Economy freezes pay, not hope

By Peter Wright

The financial bubble has burst around Macalester. As he outlined in a letter sent to members of the Macalester community on Friday, Feb. 20, President Brian Rosenberg said that the college will rely on pay freezes, an increase in financial aid, and possible program budget cuts to address the financial situation next year.The most prominent changes, at least in the short term, will be centered on faculty and staff. Rosenberg said that there will be no layoffs next semester, but the college will not hire anyone to new positions. Already existing positions, however, will still be filled.

In addition, all faculty and staff making more than $70,000 a year, and outside of special arrangements, like those made through unions, will not receive any pay raises next year. Employees who make less than $70,000 and are not in a union will receive a $400 pay increase.

Rosenberg said that reactions to the pay freeze have been fairly limited, but he said the response he has seen has been positive so far.

“I think there’s overwhelming support at this point that we’d rather have a salary freeze than have people losing jobs,” Rosenberg said.

In addition to not creating new positions, Rosenberg said that if any positions go vacant, then the college will weigh the importance of that job to the school. He pointed out, however, that in a college like Macalester, most of the jobs are necessary.

“What we are going to do is be more careful at looking at every vacancy that opens and asking ourselves, ‘Is this a position we need to fill?'” Rosenberg said.

Much of the money saved from the pay freeze will be added to Macalester’s available financial aid.

“It’s really that salary freeze that’s freeing up the dollars we will put into financial aid next year,” Rosenberg said.

Available financial aid will increase by $3.5 million dollars next year, about $1.5 million more than a normal annual increase, Rosenberg said.

He said that the increase in financial aid has several main purposes. The first, and most obvious, is that with an economic downturn, demand for financial aid may increase.

“We’re going to continue to meet the full need of every admitted student,” Rosenberg said.

The second reason for the increase is to attract new students. Rosenberg said that the school operates on a model each year based on a new class of 480 students and 20 transfers. If for some reason that number falls short, then the school would be facing financial troubles.

“The most dramatic potential increase would be a shortfall in a class,” Rosenberg said.

Each year, Admissions, with input from other offices in the administration, predicts a number of students to offer admission to, expecting a significant number to turn down the invitation. That’s where the numbers have the potential of going wrong, particularly in bad economic times.

As a hypothetical example, Rosenberg described a family with a combined income of $200,000, and one person from that family started attending Macalester last year. One year later, that same family still has the same income, but they’ve watched their property value plummet and their stock go downhill.

That family might be less comfortable paying for a Macalester education at that point, not necessarily because they can’t afford it, but out of fear about what could happen to their income.

“People are just scared right now,” Rosenberg said.

The annual budget is normally approved at the March meeting of the Board of Trustees, but Rosenberg said that the date for budget approval was moved to May in order to allow more information to surface about financial need and incoming students next year.

“The reality of it is we won’t know until all of the returning students have filled out their financial aid forms and we know who’s accepted our offers of admission,” Rosenberg said.

He said that the entire budget hinges on the student body. If admissions look good, then there will only be modest cuts in the budget, and if admissions look bad, then the budget will face much more drastic reworking.

“The biggest uncertainty right now is in terms of program budgets,” Rosenberg said.

As he wrote in his letter on Friday, Rosenberg said that all the college departments have been asked to make two different budgets. One looks normal, while the other considers a 10% budget cut, a best case and worst case for expected finances next year.

Rosenberg said that the goal in getting two budget proposals is to gain input on what items could be cut with the smallest impact. He said that he would like to see as many things relating to the students left in as possible, saying he would rather see a department cut some funding for food rather than anything academic.

“We’re going to try to be strategic about them, with the same goal of having the least possible impact on the student experience,” Rosenberg said.

Rosenberg said that he wants to hear as much input as possible dealing with the budget, but cautioned that it would simply be too complicated to follow all the suggestions he gets and that whenever anything is cut, someone will miss it.

Political Science Chair David Blaney said that he does not think the double budget approach is enough. He said that the possible budget cut is coming too late, and that there should be a mandatory 5% cut to better prepare the comput.

“I think we should have been asked to cut already this year,” Blaney said.

Overall, confidence is fairly high in Macalester’s ability to survive this economy. Rosenberg said that other schools spent too much money and had too much debt, and that they are the schools that are struggling now.

“One of the things that we’ve been pretty disciplined about is not overspending,” Rosenberg said.

Economics Chair Pete Ferderer agreed, praising Macalester’s finances.

“I think the college has done an exceptionally good job managing its funds,” Pete Ferderer said.

