The Financial Road Ahead
No freeway certainly, it is likely to have many bumps and detours
ONE prediction about Dartmouth 1969 that will not be contested is that the cost of operating the College at a top-quality level will be vastly increased over the cost today.
"From the financial point of view," says John F. Meek '33, Vice President and Treasurer of the College, "the exciting vision of preeminence created for us by the Trustees Planning Committee and other Dartmouth planning groups means that Dartmouth, from a financial standpoint, will be living even more dangerously than during the past ten years.
"Financing this program will take 'some doing,' especially because many factors are simply unknown at this juncture. We have all come to have great faith in the resourcefulness of the College and we will simply have to be even more resourceful in the future than we have in the past."
Dartmouth's budget for educational and general expense for the current year 1961-62 runs slightly over $ll million, including $1.6 million for research covered by outside grants. Five years ago the total of educational and general expenses was approximately $6 million, including a relatively small research figure. If the same rate of increase holds, and the rate probably won't be lower, Dartmouth's budget in 1969-70 will be at least in the neighborhood of $20 million.
The present pattern of spending the $11 million in educational and general expenses this year is 34% instruction, 15% departmental research, 5% library, 10% student aid, 11% student services, 5% public services and development, and 4% general administration. That these same percentages will still be in effect in 1969 is not a prediction any sensible person would want to make, because cost pressures are constantly shifting and there are bound to be some entirely new challenges in seven years of the sort of life a responsive, advancing college leads today. A growing compensation total has to be taken into account, and also in the picture are projected new educational programs, the newly introduced graduate programs at the doctoral level, and the possible growth of some departments. Library costs, already a problem that the 1962 Alumni Fund is being asked to help solve, are expected to climb sharply as Baker expands its resources and its services to meet the growing demands of both students and faculty.
The operation and maintenance of the College's physical plant will likewise be increasingly expensive. New plant additions, made possible mainly through the Capital Gifts Campaign, have already added to this segment of the College's budget. This is especially true of new buildings serving the medical and scientific areas, which require much more in the way of ventilation, temperature controls, and the like. The Hopkins Center alone will be a sizable item in the plant column of the expense ledger, although here it is expected that the income of the Albert O. Brown Fund, which the Trustees some years ago earmarked for operation of the Hopkins Center, will cover this item for a period of years.
These These are some of the aspects of future College costs which which cannot be accurately translated into dollar amounts at this time. But such imponderables do not alter the over- all probability that the total expense figure in 1969-70 will be at least in the range of the $20 million figure mentioned above.
THE biThe big question is: Will Dartmouth have that much money on the income side to pay the bill? Mr. Meck's answer today has to be: He cannot know for sure.
For the current fiscal year, the income covering Dartmouth's educational and general operations is derived about 43% from student fees, 18% from endowment income, 16% from gifts and grants for current use (mainly for sponsored research), 10% from the Alumni Fund, 6% from student-aid funds, and 7% from other sources.
Seven years from now, when the College reaches its Bicentennial, tuition will still be the largest single item of income, but can it keep on climbing in proportion to rising educational costs? That all the leading independent colleges will have to charge more for tuition is taken for granted; the kind of education they offer is expensive. On the one hand, there are forces at work in the educational world which indicate a slowing down of the rise in tuition rates generally. One of these forces is the competitive situation and the gap between the charges at privately supported institutions and those at tax-supported institutions. It is quite possible that by 1969-70 student fees will cover less than 43% of educational and general costs. On the other hand, there are other forces that may serve to accelerate the rate of rise in tuition. First, if substantial inflation comes, student fees will be the most substantial offset. Second, the pressure of the mounting costs of the educational program are such that Dartmouth will have to look to tuition to bear a substantial part of the increased load. Hence, by 1969 student fees may well be covering an even larger percentage of total educational and general expenses than they are today.
Endowment income depends on the amount of endowment assets working for the College and on fluctuating market conditions that affect their growth and yield. A great deal of Dartmouth's financial strength by 1969 will depend upon the extent to which endowment funds can be enlarged. Over the past five years the total endowment in terms of market value has grown by $27 million to a total of $81 million, but a substantial part of this increase represents appreciation in market value of investments and not new funds coming into the College. However, current indications are that the annual flow of new gifts and bequests for endowment has been accelerating substantially during the past few years. At first impression this affords grounds for optimism for the future. But when one recalls that $1 million of new endowment (the average amount of new endowment in recent years) produces only $40,000 of new income per year and that over the past five years educational and general expenses, excluding direct costs of government sponsored research, have been rising at an average annual rate of approximately $450,000, it is readily apparent that income from new endowment meets less than 10% of new expenses. As a result it is probable that by 1969 the proportion of total expenses met by income from endowment funds will fall below the present 18 % of the total.
IF the Alumni Fund is to maintain its present record of providing about 10% of educational and general income, it will have to be a $2 million Fund by 1969. In view of the 1962 goal of $1,250,000, this may be low. Here again, as with the chance to build up its endowment funds at a faster rate, the College has a flexible and hopeful area to look to as it balances prospective income against the vision of Dartmouth 1969.
The extent to which government funds will be in the financial picture seven years from now is something no one can predict. Government support of the independent colleges is now largely centered in research, scholarships, and loan funds. It is generally agreed that federal funds will have a mounting impact on the financial planning of all institutions of higher education, but in what forms and to what extent remains to be settled in Washington. At present they must be counted a very nebulous part of the answer to the question whether the College will be able to pay the bill for Dartmouth 1969.
Finally, on the income side, gifts for current use from individuals, corporations, and foundations have shown a steady upward trend at Dartmouth in recent years and any projection into the future would hopefully anticipate that the percentage of operating income from these sources would hold up and possibly increase. This is another area in which nothing can be taken for granted, but it may well be the one in which lies a partial answer to future financial solvency.
"Support of higher education has become an accepted obligation of our society," says Mr. Meek. "In recent years many of our nation's business firms have taken major strides in helping to finance the privately supported institutions and if this corporate support continues to grow it could brighten our uncertain financial outlook. The same is true of the growing body of foundations and individual donors."
What if the hoped-for gains in endowment income, Alumni Fund, government grants, and private gifts do not materialize to offset the probable percentage loss in tuition income by 1969?
"If this happens and the income is not there," replies Mr. Meek, "we simply won't be able to do things which first-rate higher education ought to do. In the final analysis, financing the kind of Dartmouth College we want by 1969 will really take some doing, and in looking ahead I think it is wise, while being hopeful, to face that fact."
Vice President and Treasurer of the College
