As Vice President for Finance and Administration Brad Kelsheimer presented a saddening powerpoint depicting the university's debt to a ballroom of faculty members, the room filled with laughter as he pointed to green bars on a graph and said, "We're finally in the green."
After balancing the university's budget on a cash-flow basis for two consecutive years, both President Brian Casey and Kelsheimer expressed optimism about going forward.
Though the operating debt currently stands at about $120 million, Casey and Kelsheimer said they have accepted that number. Given the current economic climate, they feel the situation could be far worse.
"I think we have done very well, very well. The very fact that we managed to balance the budget, not take on a dollar of debt is amazing," Casey said. "Since I have walked on this campus, this institution has not taken on a dollar of debt."
Kelsheimer explained at the Faculty Institute meeting Aug. 15 that the university administration took on over $24 million worth of "bad debt" 10 years ago, mainly in short term loans in order to pay for construction projects. Kelsheimer also mentioned that the former administration borrowed from the endowment in order to pay taxes.
"If I was sitting in this chair 10 years ago, I don't know that I would have made different choices," Kelsheimer said. "So it's really easy to look back in hindsight and say, ‘How in the world could we have not seen this coming?' But I think there is a reason as to why prior administration didn't see it coming."
Kelsheimer said the former administration entered into a "lost decade" in investment return relative to years prior. This precedent influences the current administration's actions.
"It's a different era of discretion now that we live in, out of necessity," he said.
Casey addressed the issue of financing construction projects and avoiding financial downfalls upon his arrival four years ago.
"So one thing that happened when I got here is that I went to the board and I in essence handcuffed myself and said, ‘We're going to establish a new capital project policy, which is that we will never start a project, including Emison and Anderson, until 75 percent of the cash is in hand,'" he said.
Looking back on the actions of those who came before him, Kelsheimer said there are many things he wishes he could change.
"As far as challenges that the past 10 years have created, you know we'd love to have that capacity," he said. "We'd love to have a different net-tuition position, we'd love to have a larger endowment, we'd love to have a lot of things."
Kelsheimer also attributed a great deal of the financial problem to the economic recession as it hinders the university's two greatest sources of income: net tuition and financial gifts. But some sacrifices have been made in order to save money, as the university refuses to compromise on the student experience.
"We're living on a day-to-day basis making sure that their four years here, that they're getting what they came here to get," Kelsheimer said. "So we're all focused on that."
The greatest sacrifice made by the university is maintenance to buildings and other facilities. Kelsheimer said the maintenance budget this year is around $900,000 when it should be around $5 million.
He said the administration is fixing anything that may be unsafe, but otherwise, they are working on a very "reactionary" basis, solving problems as they arise rather than predicting and preventing them.
In order to lessen debts in the coming year, DePauw will offer fewer scholarships, increasing net tuition and will likely increase the rate of tuition. An exact figure for the increase will be released following discussions in January.
"There are a lot of levers that we could pull and it could change cost, but we think it would change the experience," Kelsheimer said. "If we start changing the experience, what does that do to DePauw?"