We have all been through two months of uncertainty and surprises. The COVID-19 situation we understood in February has evolved into a major disruption of what we took for granted as “normal” operations. While we do not know where this pandemic will take us in the next several months, I write today to describe where the College stands financially.
Our updated financial forecast for FY20 shows a loss of approximately $9.9M in income and a projected savings of $7.9M in expenses, with an overall operating deficit of $2M.
As you know, we have not operated this spring with the primary goal of saving the College money. We chose to support students by making no adjustments to their scholarships, even though we refunded, for most, their full room, board, and fees for the term. We chose to offer special considerations for some of our seniors who were eligible to graduate early or had only comps or P.E. credits to fulfill. We have offered to send the seniors their belongings at no cost to them. We have continued to employ regular staff and faculty without layoffs through the fiscal year. And, we have offered assistance to Bon Appetít and Barnes & Noble to help ease the burden on their employees who are based at Carleton.
There are two key reasons we were able to do this. First is that we have continued to serve our students and thus be paid for those services. We have been able to continue our core mission thanks to your effort and our students’ dedication, and we have retained the bulk of our budgeted revenue. Second is the long-standing financial stewardship that we have all practiced and that has been a hallmark of Carleton. We entered this period with balanced budgets, strong student demand, and careful management practices across the college.
Still, this pandemic has undoubtedly made a financial impact on Carleton. We lost the majority of our room, board, and fees when most of our on-campus students left in March; we had about twice as many students choose to graduate early than we anticipated; and we saw a slight increase in the number of students we expected to take a leave this term. The result was 107 fewer students enrolled for Spring Term than we had anticipated. Many of you worked with individual students to help them sort out the best way to pursue their Carleton education in these difficult times. It is a testament to your commitment and our students’ appreciation for Carleton that most have elected to remain enrolled.
Looking ahead, we can see both opportunities and challenges to come.
· Summer programs: While we will not be running on-campus pre-college student programs this year, we will run an online Advanced Placement Summer Institute for the College Board, which could generate as much as $200,000 in net income for this year.
· Federal CARES Act funding: According to information published by the U.S. Department of Education, Carleton is eligible to receive $1,168,048. A minimum of half of this, or $584,024, is to be used for direct assistance to students. The remaining funds may be used to reimburse the College for expenses incurred by the changes implemented in response to COVID-19. We are in the process of applying for these funds.
· Financial stewardship: We all need to continue to be prudent in our expenditures. Because of the deficit, we will not be able to add to carryforward balances at the end of this fiscal year for departmental budget outcomes. Departmental budget surpluses for this year will roll up to the College, with some exceptions.
· Major capital projects: We are still on schedule to complete the science project work in Olin and Hulings by the end of this summer. Similarly, we are moving forward with the next phase of work on the Utility Master Plan. This includes planned renovations in Laird Hall and utility work in the tunnels. New utility lines will also be buried in the roadway behind Severance and Sayles Hill. These upgrades move us closer to benefiting from our campus-wide conversion from steam to hot-water heating.
· FY21 and beyond: Enrollment will continue to be the biggest determinant of how sustainable our operations are financially. There are also other unknowns, such as investment returns of the endowment and the level of philanthropic giving to the College. Much will also depend upon the public health situation in Minnesota and the nation, as well as the state of the economy.
· The VP transition is moving ahead smoothly. I am in regular communication with my designated successor, Eric Runestad, who will begin his tenure at Carleton on July 1. We are preparing briefing and background materials and he will be introduced to the Board in May. Eric and I have also known each other for over 5 years as fellow ACM CFO colleagues. I am confident that we will have a smooth transition and that he will be a strong and wise partner in the campus leadership.
We are fortunate at Carleton. We have earned a great reputation and generous support from our alumni, and have exhibited such consistent quality in our educational offerings that we do not usually worry about enrollment. Those traits are not easily diminished, but during this perturbation in the course of history, they may not yield the same stability in enrollment.
We must continue to work together to maintain the success we have had. I know that your commitment and full engagement will be a large part of what sustains the students, all of our colleagues, and our campus in the months ahead. As we continue to navigate this unprecedented time, I am confident we will draw on our shared values and our commitment to a Carleton future that is robust and creative in fulfilling our longstanding mission.
With sincere thanks and appreciation,
Vice President & Treasurer