Vassar College’s operating budget supports the college’s teaching and research activities, as well as activities related to student services and the physical plant. For fiscal 2011/12, budgeted operating revenues and expenses are $147.4 million. The actual revenue and expense (as yet unaudited) in 2010/11 was $146.2 million.
Net tuition and fees $72,173,000
Private gifts $13,813,000
Support from financial assets $48,814,000
Budgeted total revenue: $147,432,000
Employess benefits $27,187,000
Operating costs $44,104,000
Plant and equipment $7,389,000
Salaries and wages $68,752,000
Budgeted total expenses: $147,432,000
The college’s major revenue components are:
I. Net Tuition and Fees:
In fiscal year 2012, net tuition and fees is forecast to provide $72.2 million or 49% of the college’s revenue.
Net tuition and fees paid by parents and students is the largest source of annual revenue for Vassar. This figure includes comprehensive student charges for tuition, room, board, and mandatory fees for health care on campus and student activities, as well as application, parking and other fees charged for specific services provided.
Net tuition and fees measures the actual amount of revenue the college receives from students. This figure is arrived at by subtracting the amount of financial aid awarded to students (in the form of institutional and government grants) from the amount of revenue the college would receive if all students were paying full tuition and fees. All Vassar aid is based on demonstrated financial need, and is only possible because the college has restricted and unrestricted endowment and gifts, as well as government aid, that make up for the tuition foregone when students receive financial aid.
By basing financial assistance on each family’s ability to pay, the percentage of the total cost of each student’s education that a family pays varies. But every student receives a partial subsidy from the endowment and gift resources of the college. In fiscal year 2011/12, for example, the cost of educating each student is about $67,125 whereas the comprehensive fee for attendance without any financial aid is $55,135.
The increase in the comprehensive fee for attendance in any one year is determined annually by the Board of Trustees in February, a decision that is informed by the state of the national economy, the anticipated cost of continuing to offer outstanding programs and services on campus, and the College’s tuition and fees in relation to its peers. (Fact Book, p. 86)
NOTE: The “discount ratio” expresses the percentage of the gross tuition and fee revenue that is provided from the college’s own resources in the form of financial aid to students. (Fact Book, p. 31)
When the discount ratio rises because students are receiving more financial aid, the percentage of operating expenses covered by student tuition and fees falls. The gap must then be covered by a greater draw on the endowment, by reducing expenses, or by the receipt of expendable gifts to cover operating costs. If the discount ratio rises and operating costs fall, the percentage of operating costs covered by tuition and fees increases and the percentage covered by the endowment decreases.
As a result, the percentage of the cost of his or her education covered by a student whose not receive financial aid varies; but every full-pay student’s education is supported to some extent by the endowment.
II. Private Gifts and Grants
In fiscal year 2011/12, private gifts and grants are forecast to provide $13.8 million or 9% of the college’s revenue.
Private gifts and grants are expendable donations from foundations, alumnae/i and friends of the college made in any given year either through the Annual Fund or for a specific purpose to cover a particular current expense.
III. Government Support
In fiscal year 2011/12, government grants for financial aid and research are projected to provide $5.1 million or 3.4% of the college’s revenue.
Vassar receives important but limited assistance from Federal and State government, primarily in the form of grants to low-income students. An indirect source of support is provided through Federal direct lending, which Vassar administers as loans to students. These loans do not show up as government support, since the obligation to repay rests with students and their parents. Any research grants that are awarded to faculty or to the college from sources such as the National Science Foundation or the National Endowment for the Humanities are also included in this revenue figure.
NOTE: About 60% of private gifts come to the college through the annual fund. (Fact Book, pp. 65-69) Private gifts also come to the college for particular projects ranging from the renovation of a building to covering the cost of preserving a book in the library’s special collections. Private gifts also include “gifts in kind,” like the donation of a work to the Frances Lehman Loeb Art Center.
IV Fee-for-Service and Other Revenue
In fiscal year 2011/12 service and other revenues are projected to provide $7.5 million or approximately 6% of the College’s revenue.
