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Choosing Grinnell's Future
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Transcript of Choosing Grinnell's Future
Choosing Grinnell’s Future
132nd Annual Alumni ReunionJune 4, 2011
Presented:Faculty Meeting – April 4, 2011 Staff Meeting – May 10, 2011
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…The College aims to graduate women and men who can think clearly, who can speak and write persuasively and even eloquently, who can evaluate critically both their own and others’ ideas, who can acquire new knowledge, and who are prepared in life and work to use their knowledge and their abilities to serve the common good.
The sustainability of these three primary sources of revenue determine the size and scope of the program.
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Net student revenues(or $ collected from students)
Endowment
Fundraising
Mission-basedallocation decisions
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Grinnell has several strategic advantages…
•Net student revenues not growing appreciably•Current gifts declining•Endowment recovering but long-term investment returns likely to be lower than in the past• Program aspirations and innovations demanding increased expenditure
Our current challenges…
•Intellectual capital•Strong reputation for and faculty commitment to teaching•Legacy of social engagement•Committed and expert staff•Successful and engaged alumni•History of innovation•Flexible endowment•Low debt•Excellent physical plant•Low tuition/comprehensive fee•Opportunity to shape Grinnell’s public identity
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Grinnell Trends
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Grinnell Trends
Net student revenues(or $ collected from students)
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Net Student Revenues and Scholarships and Grants
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$19,251 $20,103 $21,541 $21,183 $21,736
$21,667
$14,228 $15,187
$16,331
$19,096 $20,726
$23,070
Net student revenues Scholarships and grants (the discount)
Projected
Source: Audited Financial Statements
fee increase
aidchanges
Recent comprehensive fee increases are more than offset by scholarships and grants provided. Net student revenues are not growing appreciably.
Grinnell Trends
Composition of Revenue Sources that Fund Cost per Student as Compared to Comprehensive Fee
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Endowment spending
Govt grants/contracts
Private gifts/grants
Other
Net student revenue
Source: Audited Financial Statements 8
$50,613$53,207
$55,758$58,036
$56,447
50.9% 51.9% 51.0% 54.1% 52.4%
38.0% 37.8% 38.6% 36.5% 38.5%
The total cost per student is more than 50% endowment supported.
The comprehensive fee does not cover the full cost of educating a student.
Cost per student
Comprehensive fee
Grinnell Trends
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Grinnell Trends
Fundraising
Decade of Fundraising
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$5.1
$9.0$7.2
$5.3 $5.1$6.3 $6.7 $7.1
$5.4$4.0
$1.7
$3.8
$0.8
$0.9 $1.1
$1.9 $2.1 $2.3
$0.6$1.0
$14.6 $2.0
$1.6
$1.8 $2.8$1.0
$3.4 $2.5
$1.0
$17.3
Current gifts Foundation grants Bequests
Source: Council for Advancement in Education 10
Large gifts are primarily from bequests, foundation grants and trusts. Current gifts are declining.
in millions
Grinnell Trends
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Grinnell Trends
Endowment
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Endowment Market Value
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* Dec '10*$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$1.443.0
$862.5
Market value as of June 30(in millions)
Source: Audited Financial Statements
* Includes debt reserve
Grinnell Trends
The endowment is recovering but is still below its peak value.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0%
5.0%
10.0%
15.0%
20.0%
25.0%
NACUBO Mean Grinnell
Rolling 10 Year Return (%)
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Endowment and Similar FundsPerformance Analysis as of June 30, 2010
Fiscal year end
Source: NACUBO Endowment Study
Long-term returns are trending downward.
Grinnell Trends
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Endowment Spending Policy
Approved April 2004*Reaffirmed April 2008.
DistributionEndowment distribution is calculated as 4.0% of the 12-quarter moving average endowment market value determined annually as of the December 31 immediately prior to the beginning of the fiscal year.
Grinnell Trends
The collective efforts of the Board of Trustees and the campus community have allowed us to respond responsibly over the past few years.
