Despite its high sticker price, Bates continues to have one of the lowest endowments among competitive liberal arts institutions. This was confirmed in the recent Student Government Sponsored Budget Forum. On February 5th, Terry Beckmann, Vice President for Finance and Administration, and Doug Ginevan, Assistant Vice President for Financial Planning and Analysis, presented on Bates’ endowment and its impact on the college budget. After reviewing many charts, graphs, and statistics, the problem became clear – Bates’ less than impressive endowment is crippling its budget.
Bates’ budget is currently about $100 million. The college draws the majority of its revenue from students and families (72.7 percent). This is supplemented by endowment spending at 11.4 percent, the Bates Fund (annual fundraisers) at 6.8 percent, and other revenue (including sales in the bookstore, dining, aid from the government) at 9.1 percent.
At $216 million (as of June 2012), Bates’ endowment is low compared to its peers. For instance, several peer institutions have endowments in the billions including Williams College ($1.8 billion), Amherst College ($1.64 billion), Wellesley College ($1.44 billion) and Smith College ($1.41 billion). Furthermore, the endowment per student at Bates ($122,000) pales in comparison to the same statistic at peer institutions such as Pomona College ($1,000,000). This is not a crack – this is a chasm.
“The main reason for the difference compared to our peers is gifts. In the 80’s it was very close but they took off and we stayed flat. We didn’t get [gifts] before the stock market went up. They got more and more of them. We can’t spend the corpus [of the endowment]. We can spend on returns – we spend about 5 percent. Some of our peers might be able to take more risks,” explained Beckmann.
Bates’ endowment causes the institution to have a higher fee dependency than its peers. (Fee dependency is the actual amount the institution relies on or what comes from students). As of June 30, 2012, Bates’ fee dependency is 70.1 percent – significantly higher than Bowdoin College (50.3 percent), Middlebury College (58.6 percent), and Colby College (64.7 percent).
However, it should be noted that having a higher fee dependency is not all bad.
“We did not suffer as immediately from the stock market downturn as our peers as only about 11 percent of our budget comes from our endowment where many of our peers rely on their endowments to support 20 to 40 percent of their operating budgets,” commented Beckmann.
Still, Bates’ low endowment has a lot more downsides than upsides. The college’s low endowment also directly affects financial aid. Bates’ financial aid budget ($28 million) is right in the middle of its peers. The college cites financial aid as an “area of priority”. Bates meets 100 percent of demonstrated need for both international and domestic admitted students. Bates also provides one of the highest grants to students receiving aid ($33,948).
However, the percentage of students actually receiving aid remains at the bottom of competitive liberal arts institutions. Only 42 percent of Bates students receive aid.
“We’re not proud of that 40 percent at all. That is something we’re trying to increase. We’re trying to recruit more socioeconomic diversity,” said Beckmann.
What is making that so difficult? The same culprit behind Bates’ high fee dependency: the endowment.
Cat Djang ‘13 wishes to correct the misconception that because Bates’ sticker price is so high it is unnecessary to give more to the institution. “We need to realize Bates faces a uniquely high cost,” said Djang.
This uniquely high cost stems from Bates’ resources and its high fee dependency. Given these financial constraints, where does your tuition money go?
“We emphasize financial aid, faculty support, facilities. You would see the money there,” said Beckmann.
Specifically, the budget reflects “what Bates values most”: teaching. Of Bates’ $25 million academic budget, 38.9 percent is allocated to instruction and research. Bates funnels a higher percentage into this category than Middlebury (36.4 percent), Bowdoin (36.5 percent), and Colby (37.2 percent). Of course, with larger budgets, these schools spend more dollars in this category.
“There are lots of schools that spend a lot of money for the curb appeal. We could be doing that but that would come at the cost of something else. We have a good balance between not having the showy things to keep students here but at the right areas,” commented Ginevan.
The forum raises an uncomfortable question for Batesies: How come many peer institutions are able to afford “the showy things” and excellent faculty?
Increasing the endowment should be a top priority for Bates. The college has already shown initiative by implementing cost-saving measures such as consolidating students to certain dorms during breaks to conserve heat and introducing electronic billing.
Yet Bates has a long way to go.
While Bates is ripe with excellent faculty, increasing the endowment continues to be a necessity. For every institution of higher education operating in a sinking economy and increasingly competitive job market, there is always the question of: How do we improve? The answer for Bates lies in enlarging its endowment.
“There are 3,300 schools that would love to have the Bates financial problems. Changing our mindset from ‘woe is us we don’t have any money’ would change the psychology,” said Ginevan.
While that may be a valid statement, it is worth noting that if Bates defines its “peer institutions” as Bowdoin, Williams, etc. for academic, athletic, and job-placement purposes, then it is inviting financial comparisons with these institutions as well.
Unfortunately, at the moment Bates does not fare well in these comparisons.