St. John's and the Economy: Questions and Answers

St. John’s College and the Economy
Questions and Answers

St. John’s College is responding to the economic downturn by taking measures similar to those enacted by other colleges and universities across the United States: cutting expenses whenever possible, slowing down or freezing hiring for staff positions, and freezing faculty and staff salaries. No personnel cuts or furloughs have been necessary, although some tutors have voluntarily taken a reduction in teaching stations for this fiscal year. The result is that this year, like the prior 17 years, St. John’s has a balanced budget.

These steps, along with tapping reserve funds, have helped the college preserve what is most important – the quality of the academic experience for students. To avoid operating budget deficits in the future if the nation’s economy does not improve, the college is scrutinizing its operations to see where more savings can be found, and devoting more resources to strengthening admissions efforts.

Here are answers to common questions posed by alumni, parents, students, and friends of the college.

What is the state of the college’s financial health now?

The successful completion of the college’s capital campaign, which raised $134 million, provided money for ongoing financial aid, enabled the college to build several needed buildings, and strengthened the endowment significantly. The endowment continues to be an important source of revenue for the college. Although the endowment lost value as the recession deepened in 2008, it has rebounded somewhat (from $100 million to $117 million) by the end of September. The college draws between 4.5 and 5.5 percent from the endowment for operating expenses –faculty salaries, financial aid, student services, administrative office expenses. While the draw amount is down for 2009-2010, a measure of overall progress is that in 2005, prior to the campaign, the college’s endowment was $100,000 per student; it is currently $113,000 per student.

However, the recession has affected every area that brings revenue to the college. A drop in freshman enrollment on both campuses, while not as steep as at some other colleges and not as steep as predicted, will affect St. John’s for the next few years. Grant support from the State of Maryland’s Sellinger Program is down significantly. The college expects The Fund for St. John’s (which raises money for annual expenses) to be flat, or to bring in about the same as in the 2008-2009 fiscal year – about $3 million.

Did the college raise tuition to help increase revenue?

The college enacted the smallest tuition increase in 20 years, raising tuition just 2.9 percent for this academic year. This decision reflected both an awareness of how the economic crisis is affecting current students and their families as well as a desire to keep St. John’s competitive with peer colleges.

Is the college still providing financial aid?

The college significantly increased the amount of financial aid to meet the need of students this year. Across both campuses, 62 percent of St. John’s students receive financial aid, and costs in this area have been climbing steadily. The average St. John’s grant is $22,000. Nevertheless, in terms of college priorities, funding need-based aid is – and will continue to be – second only to preserving the quality of the academic program.

How did changes in enrollment affect the college budget this year?

The college budget reflects a 6 percent drop in enrollment in the 2009-2010 academic year, primarily due to the recruitment of smaller freshman classes. That meant the college brought in less tuition revenue, and since tuition makes up about 65 percent of the college budget, this loss in revenue is noteworthy.

Having encountered swings in enrollment in the past, the college does not expect this downturn to continue. However, to ensure a stronger applicant pool the college has made significant changes in its admissions efforts. Last year, St. John’s engaged a consultant, George Dehne and Associates, to evaluate every aspect of its admissions practices. The college has increased the number of admissions counselors and has changed its practices to extend the reach to prospective students. New recruitment materials are being prepared this year by North Charles Street Design, a top firm that also represented the University of Chicago.

What is the college leadership doing to plan for the future?

The St. John’s Board of Visitors and Governors, in concert with the Management Committee (the college presidents and deans, working with the treasurers and vice presidents), has created a task force to study the college’s financial model and make recommendations to ensure the long-term financial health of St. John’s. The Sustainability Task Force brings together board members with extensive, high-level experience in the finance and business sector with representatives from the college. Board members are Greg Curtis, Steve Bohlin (SF82), Perry Lerner, and Stephen Feinberg. Faculty members include Annapolis Dean Michael Dink and tutor Joseph Macfarland and Santa Fe Dean Victoria Mora and tutor Stephen Van Luchene. The group will meet regularly and report on its recommendations at future board meetings, beginning in January.

Responsible financial planning requires the college to take into account all scenarios, including "status quo” and "worst case” models, both of which show substantial deficits in the operating budget by 2013. Ensuring that the college avoids these scenarios is the reason the task force was assembled. College goals will be to restore optimal enrollment, keep financial aid spending within reasonable limits, increase the endowment through investment growth and gifts, and improve fundraising. Overall, the college remains strong financially; the endowment is highly diversified and well-managed, and fiscal responsibility is a priority on the campuses. Our investments, though down, have far outperformed those of peer institutions.

What can alumni and friends do to help St. John’s?

Alumni and friends have always been an important source of assistance for the college. They support St. John’s by making gifts, acting as volunteers, and advocating for the college. Continuing these support activities is crucial to St. John’s. An increase in gifts to The Fund for St. John’s College would never be more appreciated than now.