The College has been wellserved by its endowment spending policy and the buffers embedded in it.
Budget AllocationThe College shall not allocate 100% of this distribution to the operating budget. Factors in determining the allocation include: 1) revenue balance, 2) expenditure discipline, 3) facility requirements (including debt service) and strategic initiatives, and, 4) the allocation to the operating budget should not increase or decrease more than 5% of the prior year’s budget allocation.
* Included staged reduction from 4.5% (FY 2004), 4.25% (FY 2005 & FY 2006) to 4.0% in FY 2007.
Required Investment Return
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Grinnell Trends
Let’s assume…
Net student revenues and current gifts are flat (not growing). The endowment funds 50% of all costs and the spending rate is 4%. Inflation is 3% (HEPI averaged 3.7% over the past decade). At a minimum, the “real” cost of the program must be retained.
What does this mean?
The endowment return would need to cover:
Spending rate (4%)+Factor to cover lack of growth in other revenue sources +Inflation rate ( 3% to maintain real value of the endowment )
=
Total Required investment return to maintain real growth of the program and real value of endowment.
Even modest increases in the growth of these revenues sources compound and increase the endowment/program’s sustainability.
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Grinnell Compared toCarleton, Swarthmore and Williams
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Net Student Revenues per Student
Carleton Grinnell Swarthmore Williams$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$34,230or
70.8% $21,078or
51.2%
$32,374or
66.8%$29,074
or60.5%
$14,110or
29.2%$20,098
or48.8%
$16,092or
33.2% $19,006
or39.5%
Net student revenues
Scholarship and grants (the discount)
Comprehensive fee$50,205
Comprehensive fee$45,012
Comprehensive fee$49,600
Comprehensive fee$49,880
Source: Audited FY 2010 Financial Statements
Fall 2009 enrollment 1986 1651 1513 2119
Assuming an enrollment of 1600, Carleton, Swarthmore and Williamswould have collected $21, $18 and $13 million MORE, respectively, from students.
• Grinnell, Swarthmore and Williams are need-blind.• Only Carleton and Grinnell award merit aid.
Grinnell as Compared
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Decade of Fundraising
Carleton Grinnell Swarthmore Williams$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$216.2
$77.1
$166.3
$393.1
$40.4
$48.0
$41.8
$44.7SourcesCurrent gifts
Bequests
Source: Council on Advancement in Education
$256.6
$125.1
$208.1
$437.8
Carleton, Swarthmore and Williams averaged $13, $8 and $31 million MORE annually, respectively. They have built their endowments as well as supporting operations.
Carleton Grinnell Swarthmore Williams$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$110.9
$42.2
$110.2$147.2
$145.7
$82.9
$106.9
$290.6
Operating
Capital (including bldgs and endowment)
Uses
(in millions)
Grinnell as Compared
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Endowment and Debt
Carleton Grinnell Swarthmore Williams$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$582.6
$1,264.8 $1,249.3
$1,456.7
$122.7 $125.6$177.0
$254.8
Endowment market value Debt
Source: Audited FY 2010 Financial Statements/NACUBO Endowment Study
Grinnell’s endowment is investment performance rather than gift driven…
…and has used debt more conservatively.
Carleton Grinnell Swarthmore Williams$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
66% 30%
63%
89%
34%
70%
37%
11%
Donor contributions
Internal reinvestment
The sources of Grinnell’s endowment reflect disciplined “savings” and provide financial flexibility.
(in millions)
Grinnell as Compared
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In review…
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•Net student revenues aren’t growing appreciably. •Gifts are declining.•The endowment is recovering but sustaining its real value
will be a challenge.•Growth in program requires efficient use of existing resources and additional revenue sources.
•Explore admission and financial aid policies to determine how to increase net student revenues•Invest in development to increase gifts•Continue to maximize endowment returns•Develop a compelling case for why to invest in Grinnell•Increase operational efficiencies
Our strategic options…
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