September 30, 2022 | NEWS | By Konoha Tomono-Duval | Photo courtesy of the Colorado College website
Last Wednesday, I sat down with Associate Vice President for Finance Lori Seager to discuss decision-making in the Finance & Administration Department, and what it costs to run Colorado College.
So I know you’ve worked at New Mexico State for a while. How does the approach to finance differ between a large public university and a small private college?
It’s changed a little because the state support is probably less than it used to be back in the time when I was at a state school. But it was a third from tuition and fees, a third from federal grants and contracts, and then a third from state support through appropriations. So that is very different.
There’s very much an open access mission at a state school, where tuition is kept very low and very high financial aid dollars are spent. So then I went from New Mexico State to the University of Puget Sound, which is very similar to here. And it’s a total shift because we (at small private colleges) are very dependent on payments made by students and their families, as well as the endowment.
Could you give a breakdown of CC’s annual income and spending
Of the overall revenue sources at the college, about 65% comes from tuition and fees. And then we’re fortunate to have a sizable endowment. In this year’s budget, about 18% of overall revenue comes from the endowment.
Our discount rate is 35%. So our students pay [on average] about 65% of the total cost of attendance. That means we look at the total gross tuition times the number of students, times the sticker price. And 35% of that is paid by the college budget in the form of financial aid.
I would say that the percentage of students that pay the full, comprehensive fee is somewhere in the neighborhood of 55%. A little more than a fourth are paying very little and are receiving full financial aid. And then there’s some variation in the bar part of the barbell [curve].
Our two highest expenses are compensation for faculty, staff and students and then financial aid. Of the overall expense budget, 49% is for compensation. This includes not only salary and wages, but also benefits that are offered by the College. And 23% goes to financial aid. That’s the piece of things that isn’t funded by specific endowments or scholarships.
CC spends a fair amount on events and student activities. Do you believe that if the college offered less of these, that it would attract fewer high income students?
In my personal opinion, I think that’s the experience that all students are looking for. So I don’t know that if fewer of those things were offered, it would impact just one segment of the students on our campus. More likely, all students on our campus would have less available to be involved in.
Do you think that CC uses those kinds of events to help draw in wealthy students?
I think there are a number of factors. I do know, mostly from a financial perspective, that CC spends more on the student experience than just what the cost of attendance would reveal.
How would you know which things to pare back, or would it be an across-the-board paring back of activities, excursions, and study abroad? All of those things contribute to the experience that students have here at CC.
Do you think that would decrease the number of people paying full final full tuition, therefore, decreasing the amount of funding that CC has?
Yeah, it definitely is a possibility. I would go back to saying that not only would it impact those that are paying the full comprehensive fee, but it would also impact those whose experience here is fully supported by financial aid.
And you know, I’m sure you’re fully familiar with the demand that we have. So cutting back on those experiences, would that decrease the demand overall? We don’t admit every student that applies regardless. We certainly have a waitlist and all kinds of students that are very qualified to come to CC that we just don’t have enough room for, or who choose not to come.
Could you describe the current composition of the endowment?
So, we (CC) are very diversified. And we use an outsourced chief investment firm to help us gain access to a number of different funds that we invest our money in. That diversified portfolio can help us weather strikes, such as the inflationary period we’re in. So we’re invested in probably 100 different funds, limited partnerships and other things like that. That covers a number of asset classes; we have global equities, fixed income instruments, we invest in hedge funds, private equity and private debt. A lot of our investments are in a limited partnership fund that has underlying investments that another manager trades actively.
The average over the last 20 years is essentially a 10% return, which is quite good. And it fluctuates wildly. We just completed our fiscal year end and we had an overall loss (on market returns), which most of the market did, of 7.5%. Last fiscal year, we had a 27.3% (positive return). So at least we’re not as far down. Not as much as we were up the previous year. But because the endowment is invested in perpetuity, it’s better to look at a 3, 5, 7 or 10 year average. And yeah, the 10 and 20 year averages are about 10%.
You came to CC about a year before COVID and all of this financial kerfuffle. How’s that been for you?
