Middlebury Facing Financial Difficulties

Colleges and Universities A-Z Middlebury College
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<p>Made my way back to Midd to watch lacrosse (successfully knocking Tufts out of their first place tie - GREAT game). But even though they had tours and such this morning, the admin office was closed by the time I got here around 1:30. </p>

<p>So… I will have to ask my questions via email or a phone call. :frowning: Thing is, of course, just because no one else is talking about these things like Middlebury is, or being referred to in fairly detailed articles, they are hardly alone in these concerns. Or rather, they shouldn’t be the only school worried!! So… when one looks at their acceptance offers, as a parent I just want to have some level of confidence that there is a good stewardship of my money. </p>

<p>I did look at the website however and it says it doesn’t consider consumer debt in determining financial aid which is consistent with the article, however, if you didn’t have 100K consumer debt would you have needed to take out 200k of educational debt (which they do consider)?</p>

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<p>LaxTaxi… </p>

<p>Beyond the student experience, when it comes to faculty, who shore up a school’s reputation in my opinion, it’s a little bit of a catch-22. So many top schools have instituted a hiring freeze, which would suggest that those willing to do any hiring whatsoever, will be in a great position to be very selective. However, a pay freeze is not exactly the best way to secure your resources (professors) for the future when the economy warms up. And you certainly don’t want some grand exodus when the economic times improve because you’ve been uncaring or concerned for their welfare. So… how committed are the professors in the face of lighter paychecks and heavier workloads (in slightly larger classrooms) - -even as few as two students in a class is that many more papers to grade, exams to be scored, students to meet with, support, etc. So just as important as the student experience, how the faculty feels is important as well. Is everyone on the same page, somewhat? If their paychecks are smaller, are they finding non-monetary support in some way so that they remain happy? We certainly wouldn’t want resentments between students (who some may appear indulged or spoiled) and professors. </p>

<p>All of this said, from what I saw over the weekend… it’s a solid community. Lots of local folk on campus, young families, professors, parents, alumni etc out and about at games and whatnot. It was a beautiful, if not really windy day and seriously, everyone looked pretty happy. I didn’t see a bunch of gray clouds weighing down the mood in any way while we were there, and remember, this was not an “accepted students day” so I imagine we saw the real deal.</p>

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<p><gulp> What does this mean?</gulp></p>

<p>[05/12/09:</a> President’s letter on budget recommendations](<a href=“http://www.middlebury.edu/administration/budget/challenge/boc_memo_051209.htm]05/12/09:”>http://www.middlebury.edu/administration/budget/challenge/boc_memo_051209.htm)</p>

<p>Most were fairly expected and even hinted at, but… then I came to this</p>

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<p>and I am thinking one of the great things about the meal plan was there was no meal plan! It seemed to me that the price tag of said room and board was substantial enough to cover the expenses of letting the kids eat as much as they needed or wanted. So… since this concession was accepted, are they going to let the new folk in on it anytime soon? Maybe before we’re required to pay our bill? Does this change the comprehensive fee set for next year?</p>

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<p>it’s certain that the comprehensive fee for next year won’t be changed, but they might actually start implementing a meal plan, though not in the near future. to do a meal plan i’d guess they’d need to change the card system, and that would definitely take more than 2 years to start implementing. also even if they did do that, i don’t think the fees would increase that much.</p>

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<p>Reviving this thread in response to the recent article in Vanity Fair regarding Harvard. See CC’s thread here: <a href=“http://talk.collegeconfidential.com/parents-forum/743711-harvard-had-no-idea-things-were-bad.html[/url]”>http://talk.collegeconfidential.com/parents-forum/743711-harvard-had-no-idea-things-were-bad.html&lt;/a&gt;&lt;/p&gt;

<p>So just for S**** and giggles, I looked at what was new on Midd’s website and came up with this:</p>

<p>Total Operating Budget
Fiscal Year 2005: $163 million
Fiscal Year 2006: $173 million
Fiscal Year 2007: $183 million
Fiscal Year 2008: $207 million
Fiscal Year 2009: $220 million
Fiscal Year 2010: $223 million</p>

