Budget outlook: Swallowing ‘the bitter pill’ last year puts CC in better position now

Slide1After a year of staff reductions and $8 million in budget cuts, “the broad outlook for CC is stable,” President Richard Celeste told attendees of an Open Budget Forum on Dec. 17. While cautioning that the college’s financial condition is subject to economic changes, Celeste said he sees no reason for further reductions in staff. “We are better positioned than many institutions,” he said.

Since last fiscal year, when an ad hoc budget planning committee tackled major cuts, the college has adopted new budget planning practices. The budget-committee approach was formalized, the budget approval time has moved earlier in the year, and more time will be devoted to budget development. The new permanent Budget Committee is made up of faculty, staff, students, administrators, and a trustee. Next year’s budget will go before the Board of Trustees for approval in February, rather than May. And work on the following fiscal year’s budget will begin much earlier than in the past. 

Slide2Indications that the economic picture nationally is stabilizing, plus signs of improvement on campus, led Celeste to express cautious optimism. The college’s endowment, which fell from its brief  high point of $522.7 million to a low of $401.7 million during the stock market turmoil, has since recovered substantially to a level of $446 million. There are signs that the campus community is spending carefully: The percentage of operating budget expended as of Nov. 30 is 40.5 percent, compared to 44.5 percent at the same time last year, and 44 percent at the same time in 2007.

“That suggests a recognition that in order to do right, we all have to pay close attention to our expenditures,” Celeste said. “There will continue to be places where we have to make careful choices. We have to continue to operate in a frugal fashion. I am grateful for the hard work done by all of you.”

Slide3Dean of the College/Dean of the Faculty Susan Ashley, who chairs the Budget Committee, explained the background of the budget adjustments, starting with the Working Group on Stewardship and Cost Containment, which cut the budget on the administrative side by 5 percent in fall 2008, before the economic slide. Then, in December, when the recession had dramatically cut the value of the endowment, the Board of Trustees determined that the college needed to reduce staff positions and find $8 million in savings. Celeste created an ad hoc budget planning committee to recommend ways to balance the budget, and initiated a voluntary staff separation program. The ad hoc committee asked administrative departments to identify at least another 5 percent in economies, and academic departments to aim for 10 percent or more in reductions. In February, the trustees directed the college to identify up to $12 million in savings or enhanced revenues, and mandated a full review of programs.

Reducing positions and cutting $8 million in expenses resulted in a balanced budget for fiscal years 2009-2010, 2010-2011, and 2011-2012. The admissions office met enrollment targets and yielded a highly qualified first-year class. In May, trustees approved the projected budget and the ad hoc budget planning committee’s recommendations for a new budget process and a set of basic operating principles for budget making.

The permanent Budget Committee’s goals are:

  • Maintain the quality of Colorado College’s educational program
  • Hold undergraduate enrollment target at 1,975
  • Keep increase in cost of attendance as low as possible
  • Provide enough financial aid to support current students and recruit an incoming class at least as talented and diverse as the present first-year class
  • Retire all college debt as quickly as possible and in a time frame no longer than 15 years
  • Provide compensation increases understanding that total compensation cannot increase faster than the increase in the rate of tuition because tuition pays approximately 3/4 of the cost of increases
  • Provide the increases necessary to cover the continued decline in payouts from endowments due to the practice of 12-quarter averaging

Ashley said last year’s hard work and tough decisions have paid off. “We choked down the bitter pill, and as a result we have much more flexibility as to how we use our resources,” she said. She pointed out that other colleges instituted furloughs, did not hire new faculty, and overextended their financial aid resources to yield their incoming classes — at a level they won’t be able to sustain. None of those things happened at CC.

“We  need to be grateful for our relatively strong resource base,” she said.