This week, we have compiled the most important stories from the decade pertaining to College finances. We have pulled a selection of actual headlines from past issues, and condensed and synthesized stories relevant to each headline in order to showcase some of the most significant moments and enduring issues covered by the Orient. While our compilation is comprehensive, it is by no means complete. We encourage readers to pursue these headlines and others in our online archives, and to look back at past installments of this series.
The final installment: A look ahead.
Bowdoin prepares for financial uncertainty, October 12, 2001
The start of the decade found the College in a strong financial position, the Orient reported in November of 2000, with an improved bond rating to borrow money with greater ease and nine consecutive years of balanced budgets.
The College was not immune, however, to the economic hardships that followed September 11, 2001, which included a depressed stock market and widespread economic slowdown. Then-Treasurer of the College Kent Chabotar told the Orient that the College had been preparing for times of economic uncertainty for about two years. "We're not battening down the hatches or heading for the basement. We're just being prudent," he said in a September 2001 article.
Bowdoin's endowment, estimated around $450 million at the time, was meant to "act as a buffer in times of economic instability," Chabotar said. However, he expressed concern that the 23 percent of the annual budget drawn from the endowment—invested in stocks, bonds, real estate, venture capital and private equity—could be at risk in shaky markets.
In an October 2001 follow-up article, as the nation responded to downward trends in economic and financial indicators, Chabotar said the College was expecting "an endowment that is lower than our forecast had been." Director of Budgets Gerry Boothby announced the endowment was at $433 million on June 30—down from $466 million in June of 2000, and significantly lower than the original prediction of $500 million.
Chabotar said the College would not change its investment strategies and predicted that, in a "worst-case scenario," budget deficits would reach $1.9 million the next year (about 4 percent of the operating budget) and $5 million in five years. In contrast, the Orient reported that the College's budget crisis in 1988-89 saw deficits of 9.7 percent of the operating budget. Rather than cut academic programs, faculty positions, or financial aid, however, Chabotar said in November that the College planned to cut $1.8 million from the budget to avoid a deficit.
By the end of November of 2001, the National Bureau of Economic Research officially declared that the United States was in a recession. Following years of high endowment performance and increases in employee benefits and salaries, the College estimated its endowment dropped further to $420 million in November and would set its operating budget $4 million less than predicted. To complicate matters, Bowdoin saw a 24.8 percent increase in total energy costs, and a 30 percent increase in the cost of employee health insurance to $5 million, the Orient reported.
In response, the College announced it would set salary increases of the 550 non-faculty employees to 2 percent each year rather than 4 percent, but would still raise salaries of the 150 faculty members by 4 percent to 6 percent. Despite Bowdoin's increased expenses, a follow-up piece in December of 2002 reported that the College was working to manage its health program so that employees did not face significant increases in coverage costs.
Following the year's economic turmoil, in November of 2002 the Orient reported that Bowdoin managed a positive return on its endowment of 1.45 percent, significantly better than the negative 4.89 percent return average among other colleges and universities for the 2002 fiscal year. Vice President for Investments Paula Volent said she was "thrilled we have done a really good job," thanks to a diversified portfolio and smart investment managers.
Although performance was better than expected, College officials and trustees exercised financial prudence by approving a tight budget in February of 2003 for the 2003-2004 fiscal year. The College decided to "reduce funding to programs not believed by the administration to make a significant contribution to the priorities of the College," and to reduce total payroll by $1.2 million, the Orient reported. Earlier in the fall semester, the College anticipated a net operating deficit and cut expenses, but soon realized that programming and payroll cuts were necessary to balance the budget.
The $1.2 million reduction required the elimination of 11 vacant positions, the expiration of eight "casual or temporary" positions, and laying off the equivalent of 10 full-time administrative and support staff positions. Five employees chose an early retirement plan and 18 employees accepted reduced work hours, bringing the number of full-time equivalent employees from 795 to 760. While many departments on campus were affected by the cuts, among the hardest hit were the Department of Athletics, which made $200,000 in cuts, and technology spending, which made $850,000 in payroll and operational reductions.
