Jewell: College financially strong

(Editor’s Note: President Richard G. Jewell ’67 writes a regular memo to all alumni, reporting on different aspects of Grove City College. In March, he addressed the issue of the economy and what the recent slump means to the College where your students are living and studying.)

The onset of a deep economic recession is upon us, and we are all feeling the effects. In fact, since early September our financial, capital and credit markets have been on a roller coaster ride not seen in most of our lifetimes. So what are the early effects and implications for our College?

First, as most know, we do not take state or federal monies. Thousands of other colleges and universities do. As a result of taking – even relying on – this source of money, many schools are seeing a severe short-term revenue tightening. If you “live by that sword” (as almost all do), you can “die by that sword.”

By comparison, we are not affected at all. The College’s historic principles have proven over time – especially now – to be good, right and beneficial.

Plus, as we have learned, “strings” unavoidably come attached to the state and federal money that we avoid.

Those “strings” will also continue to increase, placing at risk the independent governance and perhaps even how courses are taught at many institutions. For when the government spends our tax money and applies it, say to a private school, the word “private” begins to erode and with it often the historic mission of the affected institution. We will, I assure you, continue our path of independence, for it is the bedrock of who we have been, are and always will be, and that is a promise.

Because the loss of government money doesn’t affect us as it does others, what does? What are the risks or threats and how are we handling them? Like most of us individually whose investment portfolios and returns have decreased, our endowment earnings have decreased by approximately 30 percent, and so in this regard we are like most other schools and charitable institutions.

While many schools use a robust portion of their endowment earnings for operations (a number have even had to invade their principal), we do not. In fact, we use endowment earnings for only a bit over 1 percent of our operating budget. Again, this is another historically sound conservative operating principle that we have always followed and whose wisdom is illustrated in times such as these. That operating principle is a simple but important one. It reminds us to manage the economics of the school based on revenue from room, board and tuition and not to rely on endowments or other funds that could dry up quickly.

The effect on our operating budget is minimal and not catastrophic. Even though we use very little of our endowment for direct operating expenses, we do use 85 percent of all our endowment earnings for need-based and merit-based scholarships. Because we do not permit students to accept federal loans or grants in order to maintain our independence, our ability to provide our private scholarship grants and competitive private-sector sourced loans is very important.

By the way, to dedicate 85 percent of a school’s total endowment earnings to scholarship aid as we do is unheard of. In fact, a major criticism of schools has been that they have not provided a high enough percentage of their endowment earnings to the scholarship area – but we have, and we will continue to do so, and that is a promise.

So, with our endowment assets reduced, we knew we would have less money to give out in scholarship aid for the incoming freshman class as well as the upperclass students who return to us next fall. In fact, we had an estimated shortfall over the amount of existing scholarship funds available last year of about $1.5 million. But I have good news, and that news reflects incredibly well on our alumni and friends. Through newly realized deferred giving specifically earmarked for scholarships by recently deceased alumni in their estates, plus current gifts from other donors for scholarship purposes, we will actually have a bit more money available to award to next year’s students than we did in 2008-09.

This is an extraordinary outcome, and one for which I again am proud to say thank you to all. This has made a great difference – one that truly impacts our ability to attract each year our nation’s best students and support our marked commitment to maintain both our independence and, most importantly, the integrity of our mission, a mission animated by the principles of faith and freedom.

Sincerely,
Dick Jewell ’67, J.D.
President

Sidebar: Economist weighs in
 
(The following is excerpted from editorials by Dr. Mark Hendrickson, adjunct faculty member, economist and contributing scholar with The Center for Vision & Values at Grove City College.)

The only possible way to rein in runaway deficits is to slash runaway federal spending.

Neither party is making this case. The Republicans may not want government spending to increase as rapidly as the Democrats do, but how many Republicans have you heard calling for a reduction in federal spending? All we get from the minority party is the same old tired refrain — tax cuts.

I am certainly not opposed to tax cuts. Lower taxes are economically beneficial. They lead to increased economic activity and production, and therefore are to be desired.

Politically, calling for tax cuts is the easy part, the low-hanging fruit. Economically, though, tax cuts are not enough. There is no way that we are going to grow our way out of a $1.7 trillion deficit with tax cuts alone.

“Into the Fiscal Abyss”
published March 6

Unnecessary, wasteful production must end. For example, fewer houses and cars should be produced, because we don’t need all that have been and are being produced.

It is not economically healthy for businesses to keep wasting scarce resources by producing things that people don’t need.

On the contrary, it is far better for society to stop wasting resources and to redeploy them into businesses that produce more highly valued goods.

“The Ghost of John Maynard Keynes”
published March 13

America is increasingly being divided into opposing camps — the governed and the governors. The stakes here are enormous. We either get the government-as-elite genie back into the bottle, or America as we know it ... will become nothing more than a memory.

“Two Americas?”
published April 3