Skidmore presents positive financial picture for present and future
A "Finances of the College" presentation held Thursday, May 27, via Zoom shared updated FY'21 projections, the FY'22 operating budget and a five-year financial forecast.
FY'21 projections
Skidmore is expected to achieve a balanced 2020-2021 (FY’21) budget, but the pandemic will continue to present some financial challenges for fiscal year 2021-2022 (FY’22).
FY’21 saw a reduction in net regular tuition revenue; increase in COVID-19-related expenses; lower study abroad revenue; and lower auxiliary operations revenue as a result of having fewer students in campus housing.
Offsetting lower revenues and higher expenses, Skidmore received $1.5 million in CARES Act funding; was able to achieve a higher-than-expected endowment takeout due to strong investment performance in December 2020; and departments achieved savings in services and supplies.
Salaries, wages and benefits included $2 million in a one-time discretionary payment to reward employees for their hard work in a very challenging year and to acknowledge the absence of a general salary adjustment (GSA) in FY’21. The payment was made possible through a surplus with careful expense management and not needing the full amount of contingency — one-time money that cannot be carried over or impact ongoing budget planning.
FY'22 operating budget
The operating budget for FY’22 is balanced at $165 million, with a $4.2 million surplus below the line. This represents revenue from over-enrollment and is net of certain one-time expenses.
The operating budget includes ongoing sources of revenue — such as tuition and fees, gifts and grants, endowment distributions and investment earnings, and auxiliary operations — and ongoing expenses, including salaries and benefits, services and supplies, debt service and transfers to the capital budget.
Revenue is budgeted at a 10.9% increase from FY’21, while expenses (including a $2 million contingency — up from the typical $1 million due to continued uncertainties from the pandemic) are budgeted to increase by 11%.
Net tuition revenue, other tuition and fees, and auxiliary operations are primarily student-related sources of revenue and account for 78% of total operating revenues. Net regular tuition revenue is based upon a comprehensive fee increase of 3.5%, 2,350 net fiscal enrollment of on-campus students, 144 net fiscal enrollments of off-campus students, and a budgeted discount rate of 44.2%.
Salaries, wages and benefits are primarily fixed and account for 64% of total operating expenses.
After a year of salary freeze in FY’21, a 2.5% general salary adjustment and a $300,000 market pool are included in the FY’22 operating budget.
FY’22 will be the first year of implementing the overall reduction target of 10% for faculty lines and staff positions. The College has eliminated 18 vacant staff positions and two vacant faculty lines in the FY’22 budget that provided savings to the compensation and benefits budget of approximately $1.5 million.
This summer, due to the pandemic, Skidmore will have limited on-campus summer academic programs, institutes and camps, and all external conferences and events have been canceled. In addition, the College anticipates lower room and board revenue because of the elimination of triples from student housing. The FY’22 operating budget is revised to reflect this impact and shows a $1.2 million deficit above the line that will be funded with below-the-line surplus.
Five-year financial forecast
Five-year financial forecasts are developed as a planning tool using informed assumptions about the future; these forecasts do not represent the operating budgets in the future. This five-year financial forecast includes achieving the targeted 10% reduction in staff and faculty positions by FY’26.
For faculty, the College will work with the Faculty Executive Committee to review open positions and requests for replacements; will continue to apply criteria to identify positions for reduction; and will incorporate salary savings from retirement and replacement of senior faculty.
For staff, the College will continue to employ a strategic hiring process and explore ways to redistribute workload, to redeploy staff and to change service level expectations.
The five-year forecast shows an operating deficit that is projected to be $3.1 million by the end of the forecast horizon, FY’26. Historically, operating deficits of this magnitude have been managed to breakeven as the College moves closer to developing the budget in that year. The long-term impact of COVID-19 is unknown at this time and could dramatically change this five-year financial forecast.
Future budget considerations
To manage future operating budgets, the current cost structure will need to be managed to ensure the College maintains flexibility to adapt to ever-changing needs for financial aid.
Priorities continue to be affordability and access; careful and strategic decisions around new initiatives; and controlling the rate of increases for other expenses.