Bowdoin finds itself well-endowed for 2003, October 24, 2003
For the next five years of the decade, from 2003 through 2007, the College saw steady growth on campus: an endowment with above-average performance, the launching of a $250 million capital campaign, and extensive building projects.
In October of 2003, Bowdoin ranked third for its endowment performance and management out of 158 colleges and universities followed and evaluated by the firm Cambridge Associates, and 10th among all endowed institutions. The report gave Bowdoin high marks in a number of categories, including fiscal returns and investment returns. Following an endowment slump in 2001 and 2002, the College reported a 9.03 return on the endowment for the 2003 fiscal year, well above the median return rate of 3.2 percent reported by Cambridge Associates. Bowdoin's five-year annualized return on its endowment was 6.0 percent, compared to an average of 4.3 percent. By the end of the 2004 fiscal year, the Orient reported that the College's endowment was estimated at $514 million.
By 2005, the College's endowment began to grow at higher rates. A study conducted by the National Association of College and University Business Officers (NACUBO) on 746 schools reported an average investment return of 9.3 percent for the 2005 fiscal year, while Bowdoin's rate of return was 13.6 percent, the Orient reported. The endowment grew to a market value of $578 million, more than doubling its value a decade before of $223 million in 1995.
In the fall of 2006, there was some controversy around Bowdoin's investment policies, the Orient reported. After some students expressed concerns about genocide in the Darfur region of Sudan, President Barry Mills recommended to trustees that the College "avoid investments in corporations with business dealings in Sudan."
In January of 2007, Bowdoin received an overall grade of B- from the Sustainable Endowments Institute's report card on endowment policies and campus environmental practices, but received a C in the "investment priorities" category, and an F in "endowment transparency" and "shareholder engagement." At the time, Mills said he was not concerned about political evaluations of the endowment: "The investment of our endowment is designed to maximize returns...To find yourself engaged in a political and social debate about priorities is not the purpose."
Bowdoin boasted a 24.4 percent return during the 2007 fiscal year, climbing from $673.4 million in 2006 to $827.7 million. The Chronicle of Philanthropy reported an average rate of return for endowments and foundations of 17.5 percent. The Orient reported that the rate of return was the highest one-year return since 1986, and the fourth-highest since 1970.
Campaign aims for $250 million, November 10, 2006
While Bowdoin's endowment was outperforming expectations in the middle of the decade, the College was making plans for other avenues of growth. At an event in November of 2006, the College formally launched The Bowdoin Campaign, with a goal of raising $250 million by June 30, 2009. The College aimed to raise $76.5 million for financial aid, which Senior Vice President for Planning and Administration Bill Torrey said was the "hallmark of Bowdoin fundraising."
The campaign also sought $70 million for academic affairs, approximately $33 million for student affairs items, and other funds for building projects in progress and operating budget support. The public launch marked the halfway point of the capital campaign's lifespan, as it had already privately raised $147 million since its start in 2004. By September of 2009, the College announced that the Bowdoin Campaign had successfully raised $293 million for the College.
College limits spending but remains 'secure', October 24, 2008
In the fall of 2008, the College turned its eye to the nationwide economic turmoil. Following a period of sustained growth, the endowment saw a return on investment of only 1.3 percent in the 2008 fiscal year. In September 2008, Mills said he was most concerned "about the pressure of college costs for families, the effect of increasing oil and gasoline prices for employees, and the diminishing retirement accounts of employees," the Orient reported. Although Director of Student Aid Stephen Joyce acknowledged that it was a "nervous time for families," he said he was not worried about the College meeting financial aid demands. College officials said they did not anticipate the economy to conflict with building projects already underway or funded, and that donations were on track for the Capital Campaign.
Wachovia Bank froze a fund that contained less than $500,000 of College funds in September of 2008, indicating that Bowdoin, too, was susceptible to America's credit crisis. The short-term investment fund, managed by the nonprofit Commonfund, contained millions of dollars of the College's money before Bowdoin moved most of it to other investments over the summer, the Orient reported. Senior Vice President for Finance and Administration Katy Longley said the College "moved the funds elsewhere to safer investments," because some of the Commonfund investments made the College "uncomfortable."