<p>How does a school needing to cut $20 million (I think that’s what the number was) increase their operating budget by $3 million? While it’s clearly not the kind of increases experienced previously, it’s not a decrease either. Plus, I thought it was said somewhere that they didn’t want to use more than 5% of the endowment towards operating expenses, but according to the pie chart about revenue, 22% comes from the endowment. Am I missing something?</p>

<p>Also… in the VF article, there was quite a bit of info on Harvard’s financing new building projects through debt. I am just wanting to clarify that although MIddlebury did do a lot of building in the last decade, is there a lot of outstanding debt needing to be paid on these projects or was their financing in place prior to their construction?</p>

<p>Basically, if there is a mere finger in the dike this year, are there fissures we are about to see spring to life? There hasn’t been much in the way of new news on the website and seems there’s more news on implementations on already agreed upon cuts. But hey… at least Middlebury uses the word “cuts” vs Harvard who seems to love a thesareus when it comes to these things.</p>

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<p>well, i’m guessing the $20 million was supposed to be cut over several years, not all at once, and even then, there was probably a <em>proposed</em> budget that was well in excess of the $223 million you see for FY`10 .</p>

<p>Also, the 5% draw from the endowment is based on the amount of the endowment whereas, the 22% figure is based on the size of <em>the budget</em> that is derived from the endowment. Different denominators.</p>

<p>And, yes some commentators (notably, Interesteddad), would say Middlebury’s debt makes its financial picture appear “out of equilibrium”. However, the biggest variable is how much longer the recession will continue to cause bearish sentiment to prevail upon the equity markets? If things look up by the end of this year, Middlebury and most of its peers will have dodged a bullet with some deferred construction and a few negligible adjustments to their enrollments. However, much longer than that and you could see some “game-changing” situations develop in places no one could have foreseen only a few years ago.</p>

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<p>In the winter issue of MIddlebury Magazine (which apparently they don’t send to new parents since we didn’t get the spring edition), there is an interview with Middlebury’s Vice President for Administration and Chief Financial Officer Patrick Norton. In it, he states:</p>

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<p>I might ask that we revisit the questions and ask now, is Midd meeting their short term obligations (not needing to borrow to pay the rent)? And while what was done right or wrong is probably too early to tell, I think there is some indication that the bull is at least looking for the door and that bearish sentiment (as referred to above) is hopefully lessening amid stronger market indications. </p>

<p>I did notice, however, that Midd got huge kudo’s for being so open about their predicament and that other schools should follow Midd’s lead for the benefit of their students, faculty and alumni. I think it was Midd’s honesty that helped it reach its 60% Alumni giving level – an impressive number for any year made even more so in this climate.</p>

<p>and oh yeah… saw that Midd is servicing $270 Million (?) in debt. Based on the numbers given, not sure the 4.4% is still as good a deal as layed out by the article - -another revisit to that question would be nice as well.</p>

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The number cited was $270 million. For comparison, I’ve seen debt estimates of $260 million for Williams and $320 million for Amherst. So superficially, Midd’s debt doesn’t seem unreasonable.</p>

<p>But the difference is that Williams and Amherst have larger endowments than Midd. In 2008, before the bottom dropped out of the stock market, the [url=<a href=“http://www.insidehighered.com/news/2009/01/27/endowments]estimated[/url”>http://www.insidehighered.com/news/2009/01/27/endowments]estimated[/url</a>] endowment sizes were $1,800 million at Williams, $1,700 million at Amherst, and $900 million at Middlebury (of course, all these numbers are lower now, probably by ~ 25%). Viewed in that light, Midd’s borrowing may have been particularly aggressive.</p>

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<p>I agree Corbett, but as stated on other boards, Amherst has $500 million in private equity cash calls and just issued $100 million in taxable bonds to cover operating costs like payroll. As you point out, they now have over $300 million in debt. The valuation of endowments at this point is somewhat tricky still because, as I understand it, of illiquidity and certain investments being difficult to value (which in my book means they’re worth a helluva lot less today than they were a year ago).</p>

