The squeeze is on

The worst stock-market declines since the 1970s, state budgets in the red, a widespread economic slump that just won’t quit—no wonder this winter’s academic press ran headlines like “Budget cuts force Dartmouth to axe swimming, diving programs,” “Dashed hopes in Missouri: A fiscal crisis derails an ambitious agenda for higher education,” and “Rising tuition increases financial woes for U. Wisconsin students.”

Revenues,
expenditures, and all the budget basics at Skidmore

     “It feels awful,” says Karl Broekhuizen, Skidmore’s business VP. “But that’s because it follows the extraordinary boom of the mid- and late 1990s.” Colleges and other nonprofits, he points out, are “in the business of offering services, so they tend to offer more when they have the budget for it. Those enhancements get embedded in the operating budget, and then a revenue decline causes a serious pinch.” Michael Hall, financial planning director, says, “Skidmore could have diverted resources into our reserves, but instead we grew our programs.”
     In capitalizing on the boom of the ’90s, the college added new majors and minors, expanded and renovated campus facilities, raised enrollment selectivity and quality—and earned recognition for it in the college guides and other influential publications. Nobody wants to cut back on gains like those. But at Skidmore, as at colleges around the country, the squeeze is on. This past winter Skidmore financial officers scrambled to cover a $3.1 million shortfall in the college’s $83 million budget, and projections for 2003–04 showed a yawning $5.3 million gap. “It’s clear that we cannot continue to do all the things we’re doing,” Broekhuizen says flatly.
     What went sour in this year’s budget? The sagging stock market shrank the endowment, so the usual 5% takeout amounted to less cash. In the tight economy, fewer donors made major gifts and government funding took a dive. Meanwhile, utility prices jumped and the cost of health benefits skyrocketed. The benefits explosion was a particularly dizzying ride. Hall reports that Skidmore wasn’t given a firm estimate of its mandated set-aside for current and future retiree health-care costs in time for budget planning. “Maybe we could have pressed harder for that figure,” he says with a wince. But they took their best guess, building on last year’s number, and budgeted $1.6 million. Later, well into the fiscal year, “we got the official estimate of $2.7 million and just about fell off our chairs!” By winter it was raised again, to $3 million. “From $1.6 to $3 million—that’s half our shortfall this year,” Hall says.
     As of February, Skidmore had plugged its $3.1 million gap with an amalgam of contingency funds, urgent scrimping, and employment concessions. For example, a nonfaculty hiring freeze, as well as restrictions on overtime and vacation policies, were instituted; office travel accounts were closed; and heating to all campus buildings was ratcheted back a couple degrees.
     Also in February, the trustees approved a basic outline for next year’s budget, with even tougher adjustments. First, 2003–04 tuition will be up 5.95%, a point more than planned. Also, to avoid making any major program cuts without time for planning, administrators opted for a campuswide freeze on salaries. Construction projects, like the new music building and new student housing, are on hold pending gifts or other funding sources; some maintenance, renovations, and equipment upgrades are also deferred. The multiyear schedule for hiring ten or more new faculty, as called for in the college’s strategic plan, will be slowed.
     Final budget approval won’t come until May. Meanwhile, thorough program reviews, administrative and academic, are being arranged. Virtually everyone on campus has come to agree that something’s got to give. The way Charles M. Joseph, interim dean of the faculty, puts it: “We need a leaner program. We need to do less so that we can do it better.” Broekhuizen cautions that “spreading reductions too widely would weaken too many programs and endanger the institution overall.” He adds, “This is not a crisis, unless we fail to take action; and our actions will pinch but will not diminish the quality of a Skidmore education. In fact, we’ll be stronger in the long run.”
     James Kennelly, faculty chair of the Financial Policy and Planning Committee, agrees, “The college is financially solid, but we do have planning problems,” which, he adds, must be confronted “directly and strategically.” For FPPC faculty rep Denise Smith, one key strategic issue is enrollment. “We need a thoughtful discussion about the size of the student body,” she says. “Is 2,100 a magic number? If it grew just a little, would our selectivity slip badly? I’d like to hear a full debate on selectivity.” Another issue is administrative operations, where staff has expanded even while student and faculty numbers haven’t much. Academic programs have proliferated too, sometimes without sufficient resources to support them fully. Clearly, every program and activity will be subject to scrutiny, if not cutbacks.
     In the next few years, says President Jamienne S. Studley, “I see only two certainties: educational quality will be sacrosanct, and a change in scope will be inevitable.” —SR