Volume CXXXIII, Number 5 October 12, 2001 f

Bowdoin prepares for financial uncertainty
ALISON McCONNELL
SPORTS EDITOR

In a time when news of sliding indicators and downward trends seem to fill financial headlines, Bowdoin's administration is working to offset the nation's apparent economic decline and plan for an unpredictable future.

Treasurer Kent John Chabotar has not given his financial outlook a drastic revision since the September 11 terrorist attacks. Instead, he indicated that the College is proceeding cautiously in a time of national uncertainty.

"There is no major change," Chabotar said. "We're still dealing with an endowment that is lower than our forecast had been. Based on a very conservative forecast, we were expecting an endowment of $500 million by September 10."

The nation's economy showed signs of a downturn for some time preceding the attacks and subsequent military response. According to Chabotar, lower endowment levels were already a concern. "It was about $30 million lower on June 30 of this year than it was on June 30 of 2000, after we had taken $17 million out for spending," he said.

Bowdoin's endowment is invested in a variety of accounts, some of which do not easily translate to numerical worth. "We have so many different types of investments, including some which have no direct market value," Chabotar said. "Oftentimes we have to wait up to three months to get those values."

Because of this, an up-to-date endowment figure is not readily available. "I can't give you a flash report as of today," Chabotar said. "I'd say that $430 million is a rough estimate at this stage."

The College's financial administration, operating in a time when economists cannot predict the direction of markets, is refraining from methodology changes. "We are keeping the same spending rate, we're keeping the same basic investment philosophy," Chabotar said. "We're not market-timers; we don't see the market go up or down and wildly change our investment approach. Over the long term, that's usually counterproductive."

After a period of unprecedented national economic expansion, Bowdoin has needed to assess a new set of circumstances. "We went through a huge growth; the budget doubled and the endowment tripled," Chabotar said. "Now were looking at a budget that will rise much more slowly, and an essentially flat endowment.

"Because we take a 12-month lagging average [to measure endowment], we're looking at suppressed earnings for a while, even if the endowment picked up right now, " Chabotar said.

The treasurer indicated that the College's financial picture isn't entirely pessimistic. "Even if we took the worst-case scenario-the deficits going full for the next four years-they are the equivalent of four percent of the [roughly $100 million] budget," he said.

In perspective, during the College's last budget crisis (in 1988-1989), the highest deficit was 9.7 percent.

The College is taking some steps to act with the times. "We're looking at taking $1.4 million out of the budget," Chabotar said. "We shared that with the Executive Committee [of the Trustees], and they seemed to be saying that we're heading in the right direction.

"The cuts are really budget relief," he continued. "About $400,000 is new restricted money for academic programs, and the million dollars is in cuts from various areas, spread out over two years."

Chabotar said that the cuts will stem from staff spending budgets and travel. Administrative and support staff compensation and will probably be offset by gift-raising efforts. "We're assuming we'll get the endorsement of the financial planning committee at the Trustees' meeting in October," he said.

This year's changes will be effective as soon as a go-ahead is given, and the 2001-2002 budget cuts will be made later in the school year. "Essentially, we've said to the budget committee that we know where we can find a million bucks," Chabotar said. "The committee members will look at it, and if they like the idea they will incorporate that savings into the budget they present to Barry and I in January."

Chabotar was adamant that alterations in College spending would not affect professor positions, student programs, or financial aid. "In terms of priorities, the first is academic programs; we're not a bank or insurance company, we're a college," he said. "The academic programs come first. That means maintaining a number of faculty with a competitive salary...and keeping class sizes reasonable.

"A very close second is financial aid, both to maintain affordability and to increase diversity," he said. "We expect our financial aid costs to rise fairly rapidly going forward, particularly if we try to become more diverse."

According to the treasurer, next year's budget will include a nationwide college trend: a hike in tuition. "It will definitely go up," he said. "The College's costs are going up between four and five percent a year, and if the endowment isn't performing, which it isn't, and two-thirds of our revenue comes from tuition, we either cut services or we raise the price."

The pro-former budget, which the trustees look at as an early estimate, assumed a 4.5 percent average rise in tuition and fees. Last year's tuition rate saw a five percent increase.

Chabotar said that the College is aware of the difficulties associated with tuition increases. "Clearly, they have an effect on students' parents," he said. He went on to assert that Bowdoin is still very concerned with families' ability to pay.