In time of uncertainty, UST does not hold fast to status quo St. Thomas Newsroom November 4, 2009 The Chronicle of Higher Education recently published a story, headlined “In Time of Uncertainty, Colleges Hold Fast to Status Quo,” with this opening paragraph:“The financial meltdown that has caused seismic upheavals in many other corners of the economy hasn’t changed much about how colleges operate.”I must disagree.Here at the University of St. Thomas, we are looking very seriously at how we operate – all in an effort to become more efficient and to save money while at the same time improving the student experience. That is a tall order, to be sure, but we believe we can be successful in stabilizing our operating costs and making education here more affordable for our students.Our Board of Trustees, which had its fall meetings last month, has challenged us to reduce expenses and wants 2010-11 tuition increases to be lower than the 5.9 percent increase this year. Several trustees have volunteered to serve on a task force that will work with senior administrators to shape next year’s budget, which the board will consider in February.One question often raised in higher education circles is why increases in comprehensive fees – tuition, room and board – routinely exceed the Consumer Price Index by several percentage points. Factors such as financial aid, personnel costs and facilities must be considered in measuring the impact of the so-called Higher Education Price Index, which has increased an average of 4.2 percent a year over the last 10 years, compared with 2.9 percent for the CPI.Financial aidOur biggest budget change over the last three decades has been increases in financial aid for undergraduate students.Financial aid in the form of institutional scholarships and grants is absolutely necessary to attract students and remain competitive with other institutions. To enroll freshmen classes exceeding 1,300 students in recent years, we have increased the amount of undergraduate financial aid at a higher rate than tuition itself. Tuition increases averaged 6.1 percent over the last six years, but that figure dropped to 3.5 percent – and closer to the CPI – after factoring in average increases of 12.4 percent a year in the financial aid budget.More than 90 percent of undergraduate students – and virtually every freshman – receive financial aid, and even those who don’t still are not paying the full cost of a St. Thomas education. We rely on donations, endowment and investment earnings and contributed services from religious personnel to cover more than 20 percent of instruction-related expenses.St. Thomas has tried to remain moderately priced in comparison with the 16 other institutions that are members of the Minnesota Private College Council. This year, we rank No. 9 in tuition, No. 8 in comprehensive fees and No. 6 in room and board. Over the last five years, our comprehensive fees have increased an average of 5.6 percent – No. 12 among the MPCC schools.Personnel costsA university is heavily labor intensive, and St. Thomas is no exception. We try to keep class sizes small, and some services are provided around the clock. Running a campus has been compared to governing a small town because so many students are present 24 hours a day and need housing, food, security and a computer network. It takes a lot of people to provide those services.Two thirds of our operating expenses are for compensation. Salaries and wages are market-based and we try to reflect the market with merit and equity increases, which averaged 4 percent in 2008-2009 but will be only $500 this year for employees making less than $75,000 because of the recession. We have experienced double-digit annual increases in health care costs over the last several years and expect a 2010 increase of 7.5 percent, which will be shared by the university (10 percent) and employees (3.2 percent increase in premiums plus higher co-pay costs.)FacilitiesOur campuses have dozens of buildings, and all of them require regular cleaning, maintenance, repairs, heating and cooling. Many buildings – especially residence halls – operate around the clock. Utility rates increase on an annual basis, and as much as we try to turn down thermostats we still are held hostage by how cold it gets in the winter and how hot it gets in the summer.We are proud of our architecture and our buildings; they are part of what attracts students to St. Thomas. We continue to invest in new buildings such as Flynn Residence Hall (2005), McNeely Hall (2006) and the Anderson Athletic and Recreation Complex (2010) to meet the needs of students and remain competitive with other colleges and universities that are also adding new facilities.So what might we do?Despite all of those legitimate financial pressures, we still realize that we need to slow down the increases in operating expenses given the economic conditions and the impact that the recession has had on our families.We are just beginning the process, but I expect we will examine steps such as these:Maintain – but not increase – the discount rate for undergraduate financial aid.Look harder at when – and whether – to fill faculty and staff positions as they become vacant. We can save money by waiting longer to fill vacancies. We want to avoid layoffs if at all possible.For 2011, consider alternative health care plans that would be less costly than our existing plans.Restructure departments or areas, combining or eliminating functions that no longer may be necessary to run the university or are perceived as less necessary to carry out our mission.Regularly seek competitive bids for products and services to ensure we are getting the best deal with existing contracts.Consolidate to fewer or single vendors in areas where we can get better pricing and better service through higher volume.Review the pricing structures of internal services such as Catering Services, the Service Center and the Gainey Conference Center to ensure what they charge is the same or lower than outside organizations. Departments should spend money internally whenever possible.Raise more money, especially for annual and endowed scholarships. We are in the middle of our Opening Doors capital campaign, which has a goal of $500 million and has raised $379 million in gifts and pledges. Our highest priority is to raise $130 million for financial aid.What can you do to help?Now more than ever, we need your ideas on how to cut costs and increase revenue.Tell us what support services you may not use or need, and where you think there is an opportunity to reduce costs and curb wasteful or unnecessary spending. Or maybe you have an idea on how to generate additional auxiliary revenue. Please send your suggestions to Mark Vangsgard, vice president for business affairs and chief financial officer.I look forward to working with all of you on solving these financial challenges and building a stronger University of St. Thomas that will provide the best education for our students.As we say in our fund-raising communications, we have been opening doors for 125 years. I know, with your help, that we will continue to open them for another 125.