Goals to guide long-term financial planning
The challenges the college faces in the long term involve balancing the various needs of the college within the limitations of our resources. The following are some of the considerations that enter our longer-term planning:
- A competitively compensated work force of a size appropriate to achieve our educational mission.
- A diverse student body supported by sufficient financial aid.
- A physical plant that is properly maintained and provided for in the budget to ensure sustainability.
- Facilities that meet the needs of the educational program and that are accessible to all students and employees of the college.
- The capacity for new initiatives in support of the educational mission of the college.
Planning at Vassar follows a pattern that the Middle States Reaccreditation committee has labeled "adaptive strategic management." Priorities emerge from discussions on campus in various venues and are then vetted and endorsed by the Priorities and Planning Committee, the Senior Officers and the Trustees. For example, over the last five years, two major initiatives have become central to both short-and long-term planning: diversifying the student body and improving facilities for the sciences. As priorities take shape, their financial implications are incorporated into the integrated financial model. Planning for the implementation of priorities adapts to changing conditions at the college and in the larger world as necessary. It allows for new initiatives to be incorporated into and then balanced with existing needs in ongoing discussions between the faculty, administration, and Trustees.
Principles of Financial Planning and Budgeting
Vassar’s long-term objective for financial planning is to achieve the mission of the College within the context of “financial equilibrium.” As explained in the section of this site entitled Financial Equilibrium, the goals of financial equilibrium encompass balanced annual budgets, sustainable growth rates in operating income and expense, reinvestment in physical assets to maintain their value over time, and sustainable rates of reliance upon financial assets, so that all generations achieve the benefits of the campus facilities and permanent endowed funds. Yet these are simply “financial concepts,” devoid of mission and a sense of the values of the institution. In this section, we describe the connection between financial planning and the programmatic objectives of the college, as reviewed and renewed periodically through the planning processes of the college and informed by the external opportunities and constraints of a global economy.
Vassar College, like most liberal arts colleges, is founded on the principle of providing intensive, face-to-face, inquiry-based instruction in a residential setting as a means of developing not only a student’s breadth of knowledge but also abilities in critical thinking and imagination. Adherence to this educational objective determines multiple dimensions of the allocation of resources. Two examples illustrate how mission determines the structure of the college’s finances:
• The college’s vision for the academic program becomes the starting point for many decisions that drive the cost of education. Compensation must be at a level to recruit, retain and reward talented faculty, whose teaching, scholarship and creative activities are at the heart of the college’s mission. In creating the compensation budget we ask: what level of staffing does the college need to provide the kind of education that allows for meaningful exchange of ideas between faculty and students? How many faculty members are needed to offer a curriculum that has both breadth and depth? What resources do the programs that support instruction and research require?
• The commitment to a residential community establishes requirements for physical facilities and a wide-range of services and support for students in residence, ranging from residence halls and apartments to athletic facilities and physical education programming; from services for mental, spiritual, and physical health to safety and security on campus; from programming for volunteer and social activities for undergraduates to post-graduate planning and placement services. Many of the requirements for programming and facilities in support of a residential community are framed by government regulation at the local, state andFederal levels, as well as by the need in a competitive environment to offer facilities in keeping with those at peer institutions.
The Vassar community has also given priority to ensuring that a Vassar education is accessible to students from all socioeconomic backgrounds, and to increase the socioeconomic diversity of the student body. These goals reflect not only a long-term commitment to social justice achieved through educational opportunity, but also to the educational benefit of intellectual and cultural diversity. Beginning in 2008/09 the college augmented its long-standing policy of meeting an admitted student’s full need for all four years of his or her education with the return to a need-blind admissions process, which ensures that a student’s financial situation is not part of the decision about admission. The college also eliminated loans from the financial aid packages of students with lower family incomes. In financial terms, these policies resulted in the reduction of the college’s reliance on tuition and fee revenue to pay for its operations and increased its reliance on the investment return on its financial assets in the endowment, on annual restricted and unrestricted gifts, and on governmental programs that award aid to needy students.
