Tufts may escape effects of slow economy

Consequences of the recent downturn in the economy have begun to reflect in budgets of colleges and universities across the country, according to recent economic statistics. Many schools, including private colleges like Tufts and Dartmouth, have been forced to cut back their budgets, even though tuition costs have risen steadily at an average rate of 4.5 percent annually.

But the severity of these effects differs between schools. The economic downturn has more far-reaching effects on public universities than their private counterparts, according to Economics Chair Gilbert Metcalf. The budgets of public colleges depend heavily on state subsidies and, in times of economic turmoil, the states rarely hesitate to slash college funding.

Metcalf cites the situation at the University of Massachusetts-Amherst (UMass) as an example. The university recently withdrew an expected $30 million raise for faculty because it lost some state funding.

"In addition to the pay cut, I predict that UMass will raise student fees and other charges in an effort to balance their budget while claiming that they're holding the line on tuition," Gilbert said. Although tuition costs may seem static, students still pay the university more in other service charges.

Executive Administrative Dean of Finance Wayne Bouchard echoed Metcalf's sentiments. He also mentioned UMass and explained that "it is extremely challenging to build and maintain a system with huge budget swings" caused by the state's lost tax income.

Both Metcalf and Bouchard agreed that private institutions such as Tufts are better equipped to deal with fluctuations in the economy because of its revenue sources.

"Private universities of Tufts' caliber are better insulated from economic downturns by their endowments," Metcalf said. A university's endowment allocates a fixed percentage each year to the University's budget.

This amount, called the "payout rate," is based on the endowment's value over time, usually three years. Therefore, a private college's budget is better protected from shorter-term fluctuations in the stock market.

Tufts' endowment is currently valued at $677 million. UMass reported an endowment of $72 million last month.

"But a sustained downturn in the market, as we're currently experiencing, can cause real problems," Metcalf warned. Such problems have not yet materialized at Tufts, but Dartmouth College was forced to cut $1.6 million out of its budget this year due declines in the value of its endowment.

Even if the economic situation became desperate, Bouchard said that the annual increase of Tufts' undergraduate tuition will never be more than five percent a year.

At Tufts, revenue shortfalls affect expenditures, particularly financial aid, before tuition.

"A weakened economy will put pressure on that discount rate and make it harder for us to attract excellent students who cannot attend Tufts without financial assistance," Metcalf said.

"Pressure" was also used by Bouchard to describe the economic situation in relation to tuition costs. In the economy's current depressed state, the University is struggling with the gap between tuition revenue and budget costs, while families are finding it harder to come up with the money to pay for college.

"When costs are increasing three, four, five percent a year and a family's income is flat or shrinking... this is our most immediate concern," Bouchard said. He cited the increase of financial aid expenditures as his highest priority. Like University President Larry Bacow, he has a strong desire to introduce a need-blind admissions policy at Tufts. Due to lack of funding in this current economy, however, a need-blind admissions policy is not immediately feasible, Bouchard said.

A downturn in the economy also increases demand for the University's resources because many people decide to go to graduate school rather than entering the job market.

"Less growth in terms of jobs means an increase in graduate study," Bouchard said. He explained that recent graduates and employed adults had decided to enroll in graduate schools so they can get higher-paying jobs.

But the effect of more graduate students is not widely appreciated at Tufts because the University focuses on undergraduate education.