Service revenue comes from any of the facilities or programs on campus that charge a fee. Examples include the Alumnae House, which charges for overnight stays in the guest rooms and for renting its public spaces for events; nursery school and daycare services at Wimpfheimer Nursery School and the Infant and Toddler Center; and cash sales for food at the Retreat. (Expenses that the college incurs in running these facilities or programs appear under operating expenses in the budget.)
Other revenue includes, for example, rents from faculty housing rental units, sales of leasehold houses, summer programs, health services, and vending machines. Here too the services benefit the college in many ways, so the college does not do a cost/benefit analysis in purely financial terms.
V. Support from Financial Assets
In fiscal year 2011/12 (the 2011/2012 academic year), financial assets are forecast to provide $48.8 million or 33% of the college’s total revenue.
Expressed as a percentage of average market value over the last three years, this represents a draw from the college’s financial assets of about 6%. This level of support from financial assets is relatively high compared to Vassar’s financial equilibrium target and the college’s history of support from endowment. It reflects the college’s reliance upon the endowment for critical program support during the recent recession, particularly in providing financial assistance to students with demonstrated financial need.
A sustainable amount for annual spending from the college’s endowment is between 4.5% and 5.5% of the market value of the endowment at the beginning of the fiscal year. This target range is based on the expectations of investment return for the college’s endowment as well as the need to save a portion of annual returns to provide for future inflation in operating costs. Vassar’s financial planning is based on achieving a long-term average annual return on investment of 8.5% and a long-term inflation figure of 3-4%. However, in shorter time periods, investment returns and inflation can fluctuate significantly around these figures, as was vividly demonstrated during the 2008 and 2009 recession.
Historically, the college has drawn more than 4.5%-5.5% from the endowment in the following circumstances:
a) A “special draw” on the endowment may be needed to allow for upkeep of the physical plant. This practice is in essence transferring resources from one asset into another, as the physical plant is one of the college’s main assets. Like the endowment, it must be maintained for the long-term health of the college.
b) Following a period of significant downturn in capital markets, the draw from the endowment might rise above 5.5% of the beginning market value in that year to meet the budgeted expenses. If this happens with any consistency, the college must cut its operating budget as a remedy, since it cannot continually draw a higher percentage from the endowment and maintain financial equilibrium. (Fact Book, pp. 90-91)
c) An initiative central to the college’s mission may require additional spending for a limited period of time.
There have been two cycles in the last decade where sharp declines in capital markets have forced the amount drawn from the endowment above the levels considered sustainable, the most severe being the 2008-2009 recession. In response, the college adopted changes in employment, compensation and program spending to place the college on a path to reach a more sustainable rate of spending from the endowment by 2015/16.
For more information about the market value of the endowment and the spending rate, see Part XII of the Fact Book.
The college’s major expense components are:
As the pie chart above clearly shows, total compensation of the college’s faculty, administrators, and staff is the most significant expense category, accounting for two-thirds of Vassar’s annual operating expenditure. It includes salaries, wages, and benefits for all Vassar’s employees. Consumable supplies and expenses, the next largest expense category, include costs other than compensation and spending on buildings and equipment that the college incurs in providing educational and residential services to its students and administrative support for all operations. Such costs range from utilities to departmental budgets to fees for visiting lectures to dining services. Plant and equipment expenses refer to costs associated with maintaining or renovating buildings and campus infrastructure such as heating and cooling lines, as well as costs for equipment ranging from furniture to computers and campus network hardware, to other forms of technology necessary for the academic programming and administrative functioning of the college. In some cases, the annual budget provides the primary source of funding for an outright purchase; in other cases, the College may be developing reserves for the replacement of plant and equipment that depreciates over time. The college combines its operating allocation for plant and equipment with capital contributions from donors and also with the proceeds of debt. Hence, debt service is another category in annual costs, referring to the amount of interest paid annually on funds borrowed to renew existing facilities and infrastructure or add new facilities. The debt the college has incurred to date comes in the form of tax-exempt bonds, a low cost form of financing.
