Editor’s note: This is a response to “More nuance needed in discussion of Vassar’s finances,” written by Joshua Sherman ’16 published in the Opinions Section on Feb. 1, 2017. Sherman’s piece was a response to Professor Foster’s, “The Vassar Bubble Has Popped,” published in Boilerplate Magazine. This article was run in the print edition of The Miscellany News as, “Administration must be trimmed, financial aid upheld.”
Writing for the Miscellany News, Joshua Sherman (class of ’16) assures the Vassar community that a loss of $54 million (as reported in Boilerplate Magazine) is hardly breathtaking: “Vassar is not on the brink of its extinction.” Josh is right. Vassar remains among the richest colleges in America. We still receive more revenue in tuition and fees (even after generous financial aid discounts) than most other colleges. No one’s talking bankruptcy here. (For your parents, maybe. For the College, not so much.) Josh frets that someone may think “Vassar isn’t a valuable institution to attend.”
No one who matters thinks that. Vassar is one of the most valuable colleges in the world. It’s also one of the most expensive. Faculty and administration have therefore a responsibility to deliver top value to each student, no matter what he or she may have paid to be a member of the community.
“If we’re on a financial highway to hell as Professor Foster insinuates,” alleges Josh, “then we’re in good company.” Setting aside the ascribed hyperbole, Josh is right again: Vassar is not alone. Many of the nation’s wealthiest schools have spiked tuition and hiked administration costs exponentially, while the workers’ wages have been held in check, and the budget for student services slowly chokes. The CEOs earn more; the consumer pays more and receives less.
If you maintain a slick advertising campaign for your brand, all’s good. And yet, in 2016, several of the worst-offending schools saw significant losses to their endowments that could not be offset by high tuition. The net declines were not chiefly from unlucky investments but from bad spending by college officers who drained endowment-cash on the expectation of capital gains that did not materialize.
Every endowment suffers a loss from time to time. Money spent is cash over the dam. How we recover financial equilibrium, as we move forward, will depend on which budgets get cut, and on how well we are able to restore alumni confidence.
Nuance is good. So, too, is factuality. When Josh states that 2016 was Vassar’s first net loss since 2007, he’s mistaken (2007/8, 2008/9, 2011/12). Josh writes that Vassar’s 2015/16 loss of 5.5 percent “happened to almost all other colleges with large endowments.” Fact: Of the 97 schools that had more wealth than Vassar in 2015, seventy-one had a better year than we did financially. Berry College—with its $56 million gain against our $54 million loss—sailed right past us. Among 39 liberal arts colleges in New York State, 28 endowments performed better than Vassar, and 10, worse. Oswego College topped the list with 21 percent growth. It’s true that big spenders took a big hit. But the #1 biggest loser, Harvard, will hardly feel the pinch: with $35.6 billion remaining, Harvard can lose $54 million a year for the next 658 years and still be left with pocket change.
In reporting that the S&P 500 “declined 3.05 percent,” Josh is mistaken: July 2015-June 2016 the S&P 500 actually went up (slightly). Meanwhile, Vassar suffered $20.6 million in realized and unrealized losses on investments. By Josh’s math, that sum represents “only 1.7 percent” of the college’s $54.1 million net loss to the endowment (but 20.6/54.1=38.1 percent).
“That’s right,” says Josh. “Vassar beat the market last year.” Kellyanne Conway could not have said it better.
Vassar’s 2016 investment losses (as opposed to unrecouped spending) were due largely to high-risk, high-fee hedge funds, exacerbated by our administration’s dogged commitment to illiquid investments in oil and gas partnerships. In defense of oil, Josh reports that the S&P Energy Index—Chevron, Exxon Mobil, Halliburton, that crowd—declined by only 3.4 percent. Another mistake. The Energy Index suffered a decline of 5.8 percent.
“almost doubled.” On the last day of President Fergusson’s administration, Vassar held $77 million in long-term debt; 10 years later, (weeks before Hill’s departure), that figure stood at more than $248 million (a more-than threefold increase). In FY2016, Vassar paid more than two million just to service its debt.
Vassar’s not broke, far from it, but the trustees and senior officers will be making some hard choices. The unhappy fact that other wealthy schools have burned through their cash at an even faster clip than Vassar is nothing to feel good about.
Big ships cannot turn around on a dime. Nor does it help if one well-meaning passenger on board cheers for the crew that drove us into the iceberg, saying that it’s nothing really to worry about.
Action must be taken.
Our trustees will keep Ship Vassar afloat, you may be sure of that, even if it takes their own money to do it. Meanwhile, the crew (faculty and staff) will do their best to provide a safe and pleasurable journey to the paying passengers, regardless of their ticket price. But we all have deep cause to be concerned.
Captain Cappy has jumped ship, Commander Bradley has not yet arrived. In the interim, baggage must be thrown overboard. (One possible strategy: let the passengers keep their goods and services unmolested; trim the administration to 2006 levels, and we save more than $10 million a year. Don’t count on it. The objects being floated about instead: need-blind tuition, and about 5 percent of everything else).
Elite institutions imitate one another’s good and bad behavior. You may soon see a chain-reaction of schools announcing discontinuation of need-blind admission.
Here’s why everyone who cares about Vassar should care about that: if low- and middle-income students are priced out of the private college market (and it’s already happening), then all of the priciest private schools will be forced to compete for an essentially stable population of wealthy high school students.
Those colleges that cannot provide luxurious dorms and student services will be squeezed harder. Many will be forced to lower their academic standards or reduce their services, or both.
Dartmouth is one of the schools that outspent Vassar in 2016 and took a big drawdown on the endowment. Executive Vice President Richard Mills is not terribly concerned (his personal compensation package for FY2016 stood at $668 thousand).
Dartmouth is “wealthy enough,” said Mr. Mills, “with a well-established brand and a clear quality level, that there are going to be people [sic, a telling slip of the tongue] below us— that there are places that are less affluent than us in terms of brand or academic quality—that are going to be affected first….We have a bit of a cushion…whereas other institutions may have less time.”