Connecticut College Magazine · Winter 2008-2009

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Moving forward in a challenging economy

Moving forward in a challenging economy
Paul Maroni, vice president for finance

The College´s vice president for finance is looking to the future with cautious optimism


Many colleges and universities have announced they will cut spending, implement hiring freezes or impose other financial restrictions in response to the dramatic downturn in the economy. For many years, Connecticut College has had in place prudent budget practices and contingencies to absorb potential downturns. CC:Magazine met with Paul Maroni, vice president for finance, to discuss the current economic environment and the College´s strategies for managing through it.

CC: How do you expect the College to fare in this economic downturn?

PM: The College entered this downturn from a position of financial strength. Our endowment reached an all-time high of $225 million at June 30, 2007, and held fairly steady through the 2007-2008 fiscal year, finishing at $215 million net of gifts and spending. Despite prudent financial management, the endowment — like many other college and university endowments across the country — has seen a reduction in value recently, but much less than the overall declines in the world´s equity markets.
We prudently manage the College´s budget, operations and long-term debt position, and we have a number of built-in contingencies. Because of our already conservative approach, we do not anticipate any reductions in programs and services this year. And we will move forward, cautiously but deliberately, with important strategic investments in the educational experience.

CC: How important is the endowment to the overall financial well-being of the College?

PM: The endowment plays a central role in the financial health of the College. It is the single largest asset on the College´s balance sheet and has been the primary source of growth in the College´s net assets. Five percent of its value, averaged over 12 consecutive quarters, is added to the College´s annual revenue stream to support the operating budget each year. The larger the endowment, the greater that revenue stream can be. The endowment, along with annual gifts to the College, helps fund each student´s education here, even those who pay the full comprehensive fee.

CC: How does the Annual Fund help the College?

PM: Gifts to the College through the Annual Fund support the College´s day-to-day operations, so such gifts are extremely important and very much appreciated. What some donors don´t know is that you can designate your Annual Fund gift toward specific on-going initiatives. In this environment, people could choose, for example, to support financial aid with their Annual Fund gift to help support the College´s commitment to recruit and retain outstanding students.

CC: How do you expect the economy to affect the College´s fundraising success?

PM: We recognize that fundraising in this environment will be challenging. We also know that a Connecticut College education matters deeply — to our students and their parents, to our alumni and, ultimately, to the global society in which our students will participate. We believe that alumni, parents and friends will continue to support the College to their highest ability because they remain committed to our educational mission.

CC: Will the College be making any cuts this year?

PM: Because we prudently manage our financial resources, we do not anticipate any cuts to programs, services or staffing this year. As we work now to construct next year´s budget, we are cautiously optimistic that temporarily slowing the pace of progress toward certain goals will prevent the need for reductions in spending. The College has a long-term commitment to operating efficiently, and that will help us manage through this downturn. Of course the current environment exhibits wide daily fluctuations in the capital markets as well as spreading recessions of durations difficult to predict. Throughout, we will need to reevaluate conditions and adjust spending projections accordingly.

CC: The College has been aggressively spending on campus renovations. Will that change?

PM: Spending on campus improvements will continue, however the progress will likely follow an irregular pattern — up some years and down others. Much of the recent campus renewal has been funded through gifts to the College and long-term, fixed-rate, tax-exempt debt financing. Our new fitness center that will open next fall, for example, is completely funded with gifts, as were the recent classroom and common room renovations. Beyond that, the College currently budgets about $2 million annually for campus renovations, and we have expected to increase that amount over time. We will certainly do so, but the rate of growth will likely slow for a while. Capital gifts and debt-funding flow into the mix more unevenly, so we will continue to fundraise, and we will return to the debt market in the future as appropriate.

CC: The College has outlined a vision for the future that includes a number of new investments in programs and services that directly impact students. Will that change?

PM: The College will continue to move forward with important strategic investments in the educational experience, but as we go, we are weighing each commitment carefully and deliberately and will continue to do so as economic conditions evolve.

CC: How will the economic downturn affect financial aid?

PM: We anticipate that more of our students may need financial aid and that those who currently receive aid may need more. We meet the demonstrated need of all of our students, and will continue to do so within the limits of our resources. Because we do not automatically grant across-the-board increases in all operating budgets, we can more easily direct funding tactically and strategically. In this environment we will continue to do everything we can to ensure that the best and brightest students can have access to this education, regardless of their economic circumstances. The College´s financial aid counselors remain available to work with students and families who have questions or concerns.

CC: Do you anticipate the economy will cause a change in the number of students who apply to private colleges?

PM: In reality, private colleges may be affected less by this economy than public institutions that rely heavily on state funding. In many cases, students who receive financial aid spend less at a private college than they would at a state institution. We are working to communicate that message to prospective students.

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