In general, the proportion of each of these four expense categories with respect to the college’s overall annual expenses has remained relatively stable from year to year. A history of recent expense patterns is available on pages 95 and 96 of the Fact Book.
Salaries, wages and employee benefits for the more than 1100 individuals who work at Vassar in a wide variety of roles amounts to $95.9 million for 2011/12, representing 65% of the total budget.
Vassar’s employees are broken into three large groups: faculty, administrators, and service staff employees. Starting salaries, annual increases and benefits are determined slightly differently for each group.
Vassar is committed to providing fair and competitive compensation for all employees, both as a central value guiding its employment practices, and as a means for recruiting and retaining top-flight faculty, administrators, staff and service employees. Ensuring competitiveness requires close monitoring of compensation trends with respect to local employers, as well as other colleges and universities with whom we compete in recruiting and retaining talented faculty and administrators.
Total compensation is comprised of salary and employee benefits, such as health insurance and retirement plans. Details of the benefit packages provided to Vassar employees differ, reflecting collective bargaining agreements and other factors, and are available from the Benefits Office. Benefit packages at Vassar are strong and play a substantial role in recruitment and retention of employees across the college.
Each fall, the Faculty Compensation Committee, consisting of a small number of elected faculty, consults with the administration to consider how to determine and distribute among the ranks faculty raises. The goal, set by the Board of Trustees, is to rank among the top third of our peer group in compensation. Key in these discussions is the tracking of Vassar’s salaries and total compensation against that of the group of 21 peer colleges, using data collected annually by the American Association of University Professors. Recommendations from this process are presented to the trustees when the budget is approved in February.
The college also sets starting salaries at a level that is competitive with those of our peers, as this is one of the most important tools to attracting talented faculty and ensuring competitive salaries, as individuals move upward through the faculty ranks.
The classification “administrator” encompasses a wide range of positions and salaries at the college, but in its broadest sense is used to describe people in non-unionized, non-teaching-faculty positions. The classification thus includes the most senior levels of the administration, but also a wide range of positions in support of residential life, human resources, career development, health and counseling services, alumnae/i affairs and development, technology, admissions, athletics, and academic areas such as the art museum, the nursery school, and the library, to name but a few. The diversity of positions makes it more difficult to apply a single benchmark to guide salaries, but the college regularly consults data from the College and University Professional Association (CUPA), which surveys salaries for standard academic administrative positions across a broad range of colleges and universities annually. Faculty and administrators have very similar benefit packages at the college, including health care, retirement contributions, post-retirement health care, and tuition remission programs.
Staff, Security, Service, and Trade Supervisors:
We have grouped together classifications of employees paid on the basis of scheduled hour, whose contracts specify hourly rates and eligibility for overtime payments when their work exceeds 40 hours per week. The majority of these positions are unionized either through the Service Employees International Union (SEIU) or as one of two bargaining units represented by the Communications Workers of America (CWA). Wage rates, benefits, and terms of employment for the various union are negotiated periodically between college representatives and the respective unions. Vassar strives to be a leading employer in the Hudson Valley area, with very strong wage rates, benefits, and employment policies.
II. Consumable supplies and expenses
The expenditure on discretionary and non-discretionary operating costs for 2011/12 is forecast to be $36 million or 25% of operating expenses.
Operating expenses can be broken down into those over which individual departments and programs have some control and those that are not easily controlled at the department level. Discretionary costs include: supplies; travel and entertainment; publications and printing; event costs; athletics team expenses (equipment, travel); and library acquisitions to name but a few. Non-discretionary costs range from contractual expense for goods and services procured by the college (for example, maintenance contracts for equipments and software; mail and package delivery services; telecommunications contracts; trash services and recycling costs), food services, utilities, and insurance. Cost control efforts have been exerted in both categories of spending in recent years, as the college developed plans to regain financial equilibrium following the recession.
