Budget will increase despite economy

By Matt Day

Though the economy continues to show signs of instability in the wake of the financial crisis, Macalester will not implement budget cuts again next year.Treasurer David Wheaton said in presentations to the campus community this week that the unusually large freshman class has helped the college avoid further cuts, but that conservative spending is here to stay.

Cuts of between 5 and 7 percent were made across all college departments during budgeting last year, and faculty and staff salaries of more than $70,000 were frozen.

“Last year was the new normal,” Wheaton said in an interview, noting that the budget increases this year would not be enough to restore the funds lost in the cuts.

“We shouldn’t expect to return to that,” Wheaton said. “This is a new place from which we operate.”

A turnaround in the stock market after it hit bottom in March combined with unexpected tuition revenue from the largest freshman class since 1970 to give administrators the flexibility to end the salary freeze and distribute modest increases in department budgets.

Highlights of the 2010-11 budget include increases of 2.5 percent to academic and administrative programs to keep pace with inflation, a one-time payment of $2 million for facilities to help catch up on a backlog of deferred maintenance projects around campus and $1 million in additional financial aid.

The increase in the financial aid budget amounts to about 3 percent, less than the record 12 percent jump for the current year.

The endowment, which funds about one-third of the annual operating budget with a payment based on its value during the previous four years, takes time to reflect downturns in the economy. Wheaton said that during the last long bear market (the “dot-com” burst of the early 2000s) the endowment payout hit its lowest point three years after the stock market bottom.

Wheaton said that after the dot-com burst, the college endured budget cuts of two, six, and five percent in consecutive years.

This time, excess tuition revenue from a larger student body will help shield Macalester’s finances from the worst of the endowment drop.

“Broadly, we’ll see a bubble over four years from the big class to balance out the endowment flatline,” Wheaton said.

The budget Wheaton presented projects surpluses every year through 2013, when the freshman class graduates. After that, the college’s finances will depend on the speed and extent of the economic recovery.

Wheaton said the college was financially strong, and had fared better than most in the financial crisis. The endowment hit its low point down about 14 percent from its all time high in October 2007, lowest among Macalester’s peer group. The average national endowment loss was close to 20 percent.