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




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


$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.


$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)


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Endowment and Debt


$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.


$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)


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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…

Choosing Grinnell's Future

Business

Transcript of Choosing Grinnell's Future