III. Plant and Equipment:
Allocations for Plant and Equipment in 2011/12 are forecast to be $7.4 million or 5% of operating expenses.
Of that amount, $3.7 million will fund capital projects connected to the preservation of the physical plant. That amount is supplemented by funds from the bond issue of 2010. Total spending on capital projects in 2011/12 is forecast to be $21.5 million.
Campus buildings, along with the physical and technological infrastructure of the campus, constitute the college’s “physical plant.” The plant, like the college’s endowment, is a principal asset of the college, and, in order to maintain its value and functionality, it must be maintained and invested in on a regular basis. Each fall, the Executive Director of Buildings and Grounds, working in conjunction with the Vice President for Finance and Administration, the Dean of Planning and Academic Affairs, the Dean of the Faculty, and the Dean of the College, establishes a 3- to 4-year capital spending plan for major renovation and maintenance work, taking into account the specific needs and time frames of individual buildings, and their importance in the college’s mission. Special attention is paid to safety, accessibility and sustainability issues in buildings.
Applying industry standards to guide spending, the college should set aside from the operating budget no less than $15 million annually for reinvestment in the physical plant, given its size and replacement value: a minimum spending rate of approximately 1.5% of the total value of the college’s physical plant. Support from the operating budget covers some of the costs of maintaining the physical plant, but the current budgeted support of $3.7 million in 2011/12 falls short of this goal. The college supplements the amount in the operating budget with gifts to finance specific projects and the proceeds of bond offerings. For example the college issued tax-exempt bonds through the Dormitory Authority of the State of New York in the amount of $50 million to finance urgently needed campus renewal in April 2010.
Over the past decade, Buildings and Grounds Services has created significant efficiencies in the way we heat and light buildings, with modification in the central heating and cooling plants, substitution of natural gas for heating oil, and negotiation of longer term contracts for electricity. Through the efforts of the Sustainability Committee and Buildings and Grounds Services, the college adopted a set of goals for the reduction of GHG emissions in 2011. Some of the actions the college has taken to improve efficiency in the use of energy in connection with the physical plant are the improvement of building envelopes to increase insulation, improvement of the steam lines that carry heat and cooling to the buildings, motion detectors to control lighting, and replacement of incandescent with compact fluorescent bulbs.
Vassar budgets computing equipment and technology infrastructure separately from other kinds of minor, non-technology equipment and furniture. Many of these items (for example, desktop and laptop computers) are replaced on a staggered, cyclical basis, based on estimates of useful life, in order to spread costs out over time. Other expenses include the upkeep of the phone system, software licenses, the network infrastructure, and maintenance and replacement of campus servers. The Long-Range Planning Group, made up of the VP for Computing and Information Services, the Dean of the Faculty, the Dean of Planning and Academic Affairs, the Vice President for Finance and Administration, and the Vice President for Communcations meet regularly to discuss short- and long-term needs for technology, how to prioritize them and budget adequately for them.
IV. Debt and Debt Service
The expenditure for debt service in 2010/11 is forecast to be $8.1 million or 5% of the operating budget. Debt service included in the operating budget refers to the interest paid annually on money the College has borrowed to finance various projects.
In addition to using gifts or money from the endowment, the College can elect to finance certain kinds of major capital projects by taking on debt, to be repaid over the useful life of the renovation or equipment being financed. Because Vassar plans to sustain itself permanently, debt financing is an effective way to finance the renewal of its physical plant. At the same time, the college must be careful not to take on too much debt in relation to its overall asset base. (Fact Book, p. 92) In its financial planning, the college assesses its credit rating compared to other institutions, the cost of debt, and the physical needs of the campus. Donors have played an important role in the development of new facilities on campus and also in the renovation of Vassar’s historic campus.
In the spring of 2010, taking advantage of existing low interest rates, the college issued a $50 million bond to cover several much-needed renovations, largely to address building integrity and disability access concerns. The college will take on additional debt in order to finance a portion of the planned Integrated Science Center, as well as to fund additional asset preservation.