The Board of Trustees was back on campus Thursday and Friday, and wasted no time getting to work.
The trustees passed a budget for the 2011-2012 academic years on Friday, which totaled $85 million, Sarah Wallace, chair of the trustees said at news conference with student reporters. Brad Kelsheimer, vice president for Finance and Administration, said in a separate interview that the budget would contain $800,000 in cuts for capital repair and replacement and nearly $1 million in cuts for equipment and technology.
This year budget allows for faculty and staff who remain in their same position to receive a 1.5 percent salary raise. An exception was made for employees making over $100,000 a year — they will not receive a raise. Two years ago, no employee received a raise, and employees making under $100,000 a year received a $1,000 raise last year, President Brian Casey said at the news conference.
Casey and Wallace both addressed new marketing strategies of the university. The university has always touted their generous financial packages for prospective students. However, Casey said Neustadt Creative Marketing Inc., who has been working with DePauw to reshape their marketing practices, found that this sometimes overshadows the talk about intellectual engagement. Therefore, the university will be giving out financial aid later in the admissions process.
"We provide a superb education, but we don't talk about it that much," Casey said. "Money is an extremely important factor, but we want it to be a secondary factor in families' and students' decisions to come here."
However, this marketing campaign will not be easy. Casey has repeatedly expressed frustration that people sometimes associate DePauw with things such as the Princeton Review's "Top 10 Party School" ranking rather than the intellectual engagement of the university.
"It makes me sad," Wallace said of the Princeton review rankings. "I feel it misrepresents what DePauw is."
The new marketing campaign must consider how to navigate the university's precarious financial situation. Last month, Moody's downgraded DePauw's credit rating to A3 from A2. The agency cited weak cash flow as a result of low net tuition as one of the major reasons for the downgrade. Casey said in the future, the university will be shifting more towards need-based aid and less towards merit aid, which will allow higher-income families to pay more for a DePauw education.
Wallace said while the university is still facing some financial challenges, the endowment is improving. But temporarily, the university is pulling an additional $2.4 million from the endowment in addition to the annual 5.5 percent of the total. Additional draws have been approved by the board of trustees since the 2008-2009 year, when the university began losing revenue due to the recession.
"I went to the board of trustees and said ‘If we are going to abide by the 5.5 percent endowment draw, this place is going to have to face serious, serious cuts," Casey said.
An additional draw from the endowment is expected next year, but the university will likely go back to 5.5 percent draw, Wallace said.
Both Wallace and Casey also addressed DePauw's debt. Currently, the university holds approximately $120 million in outstanding debt, with all but $45 million of that as variable-rate.
When financial markets were strong, universities would finance new capital projects by taking on debt to avoid drawing unnecessary endowment money, thus allowing endowments to boom with the stock market, Casey said. After the recession began, Casey said universities became more concerned about managing debt.
DePauw is no exception to the trends. The university has taken on debt to finance many capital projects on campus over the years, most recently taking on some debt to finance the Green Center for Performing Arts and the Janet Prindle Institute for Ethics. Kelsheimer said the principal on the two buildings will be paid by the donors; however the interest accrued will come from the operating budget, funded through tuition and fees. Casey and Kelsheimer declined to offer details about the status of the payments, but noted the payments are coming in on schedule.
In January 2010, the university implemented a new policy for capital project donations. The university will not begin construction on a capital project — such as a new building — until 75 percent of the funds have been raised. In addition, the final 25 percent must be given in a period of five years. Casey and Kelsheimer have both touted this as a forward-thinking policy, and not as a reflection of donation problems in the past.
Wallace also said the money for the first phase of the DePauw 2020 plan has been raised, which will focus on the renovation of first floor of Emison Art Center and a new campus entrance on Anderson Street. She said some donors would like to remain anonymous, and so the university is trying to figure out the most appropriate way to announce the developments.