget is approved. But it’s a double-edged sword, because even major student employers like Residence Life and The Megaphone can’t use surplus funds from another account within their operations (like programming or publishing money) to increase wages unless the money comes from an external source.


What is the endowment?
It’s basically a savings account for the university, and it comprises investments monitored by the Board of Trustees, who also determine the spending rate (that is, what percentage of the endowment can be used for expenses each year). After tuition, the endowment is our largest source of operating money. It sits at about $280 million right now. By comparison: Trinity University has an endowment of over $900 million, but the undergraduate student body is twice that of SU, and there are over 200 graduate students as well.

How is it managed?
The Board of Trustees recently created an investment committee for the purpose of diversifying the assets in the endowment. To that end, SU is currently interviewing five different investment firms with varying styles. Many of the endowment’s investments have been managed for years by Fayez Sarofim, after whom our Fine Arts School is named. It was a rather comfortable nest egg until Sept. 11, when the large-cap stocks (the bulk of the investments, Coca-Cola and Exxon being examples) suffered. The endowment dropped from $345 million to $245 million in the year after Sept. 11. Although the endowment remained among the top 200 in the nation, SU had to cut $4-6 million from the 2002-2003 budget to retain balance, and managed to do so without layoffs.
The Board limits our endowment spending rate to 6% or less each year. This coming year, it will be 5.75%.


Besides tuition and endowment money, what are our funding sources?
After tuition and the endowment, our biggest sources are gifts and grants. We’ve raised about $10 million in gifts this year to pay for the construction of new buildings (like the upcoming admissions center and the recently completed Dorothy Lord apartments) and renovation of existing ones (like the Fine Arts Center, and residence halls Herman Brown and Moody-Shearn). Part of President Schrum’s job is to seek out gifts from donors and alumni, but many wealthy donors (both individuals and foundations) share their resources among various universities and causes.
We have about 13,000 living alumni (the University of Texas has over 300,000), and about 33% of them donate to their alma mater, accounting for about half a million dollars a year.
SU also utilizes governmental grants for student aid, faculty research, and programs like Upward Bound. However, our use of federal funds obliges us to follow a slew of regulations, including everything from National Science Foundation participation agreements to drug-free workplace requirements.

Who decides how all this money is used?
The Senior Staff and the Budget Committee work together to manage the operating budget. The Budget Committee is composed of President Jake Schrum, Provost Jim Hunt, VP Jerry Brody, VP Richard Anderson, Senior Advisor Ron Swain, Executive Assistant Francie Schroeder and Associate VP Gary Logan. According to Anderson, “Each person focuses on the needs of the entire University, not just their specific areas of responsibility. They all have open times for visits and encourage members of the community to visit with them.” These administrators present the yearly budget to the Board of Trustees, whose approval is final. The Board meets once per semester and also for a retreat in January.
The operating budget for next year is approximately $61 million, which matches this year’s budget by way of general belt-tightening. Since Southwestern isn’t about making profits, the administration attempts to balance the budget every year, especially because foundations shy away from sharing financial support with universities that have unbalanced budgets. We’ve actually had a balanced budget for the past three decades, but as mentioned above, this is only possible because tuition goes up to offset losses in the endowment. Some years, endowment income has gone up, allowing for milder increases in tuition.

How does SU’s budget work, and what are the expenses?<
About 60% of the operating budget pays for salaries and benefits. The rest goes to academic resources (library, etc), building maintenance, utilities, faculty support, student organization expenses, athletics and financial aid, among other things. Within academic and administrative departments, faculty and staff have a certain amount of control over what the departmental allocations are used for.
Residence halls are initiated with gifts and built with the money from bonds because tuition and room/board pay it back for them over time, whereas academic buildings aren’t constructed until all necessary funds are in place.
State universities, because they operate with government funds, are required to post their budgets publically. While SU is not required to run a transparent budget in that sense, a record of its expenses is available to students or other invested individuals who are enterprising enough to hunt for the information. In my experience, the vast majority of administrators are happy to talk to students about the budget and clarify the reasoning behind various expenses.

Do students have any influence on the process?
There are four student representatives on the president-led University Council, which meets a few times a semester and discusses various aspects of SU management, including budget, renovations, faculty positions and more. The UC doesn’t have much to do with the endowment or student payroll, nor does Student Congress, which is the main representative body for students. Student Congress’ only direct financial power lies in its Fees and Allocations committee. This committee, along with the University Programming Council, approves student organization budgets from the annual pool of $25,000 (and $4000 for emergency funding).
However, new projects that will require University money are often presented to Student Congress for feedback. Recent examples include the potential service of textbook information on WebAdvisor, publicity for revamping the Honor Code and sustainability initiatives from the Talloires Committee.

Which services do we outsource?
The major examples are the dining services, the bookstore, and the internet system. Among the operations that Southwestern manages in-house are the Physical Plant and the Health and Counseling Services. I asked Anderson how we determine which services are best outsourced, and he told me that we weigh what we could do ourselves against the abilities of outside contractors (whose advantages include breadth of service offerings, experience, volume purchasing, management and personnel).


What steps is SU taking to curb operating costs?
Different things, here and there. We prioritize which open job positions need to be filled versus those that can wait. We avoid running the sprinklers after it has rained, and we irrigate with gray water. The golf course is a service that pays for itself, relatively, via its availability to the community. ITS is working on a system to cut back expensive paper waste that results from unchecked printing in the computer labs. We try to reduce the budget every year.
Certain sacrifices are complicated to work around; for example, cutting back on campus upkeep would compromise Southwestern’s appeal, since its physical beauty is among the top draws for students. Fixed or unalterable costs include utilities (which are ultimately up to the city of Georgetown, although we’re also looking into green energy in hopes that it will save money in the long run) and medical coverage expenses.
Early this coming summer, SU will bring in an administrator from Davidson College in North Carolina to get an outsider’s look at our expenses.

How do other schools keep costs down?
The Chronicle of Higher Education recently published the results of an American Association of State Colleges and Universities survey on cost cutting in the 114 institutions that responded. The top five areas in which to save money were energy management; consortium purchasing (of computer services, liability insurance, office supplies, library resources, etc); facilities and infrastructure; use of contingent faculty; and dining and residence life operations. Although this survey refers to state schools, the categories are fairly applicable to Southwestern. The Chronicle included a blurb observing that some colleges save money by outsourcing services like the bookstore and on-campus dining, but others find it more economical to run such services in-house because the profit margins can supplement the school’s budget. The article also noted the advantages of paperless accounting and direct-depositing paychecks as well as campus-wide energy-conservation initiatives, none of which are fully implemented at SU yet, but I think we’re moving in that direction.

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