Stressful. And very interesting. I got to be, very much, in the mix on helping the college weather the storm on the operational side. I was helping manage the funding that we were using to buy our tests and our masks and all of those kinds of things. And then [I helped] at a macro level, looking at the difficult 2021 financial year and making decisions on the fly like “How will we cover expenses without having to lay off or furlough employees?”. So I would say: tiring and rewarding. All in all, I’m really proud of how students, faculty and staff came together during that time and weathered the storm.
And now we’re back on campus
For practically two years. And other schools (that are just returning to campus) are surprised when I speak about that. I think that we were very flexible and worked hard to stay on top of the science. It was definitely a hard time for everyone to go through. But I think we did what we felt was best and were even more conservative than El Paso County, just to be sure that our students, faculty and staff were safe.
I wish we had known then what we know now. The hardships that people had to endure. Students having to come to campus, go away from campus. We might have done things a little differently as well. There are things in the compensation that we had to enact to balance the budget. I wish we hadn’t had to do those things. But I am also proud that we didn’t have huge layoffs or furloughs like other schools had to have.
Could you give some specifics on what these things were?
Essentially, one of the things was that we held compensation constant going into the 2021 fiscal year . We put a pause on the retirement benefits that the College pays on behalf of faculty and staff. And we put a freeze on filling vacancies if people left. Those three things really provided a lot of funding to help us keep faculty and staff employed. That has taken its toll on folks, but we had pay increases going into the next year (2021-22) and now this year as well.
Has that changed at all to account for inflation?
Not as much. When we were setting those compensation increases, that was not when inflation was at 8.3%. And things change. So I’m very much aware of that. Our compensation committee brought forward some recommendations and our campus leadership made some decisions going into this fiscal year to significantly increase the pay of our most socioeconomically vulnerable employees. And there’s more work to come.
Is Robson Arena breaking even?
It is. Last year was our first year. The event capacity now far exceeds what we had, given that we had a whole bunch of COVID restrictions. Moving into this year, there are a lot of events that are going to happen there that are in the City of Champions agreement that we have with the city. That will provide even more revenue to Robson to be able to operate.
I think an important thing is making sure, with Campus Activities and other [campus groups], that we use Robson as much as we possibly can. The Commencement was held there, which I think was quite popular.
Are there any current plans for divestment from fossil fuel investments?
I don’t believe there’s anything formally going on right now. It is the case that, because I staff the Investment Committee and work with the Endowment directly, that students from the Sustainability Committee will have interest in this topic. The interest ebbs and flows, if you will. People come and go, depending on what their desires are.
There are discussions about what divestment means. And we have those discussions in the trustee committee with our investment advisors as well. But there’s not been a call specifically for divestment in recent years. In fact, there has not really been any conversation with students or students bringing questions since 2020.
And so I’d imagine that that doesn’t have any effect on the investment strategy of the investment advisor.
There is discussion about all ESG (Environmental, Social and Governance) elements and even tying the anti-racism commitment to that. We have a fairly general investment policy, but there’s some discussion about addressing some topics related to ESG screening. Our investment advisor is quite advanced in the vetting that they do. And because they originally started in London, the EU is far more advanced in their ESG knowledge. So I can imagine that there will be some language written into our investment policy that addresses those things in the future.
There’s no specific (divestment) policy in place, whereas other schools may have said we will not invest directly in any companies that own coal, and other kinds of elements. That might constitute a divestment statement. What many folks don’t know is that that doesn’t (sometimes) address their common, commingled investments. That might be a fund that holds a number of different companies.
I find this all very interesting, because some of the big energy companies are also the biggest investors in renewable resources, renewable energy. So I think the pressure from investors is changing things.
Final question: Is there anything you want to say to students about CC’s finances?
One of the goals of myself and my co-chair on the Campus Budget Committee Mike Taber, and L. Song Richardson, is that there is more transparency and understanding. An educational effort around these questions that you’ve asked, about the components of the budget, what comes in, what goes out. To that end, we will be presenting at First Mondays in Block Three. And we want to hear from students what they think about the budget.
We have great information that we need to push out to students and we have a budget committee website that has a lot of information on it.