Kalamazoo College Faces Budget Deficit: Officials Predict Job Cuts
February 23, 2009
by Paula M. Davis - Kalamazoo Gazette
KALAMAZOO -- Kalamazoo College officials are projecting a $2.8 million budget shortfall in the 2009-2010 school year, which will probably lead to the elimination of some positions and reduction of some others to part-time.
How many, which positions and when is not clear, said Tom Ponto, the college's vice president for business and finance.
"There's a lot of uncertainty," Ponto said.
Normally in February, the college's board of trustees sets the following school year's tuition and budget. Leaders will set tuition soon but are putting off adopting the budget until June, when they hope to have a better handle on income.
The uncertainty is in the college's major revenue streams -- tuition, its endowment and fundraising.
Private colleges in certain areas of the country have reported slumps in student applications, putting enrollment in doubt.
For the 2008-09 school year, Kalamazoo College experienced an all-time high in applications. But so far, applications for 2009-10 are down 5 percent from that peak.
The drop is in large part because fewer Michigan students applying to the college, according to officials. Out-of-state applications remain robust, they said.
"It goes back to the uncertainty in the economy, especially in Michigan" as parents and students gauge what they can afford, college spokesman Jeff Palmer said.
This year's tuition, room and board cost $38,000, though after financial aid, the average student paid about $13,450.
Tuition covers 65 percent of the college's $42 million operating budget, so its leaders closely watch enrollment. Applications hint at what the student population may ultimately be. This school year, enrollment was up 1.7 percent, and officials say they hope that trend continues.
The upheaval in worldwide financial markets also is presenting the small, liberal-arts college near downtown Kalamazoo with challenges.
Like the endowments of other higher-education institutions, K's endowment declined 25 percent -- from about $156 million to $117 million -- in the second half of 2008.
Fundraising has been tough in this economic environment, too. The college's annual fund -- a pool of dollars garnered through donations -- is trailing last year's fund by 9.7 percent.
Officials say they hope that by waiting for several months to adopt the budget, they'll have a clearer financial picture.
By June, first-year students will have paid their tuition deposits for the fall, so "we'll have a very good idea what the size of the first-year class will be," Ponto said.
As for fundraising and endowment support, Ponto said waiting will give the business office, "a few more months to assess what the impact has been or has not been on those two important revenue sources."
In a letter to the college community, President Eileen Wilson-Oyelaran said that more than half the savings will need to come from compensation, in part through reducing salary hikes proposed in an earlier budget scenario and also by holding vacancies open indefinitely.
Kalamazoo College employs about 300 people. She said even freezing or reducing salaries would not be enough to avoid potential staff cuts.
"If we expected revenues to increase back to the previously budgeted levels in another year, a temporary salary cut might be a viable approach," Wilson wrote. "However, the budget reductions needs will be ongoing. It may take years before the endowment fully recovers, and any shortfall from a smaller than budgeted (incoming freshmen) class will continue through four years."
Western Michigan University may also be approaching rough budgetary waters in 2009-10.
Gov. Jennifer Granholm's proposed state budget calls for a 3 percent cut in funding for public universities, which would amount to $3.4 million from WMU's operating budget.
Greg Rosine, the university's chief lobbyist, characterized the proposal as "one step forward, three steps back."
"We had no increase in appropriations for several years. Last year, we get a 1 percent increase, and now a 3 percent cut," said Rosine, WMU's senior vice president for advancement and legislative affairs.
The latest estimates predict WMU would see a $14.2 million deficit if state funding were cut, tuition held flat and enrollment were up slightly in 2009-10. WMU President John M. Dunn is expected to testify today before the state House Appropriations Subcommittee on Higher Education.