Volume CXXXIII, Number 11 November 30, 2001 f

Employee health benefits fall victim to sagging economy
JAMES McDONALD
STAFF WRITER

Dr. Jeff Benson, Director of Health Services, prepares a flu shot at the health center. While staff benefits will suffer as a result of budget cuts, student healthcare will not be affected. (Henry Coppola, Bowdoin Orient)

With the announcement by the National Bureau of Economic Research this past week that the United States officially entered a recession, the worst fears about the US economy have finally been realized. This announcement signaled the end of a decade of robust economic expansion that has been felt even in America's most distant corners, including Bowdoin. Bowdoin will soon be feeling the pressures of recession, and the employees of the college are going take the brunt of the fall.

Ten years ago, Bowdoin experienced a budget crisis, often finding itself with year-end deficits that mimicked the larger the US economy. With the period of domestic growth, Bowdoin has benefited from nine consecutive balanced budgets, and hopefully a tenth to follow soon. Because of its recent ability to balance revenues and costs, Bowdoin students and faculty have enjoyed increased benefits, including generous salary increases. Bowdoin employees, including the faculty, have been rewarded by Bowdoin's ability to increase health coverage. However, with the downward trends of the last year, it will be impossible to maintain both generous increases in pay and health benefits. To deal with this crisis, Bowdoin has decided that it must begin to cut corners.

According to Kent Chabotar, Vice President for Finance and Administration and Treasurer, the cost of employee health insurance has increased 30 percent over the past year. For this fiscal year, Bowdoin will spend $5 million on employee coverage. $4 million of that amount is covered directly by the College through the budget, and the employees of the College pay the other $1 million. Chabotar emphasized that Bowdoin is not the only employer in Maine to feel these increases; the entire state is dealing with skyrocketing health insurance costs.

The problem is only compounded further when one considers that the amount of money coming into the College is lessening. Bowdoin, like many others in Maine, is now forced to pay higher costs with a smaller budget. Bowdoin has three primary sources of income: tuition and fees, the endowment, and annual giving. Because of decreased returns on the endowment's investments, Bowdoin took a hit when the endowment figures came in $80 million less than expected. The endowment totaled $420 million instead of the $500 million predicted.

To determine the annual budget, Bowdoin takes 5 percent of the endowment and sets that number as the yearly budget. Bowdoin's new budget will be $4 million short of what was predicted.

To compensate for the lower budget numbers, Chabotar sums up Bowdoin's strategy as having to "trim here and there." Unfortunately for many, this trimming will come by reducing salary increases, which are being slashed for most of the 550 non-faculty employees from the usual 4 percent increase to only 2 percent. The 150 faculty members will likely see their pay raises stay at typical levels of 4-6 percent.

Cuts in health care form the other side of the equation, with coverage reducing for employees. Tim Foster, Senior Associate Dean of Student Affairs, calms any fears about student reductions: "Student health coverage will not be affected because it is covered by a student health fee, which pays for a policy that the College buys from Commercial Travelers [Insurance Company]." Conversely, the College covers employee insurance, so cost increases are more detrimental.

Health insurance costs for employees vary because they tend to age during their tenure at Bowdoin. Aging brings costs that student coverage never considers, as Chabotar jokes, "For some reason the student population never ages." In spite of the fact that they will be spending more on healthcare, employees will see their coverage reduced (i.e. full coverage would be reduced to 90 percent or 90 percent coverage to 80 percent). For now, however, the there are no definite answers as to the size of reductions, but they will certainly occur.

Kent Chabotar, who has overseen Bowdoin's nine consecutive balanced budgets, believes that Bowdoin is on track for the future. Bowdoin was facing sharply increasing costs over the next decade, which Chabotar has attempted to remedy by lowering expenditures in the short term. By doing this, Bowdoin hopes to lower the trajectory of expected costs. The cost-cutting measures of today may be long forgotten if this plan is successful, as the College will have more money compounding interest for future revenues. With these new plans, Bowdoin has been able to cut $1.8 million in costs for this year's and next year's estimated budgets. They now have $1.8 million more earning interest for the future.

Because of the unstable situation with the US economy, predicting how the College's budget will react is difficult. Kent Chabotar reassures students and faculty that the College is hardly in a crisis but is merely feeling the strain that most Americans are beginning to feel. Regardless, the effects of the recession are soon to be felt on the campus of Bowdoin. These effects may actually hurt the employees of the College more than the students, but with constantly changing predictions, the entire community may find their fears manifested in the near future as their wallets begin to thin.