Finances weather storm
As America faces a depressed stock market and general economic
slowdown, one wonders to what degree Bowdoin will be affected. A conversation
with College Treasurer Kent Chabotar revealed that, while the College
won't be shutting down any time soon, it is taking some steps to stay
above the economy's fluctuations.
"I wouldn't count it as a crisis," Chabotar said.
"We've been preparing for economic uncertainty for about two years,
[and] have been sensitive to it."
"We're not battening down the hatches or heading for
the basement. We're just being prudent." He added that the College
is lucky to have "an incredibly generous alumni body and a pretty
healthy endowment" to keep it above difficult times.
That endowment, estimated at about $450 million, acts as
a buffer in times of economic instability. The College's portfolio is
managed chiefly by the trustees, "who are all experts," Chabotar
"Twenty-three percent of our budget is endowment,"
he added. "The concern, obviously, is that 23 percent is shaky."
The nose-diving stock market, which dropped significantly
since Monday, reflects a national state of uncertainty after last week's
terrorist attacks. The losses affect the endowment, which is invested
in a variety of places such as stocks, bonds, real estate, venture capital,
and private equity
Chabotar said that he is also focused on the recession's
possible effects on another area of Bowdoin's finances: "We're concerned
about family ability to pay, average family contribution, and therefore,
financial aid," he said. "Tuition goes up every year."
The current economy is not without some benefits, however.
"Inflation is low, so that means our costs are growing
more slowly," Chabotar said. Additionally, much as it seems that
diving stock prices would affect alumni giving, the treasurer said that
he wasn't overly concerned. "[Economic problems] didn't affect [giving]
last year-I think we came close to breaking a record; we were way over
target," he said.
The College appears to possess enough stability get through
this period of uncertainty. "I'm pretty optimistic," the Treasurer
said. "The nice part about having endowment is that it makes you
a little more immune to these swings in the market."
Chabotar acknowledged that there could be more serious decisions
in the College's future if the economy sinks further. "If the market
swings too much, even a rock starts to wobble a bit," he said.
In the event of a drastic turndown, no programs or positions
would be fully removed. "If it started to get really bad, we would
start to defer or postpone things, for example, building projects,"
he said. "The second thing...is to cut spending budgets-for travel
and that kind of expense.
"The third thing we'd do would be to increase our endowment
spending rate a bit," he continued. That rate is calculated based
upon a 12-quarter market value average, and determines how much of Bowdoin's
endowment is spent in the budget.
Spending additional funds is something Chabotar would to
avoid. "In my mind, that's the last thing we want to do," he
said. "We have to worry about different generations of alumni, students,
and staff. If we increase endowment spending, it hurts the future."
For obvious reasons, the College would prefer to increase
its endowment rather than spend it.
In order to give itself some extra breathing room, Chabotar
said that the College is looking to cut $1.4 million out of the budget
over the next two years. "We haven't gotten clearance from the trustees
yet, but that's our plan right now," he said.
He added that gift-raising efforts would likely be doubled
in an attempt to offset some of the waning economy's effects.
Chabotar also indicated that Bowdoin is planning a capital
campaign in the near future. "The last campaign had endowment and
financial aid as a goal," he said. "This next, campaign, probably
in two or three years, will have even a bigger goal for endowment."
All of this planning is being done with a futuristic outlook, the Treasurer said. "We have to balance today's students and faculty with tomorrow's."