These are key principles that translate mission into decisions about the allocation of resources. But the college is not re-created anew each fiscal year. We value continuity in employment, long term commitments, traditions and expectations – not only on campus but among the larger community of Vassar alumnae/i and parents – that limit the flexibility we have in creating budgets. There are also external market phenomena such as the price of goods and services the college must purchase and capital market returns that constrain the investment results of the endowment. It is the assessment and balancing of these factors through a multi-year budgeting process that we outline below.
Introduction to Budget Development
The annual budget for the college is developed in the context of longer-term financial planning which has two goals: to ensure that multi-year plans reflect college priorities and new initiatives, and to assess the viability of these plans against principles of financial equilibrium and the external environment. We do this with an integrated financial model that incorporates all operating and capital cash flows. The model facilitates the testing of various assumptions about the economic environment or changes in policy, and provides alternative scenarios for discussion by the Priorities and Planning Committee, the Senior Officers, and the Budget and Finance Committee of the Board of Trustees.
The model starts from today’s allocation of resources and projects forward by making assumptions about the economy and Vassar’s plans and choices. Will inflation rise or remain relatively low? Will personal income of the families of Vassar students rise or will the need for financial aid increase? Will enrollment fluctuate up or down? What is the expected return on investment of the endowment? What rate of government or private support can the college anticipate? Will employment change? How much will salaries, wages and benefits need to rise in order to remain fair and competitive? What equipment needs to be replaced? How much can be budgeted to re-invest in older Vassar facilities? Should the college increase its reliance on debt financing to re-invest in facilities?
To some extent, the model relies upon information provided by many departments, programs, and offices that feed updated information on costs each year. But the process must also reflect larger multi-year objectives. For the next five years, the following priorities have also been built into the financial model in connection with Vassar’s Campaign: implementation of the science facilities plan; increased endowment and annual support for financial aid to maintain Vassar’s need-blind admission policy; increased endowment for academic programs; and growth in the annual fund. (It should be noted that a portion of the proceeds from the Campaign will be received in future years from bequests and trusts created today, and thus do not impact the immediate future represented in the model.)
The college has also re-articulated its commitment to achieving faculty compensation levels that are fair and competitive with our peers. We have similar competitive goals for all Vassar employees; however, the data suggest that special investments are needed to bring faculty compensation to a higher ranking among peers. The integrated financial model is updated annually, based on actual results of the most recent fiscal year. This update forms the basis for a reassessment of the plans and assumptions going forward.
Annual Budgeting Process
The College operates on a July 1 – June 30 fiscal year, and annual budgets are developed in the context of a five-year financial model. The cycle begins in the fall with review and discussion on campus and with Board committees of key planning parameters – staffing levels, salary and wage guidelines for continuing personnel, inflationary pressures on operating costs, and the impact of changes in program or facilities. At the same time, departments, programs and offices update their budgets in response to changes in programming or costs. All of these efforts are undertaken in the context of the multi-year plan and Vassar’s place in a larger economic context.
Capital requirements for investments in facilities, equipment, library collections, vehicles, and technology are also estimated in the fall, and reviewed in several stages for inclusion in the annual budget:
• The office of the Dean of the Faculty takes the lead in reviewing academic equipment needs, with a particular focus on the science programs.
• The Director of the College Libraries prepares a plan to meet the evolving challenge of academic collections, including paper and digital formats. The plans are based on priorities discussed with the faculty Library Committee; the budget is reviewed and approved by the Dean of Planning and Academic Affairs.
• Multi-year plans for renewing and improving campus facilities is developed by the Executive Director of Buildings and Grounds Services, for review by Senior Officers, the Priorities and Planning Committee, the Campus Master Planning Committee, and ultimately by two Trustee committees.
• Technology requirements are integrated in a plan developed by the Vice President for Computing and Information Services, addressing data and voice communications, the campus network, information technology security, and desktop equipment. Academic computing support is discussed in the Committee on Academic Technology. The longer term financial requirements to support campus wide technology are discussed in the Long Range Planning Group on Technology and ultimately presented to the Priorities and Planning Committee.