<p>So while we know the borrowing may have been aggressive for Midd, where are they in terms of servicing that debt. Our prep school, for example, somehow missed some of this bad news because, frankly, they have some really great fund managers who before the proverbial doo doo hit the fan, pulled a lot of money out and held it as cash. At the time there was some question whether or not the school was being too safe or merely prudent. In hindsight, of course, it was brilliant!! And while they still took a hit, it’s closer to 10-15% instead of 30. Just wondering how it’s going or looking to go based on newer data is all.</p>

<p>Here’s the thing, Midd has done a reasonably great job at avoiding a lot of guessing, but when this interview was conducted it was based on quite a few “what if’s” as posed in January. Some of those perimeters have altered a little and some may have become more sharply focused. Like… where do we find out what departments took the biggest hit in terms of losing faculty. And can I just ask… in reading about the commons system, is it just me or does anyone else see it as slightly bloated in terms of deans, contacts, RAs etc?</p>

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<p>do you mean, by attrition? I’m no expert on Middlebury kerfluffle, but, something tells me you and this entire board would have heard about any faculty cuts. One Swarthmore chemistry professor was “not replaced” last winter and it was major news on campus. That’s not to say, these things aren’t on the table, but, like all their peers, Middlebury would prefer not to bite the bullet until it becomes more obvious which way the economy is headed.</p>

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<p>I know S has received emails about certain departments implementing their new hours or schedules based on a smaller staff (has to do with cleaning, maintenance, etc), but nope havent read where anyone has retired and not replaced etc. Also learned that, unlike Amherst, Midd has not had to borrow to meet any kind of cash calls or meet payroll that I can find. So hopefully, trimming the budget is good for everyone and not just because of the recession or crashed economy. Everyone could stand a little belt-tightening, easier and more happily done when youre not in huge crisis mode.</p>

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<p>Middlebury has cutt >$11M from the current budget (FY2010), but even with limiting financial aid to incoming international students, the financial aid budget is significantly up from last year. Salaries have been frozen for this coming year AND next year (for those earning greater than $50,000 year). The president’s staff all took pay cuts (5%), with the president taking a 10% cut after having taking no raise the preceding year. They did am early retirement program and froze open positions beginning last summer (they did see this coming sooner than other schools) and have 90+ positions reduced from staff. I would bet that the budget published for 2010 includes the “cost” of the early retirement program, which had to be more than $3-4M, and had to be paid out to the reported 59 staff who were in that program. Still, if someone knows how all this has happened and there is still a reported increase of 1.5% in the budget from last year, please fill us in.</p>

<p>All the cuts, as has been discussed on campus, is to protect the academic program, which were exempted from the cuts thus far. Middlebury continued to hire faculty and retain the FTE count (and therefore student-faculty ratio). “Enrichment” funds for visiting lectures were cut, but many on campus argue there were already far too many lectures and events with too few attendees at many and the fewer number of events will not be a loss to students.</p>

<p>And no, Middlebury did not have the liquidity problems Amherst, Havard, Princeton, Yale, and Stanford have had (at least not yet). The reported (at open meetings and on the video on the web of those meetings) $$ of outstanding private partnership calls is less than 1/2 that of Amherst’s. At the same open meeting, the president or treasurer said the annual commitment to overall debt, incurred mostly between 1996 and 2003, is about $14M/year (and the overwhelming portion of it is at fixed and low rates).</p>

<p>Middlebury got high marks not only for its openness in what it was doing, but also for seeing this early and being able to take steps beginning last summer (with the freezing of open staff positions).</p>

<p>And to Modadunn’s comment on the Commons: yes, a large portion of Middlebury folks believe the Commons is heavily staffed and all that is under review. No doubt the decentralized deans have improved student support (academic and other), and it is doubtful that system will change. However, all the other student services support is under review, as the “old” system pre-Commons has not yet been fully dismantled since the new system has been put into effect. Thus, many do believe there are redundancies to address.</p>