With the continuation of tough financial times and the related difficulties of budget planning, St. Mary’s College tuition is most likely to increase once again this semester. How much of an increase, however, is currently up in the air.
Vice President of Business and Finance Tom Botzman laid out the current budget concerns, the many factors going into the rising cost of the College’s operation, and potential solutions (including tuition increase) in his presentation to concerned members of the campus community Friday entitled Sustainability of the College’s Financial Model.
In this presentation, Botzman first outlined how the St. Mary’s budget works. He said that the budget is divided between the operating budget, which is what the College uses for day-to-day operations, the capital budget, which is used for building projects and maintenance, and the St. Marys College of Maryland Foundation, a 501(c)3 non-profit organization which handles the College’s endowment portfolio (money which is donated to the College to be used as investment capital).
The operating budget of the College is, according to Botzman, around $69 million.
Botzman noted that the College’s revenue comes from four sources: tuition and fees (44 percent); auxiliary services, including the book store and money paid for housing (27 percent); a state block grant based on the cost of living (27 percent); and other sources (22 percent).
Botzman also outlined the primary reasons that the College is in a difficult financial situation. The biggest one, and the one from which many of the others stem, is the current economic recession. Botzman asserted that the past two years “[were] the most difficult budgeting years since the Great Depression.”
This difficult economy has in turn led to a substantial decrease in the amount of money coming from investments made with endowment money, even fixed investments. According to Botzman, case transfer from the Foundation to the College (disregarding money for facilities) went from a high in fiscal year (FY) 2006 of $1.8 million to only $400,000 in FY 2010.
Vice President for Development Maureen Silva, who gave a presentation entitled Trends in Board Fundraising before Botzman’s, said that there was a loss of around $2 million in the endowment during 2008 and 2009, but that it had been recovered for the most part this year and that it was relatively, “not a dramatic decline, and certainly not as dramatic as other institutions.”
Another major problem facing the College is the ballooning cost of health care, for current, and especially retired, faculty. Botzman said that heath insurance costs for the College will increase by $427,000 next year. In contrast, the increase in the College’s state block grant is expected to only be around $280 thousand.
According to Botzman, it would take a three percent increase in tuition next year just to cover health insurance and retiree health benefits.
Other challenges for the College include the meal plans, upon which all profits or loss are taken by the College and a drop in revenue from the book store.
Botzman also discussed how increases in tuition would affect the College. A one percent increase would amount to a $1.2 million deficit and a $200,000 increase in revenue, with each percentage point increasing revenue (and therefore decrease deficit) by around $200,000.
Botzman then outlined three possible scenarios: an increase in tuition by three, six, and nine percent.
A three or six percent increase would still require the College to freeze faculty lines and reduce transfer to the Physical Plant budget, though the nine percent increase would allow an increase to financial aid and would allow the College to restore two eliminated faculty positions.
However, Botzman said he realizes any increase in tuition will increase student strain and decrease diversity on campus.
The College is also in the process of attempting to boost fundraising in order to lessen the need for tuition increase and make the College more stable in the tough economy. In her presentation, Silva emphasized reaching out to alumni and friends of the College, and was optimistic about efforts on this front.
She said, “we’ve more than doubled what was raised last fall… there are a lot of alumni excited about [President Joseph Urgo] and the way the College is heading.” She also said she was confident that she could significantly increase alumni giving through outreach, and planning for a new fund-raising campaign will begin in 2011.
Another possibility for helping the College’s finances would be to reapply for the yearly state block grant, which was last set in 1992 and not tied to the number of students currently enrolled. Since 1992, the College has added around 400 on-campus students.
Botzman said, however, that this possibility was difficult to justify unless the College were to go on a growth campaign, which there are no plans of doing.
Considering that the state has just announced a $1.6 billion deficit that needs to be fixed this year, Botzman said this was an unlikely solution for the short-term. He did say, however, that “the Governor has been really supportive of the College.”
Botzman said that the final tuition increase will most likely be announced in February, at the next Board of Trustees meeting and after the Governor’s budget comes out the following month.
Despite the difficulties of the budget, Botzman remained optimistic.
“The President and Board of Trustees are committed to keeping the quality of academic and residence programs while keeping the cost of the College affordable for students and there families. That’s always the balance.”