Rosenberg said that working through a budget crunch could even help Macalester in the long run. He said that, aside from being in a more secure situation than other colleges, the economy gives a good excuse to do major reconstructing.

“I’m hoping we can come out of this ahead of our peer institutions,” Ferderer said. “Looking back on this we’ll say we responded well.”

“One of the things it can do is force you to ask questions like, ‘What’s most important to us?'” Rosenberg said. “There can be something healthy about that exercise.”

Rosenberg said, though, that the current plan to freeze salaries and maybe cut budgets can’t last, however, too long simply because employees will want their raises back in the near future.

“It’s something you can do for a year,” Rosenberg said.

“For the short term, it’s something we would be able to absorb” without a significant impact on student experience, Biology Chair Mark Davis said.

Recalling the financial crisis was faced by Macalester in the 1970s, Rosenberg said that, while the money saving steps seem today may seem significant, they’re no where near what the college has faced before.

“We’ve done this before and [with] much worse circumstances,” he said.

“The most dramatic potential increase would be a shortfall in a class,” Rosenberg said.

Each year, Admissions, with input from other offices in the administration, predicts a number of students to offer admission to, expecting a significant number to turn down the invitation. That’s where the numbers have the potential of going wrong, particularly in bad economic times.

As a hypothetical example, Rosenberg described a family with a combined income of $200,000, and one person from that family started attending Macalester last year. One year later, that same family still has the same income, but they’ve watched their property value plummet and their stock go downhill.

That family might be less comfortable paying for a Macalester education at that point, not
necessarily because they can’t afford it, but out of fear about what could happen to their income.

“People are just scared right now,” Rosenberg said.

The annual budget is normally approved at the March meeting of the Board of Trustees, but Rosenberg said that the date for budget approval was moved to May in order to allow more information to surface about financial need and incoming students next year.

“The reality of it is we won’t know until all of the returning students have filled out their financial aid forms and we know who’s accepted our offers of admission,” Rosenberg said.

He said that the entire budget hinges on the student body. If admissions look good, then there will only be modest cuts in the budget, and if admissions look bad, then the budget will face much more drastic reworking.

“The biggest uncertainty right now is in terms of program budgets,” Rosenberg said.

As he wrote in his letter on Friday, Rosenberg said that all the college departments have been asked to make two different budgets. One looks normal, while the other considers a 10% budget cut, a best case and worst case for expected finances next year.

Rosenberg said that the goal in getting two budget proposals is to gain input on what items could be cut with the smallest impact. He said that he would like to see as many things relating to the students left in as possible, saying he would rather see a department cut some funding for food rather than anything academic.

“We’re going to try to be strategic about them, with the same goal of having the least possible impact on the student experience,” Rosenberg said.

Rosenberg said that he wants to hear as much input as possible dealing with the budget, but cautioned that it would simply be too complicated to follow all the suggestions he gets and that whenever anything is cut, someone will miss it.

Political Science Chair David Blaney said that he does not think the double budget approach is enough. He said that the possible budget cut is coming too late, and that there should be a mandatory five percent cut to better prepare the comput.

“I think we should have been asked to cut already this year,” Blaney said.

Overall, confidence is fairly high in Macalester’s ability to survive this economy. Rosenberg said that other schools spent too much money and had too much debt, and that they are the schools that are struggling now.

“One of the things that we’ve been pretty disciplined about is not overspending,” Rosenberg said.

Economics professor Pete Ferderer agreed, praising Macalester’s finances.

“I think the college has done an exceptionally good job managing its funds,” Pete Ferderer said.

Rosenberg said that working through a budget crunch could even help Macalester in the long run. He said that, aside from being in a more secure situation than other colleges, the economy gives a good excuse to do major reconstructing.

“I’m hoping we can come out of this ahead of our peer institutions,” Ferderer said, adding that hopefully the college will look back and say it responded well to the crisis.

“One of the things it can do is force you to ask questions like, ‘What’s most important to us?'” Rosenberg said. “There can be something healthy about that exercise.”

Rosenberg said, though, that the current plan to freeze salaries and maybe cut budgets can’t last, however, too long simply because employees will want their raises back in the near future.

“It’s something you can do for a year,” Rosenberg said.

“For the short term, it’s something we would be able to absorb” without a significant impact on student experience, Biology Chair Mark Davis said.

Recalling the financial crisis was faced by Macalester in the 1970s, Rosenberg said that, while the money saving steps seem today may seem significant, they’re no where near what the college has faced before.

“We’ve done this before and [with] much worse circumstances,” he said.