More than 1,000 colleges and private schools invested in the $9.3 billion account when Wachovia announced that it would no longer serve as trustee of the fund, and only allowed participants to withdraw 10 percent of their assets as a result. Although schools were later allowed to withdraw up to 57 percent of their assets by the end of the year, participating colleges had concerns about meeting day-to-day expenses without access. Both Mills and Longley confirmed that the Commonfund investments were a "reserve fund," one that the College didn't even use.
While the economy worsened through October and the College proactively limited the "expansion of facilities, faculty, and other College programs," Mills announced that all staff and faculty positions, financial aid, and "everything that comprises the core strength at Bowdoin" was "secure." He confirmed that plans included completing construction on the Watson Ice Arena and the Peter Buck Center for Health and Wellness, and remained confident in reaching the capital campaign's goal of $250 million by June 30, 2009. He said, however, that the College would not pursue its plans to implement a new student information system, would put on hold certain facility improvements like the reprogramming of Smith Union, and would reconsider searches for new faculty positions. In a letter to the College community, Mills wrote that, despite the economic climate, "we have never been better positioned as an institution and as a community to deal effectively with the consequences."
By November of 2008, colleges and universities across the country were feeling the effects of declining financial markets through decreased endowment performance. While Bowdoin's administrators declined to comment on the College's endowment, NESCAC peer schools reported drastic drops in estimated endowment values. Amherst reported a 25 percent decline since June 30, Colby was down by at least 25 percent, Williams estimated a 28 percent loss, and Trinity saw an 18 percent drop. Over the same period, the Standard and Poor's 500-stock index lost 28.8 percent of its value, and Moody's Investor Services projected that college endowments would lose an average of 30 percent of their value in the 2009 fiscal year.
Mills supports pay freeze, small boost in enrollment, January 23, 2009
To better track the state of the economy and financial affairs at Bowdoin, Mills created the Blue Tarp Committee in December of 2008 to examine the College's finances and develop "cost-cutting recommendations" for the Board of Trustees. The committee, comprised of faculty, students and staff, met from December through February to devise and recommend cost reductions for the preliminary 2009-2010 operating budget. The Orient reported that several other NESCAC schools had similar committees in place, including Bates, Tufts and Connecticut College.
Shortly after students returned to campus after Winter Break in January of 2009, Mills sent a letter to the Bowdoin community outlining the recommendations of the Blue Tarp Committee. First, the committee recommended that the College increase enrollment by an average of 10 students per year for five years, to provide the College with "a reliable source of additional revenue," the Orient reported. Second, they advised the College to fix all faculty salaries at current levels for two years, and freeze the pay of all non-faculty staff earning more than $40,000 per year. Mills said that while he could not "guarantee that layoffs will not happen," the freezes could help prevent them. Third, the committee proposed that the College hold all operating expenses flat, but still maintain the physical plant and "keep up with necessary repairs, replacements, and deferred maintenance projects."
The following week, a forum on College finances invited students to hear and discuss the committee's recommendations. Longley explained that the College's financial planning model predicted deficits "of about $17 million" over the next five years if no action were taken. The 10-year model assumed a 20 percent loss in endowment for the 2009 fiscal year, "followed by a zero percent gain in the 2010 and 2011 fiscal years, and returns of 7 percent thereafter." The few students in attendance expressed their support.
After the trustees approved the cost-cutting measures, an Orient article in February of 2009 compared Bowdoin's financial remedies to those of its peer schools and found that some schools were taking significantly more drastic measures to balance their operating budgets. Wesleyan announced a plan to increase enrollment by 30 students annually over four years, while Amherst planned to add 100 students to its enrollment over four years. Bates announced plans to reduce its faculty and staff size, while Middlebury's president said he planned to reduce staff by at least 10 percent through attrition by 2011. Williams announced it would cut its operating budget by $10 million, while Amherst announced a 10 percent cut in its budget. Middlebury also decided to eliminate its MiddView orientation program, comparable to Bowdoin's Pre-Orientation trips, in addition to closing one of its dining halls. Mills recognized the variety of approaches to balancing budgets at these schools, and said his goal was to find solutions that "don't go at the heart of what we're about."