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Balancing a college’s expenses and income is a complex task. It is clear that the College is spending a lot of money on students and their needs on a daily basis. Basic maintenance of the athletic facilities and renovations of dorms and houses proves this point, to say nothing of the planned Core Academic Building. Even more striking are numbers that indicate the amount of financial aid Principia provides its students. A vast majority of the student body, including almost every international student, receives some form of financial aid, either in the form of scholarships, awards, or direct financial support. Knowing all this, one might wonder how Principia’s finances are organized and structured. The Pilot talked to College President Dr. Jonathan Palmer and Dean of Administration Karen Grimmer, both mainly responsible for operating the college’s annual budget.
Overall, Principia College receives its income from three different, but often interconnected sources: tuition, room, and board; donations; and income from Principia’s endowment. While the first two are obvious sources of income, Principia’s endowment deserves closer examination. The endowment is – in a way – Principia’s financial back-up. Mary Kimball Morgan, the founder of Principia, stressed the importance of establishing an endowment. Over the following decades, the endowment grew steadily, mainly based on donor contributions and gifts. In 2008, Principia’s overall endowment worth was at $755 million. During late 2008, however, Principia, like other educational institutions throughout the nation, was hit by the financial recession and lost over $200 million of the endowment. As of the last day of 2011, the endowment was at $521 million.
Principia College expenses are also divided into three main areas: the operating budget, which provides for Dining Services, power and water utilities and supplies such as paper towels, pencils, and light bulbs; the salary budget, which pays faculty and staff; and the capital improvements and investments budget, which includes all expenses that are not needed regularly and often consist of repairing or replacing parts of the infrastructure, such as roofs, parking lots, or furniture.
Ideally, Principia College’s annual budget, which includes the operating and salary budget, would be solely based on the income from tuition, room, and board, and donations from the outside. That, however, has not been the case in recent years. Even when drawing from the endowment, ideally no more than five percent of its overall worth is meant to be used on a yearly basis. That percentage enables the overall endowment worth to remain stable, while taking more than the five percent effectively reduces the overall worth. Again, for the past several years, Principia has used more than that five percent.
While Principia drew 5.56% of the endowment’s worth in 2007/8, it drew 7.05 percent in 2009/10 and 6.99 percent in 2011/12. Looking at this fact, Grimmer stated: “Each year we plan to [reduce our income draw from the endowment] under five percent […]. However, we have found ourselves in situations in recent years where the economy was not so good. One result of this was that more families had need, and so we found ourselves needing to provide more financial aid.” Grimmer underlined that fact with numbers: “On average, students are only paying about $12,000 a student, but tuition, room, and board is over $30,000 a student. That gap has to be paid for by something or someone. And that difference ends up being paid from additional draw from our endowment and gifts from friends of Principia.” In addition to increased expenses for things like financial aid, Principia has had to spend money on the installation of sprinkler systems in all the dorms across campus “to meet the Illinois mandated life safety upgrades for all student dormitories across Illinois to be completed by January 2013. […] Principia’s desire to meet this legal commitment has required that we continue with substantial capital spending plan.”
While it has been necessary to continue to spend more in recent years, Grimmer also sees value in the way the administration approaches spending: “We try to really operate under the principle of wisdom, economy, and brotherly love. It is not about ‘have’ and ‘have not’s. For the most part, everybody that I deal with is very thoughtful about how they use Principia’s resources for their specific department activities. […] I see very much a willingness to be aware of the overall and greater need.”
To get a picture of Principia College’s financial standing this year, it helps to look at the gap between income and expenses for the College. Operating and salary budgets amount to a little more than $23 million. Revenue from tuition, room, and board, after subtracting those amounts Principia spends on financial aid, amounts to about $6 million. That means that around $17 million has to be paid by the endowment and annual donor contributions. This number does not include any capital investments, which also have to be paid by the endowment. Addressing this fact, Grimmer stated: “We find ourselves in a unique situation among colleges, where we need our endowment to supply the majority of our operating expense budget. We cannot just raise the price, and we cannot simply enroll more students. We have a target audience and what we bring in is what there is.” Underlining the careful consideration of the spending, Grimmer added: “I think what we spend is what it takes to operate the campus. And I can sincerely and honestly say that I don’t see a lot of extravagance.” She continued: “I think people are very cognizant of the fact that when we are spending money from the endowment we are spending what people very generously have given to Principia, because they care about Principia’s mission and educating students. And there is a sense of wanting to be wise with that.”
Dr. Palmer is aware of the situation as well. In order to keep expenses at a necessary minimum, Dr. Palmer and the administration examine the budget with great care: “We have been very careful with our budgets over the last couple of years. We look carefully at every budget line every year to see if we are meeting the need, and in some cases [we are] not […] able to meet the want.”
While Principia College is trying to reduce its overall expenses to preserve the endowment, the administration also plans a series of projects over the coming years. Building the Core Academic Building is only one component of Principia’s Master Plan, which aims to transform vast parts of the campus and introduce new forms of technology and equipment to its facilities. It could almost seem contradictory to plan these expansive projects while trying to save money. Dr. Palmer explained: “We don’t have a do nothing option. The buildings that we are contemplating replacing need to be renovated or replaced. We can’t just wait for another twenty years; we really have a drive to do something. […] Our hope is that [these plans] position us for the next hundred years.”
Financing the proposed Core Academic Building is not part of Principia College’s operating budget itself. Grimmer explained: “That project is not funded within […] the College budget. The advancement office is working to bring in new financial support so that we can move forward with this building and other major capital expenditures associated with the College Master Plan.” Thus Principia’s plans for the future are dependent on donors from on and off campus.
While Principia’s finances are undergoing a period of intensive demand and need, the overall goal for Dr. Palmer is clearly a long-term one: “We will make this continue to be a compelling place for students to be here for their study and growth in Christian Science, for their growth intellectually, socially, athletically, and morally … [Principia] is a global institution, which is why people will come from Berlin, Zimbabwe, Indonesia, or Montevideo. That is who we are and we want to make sure to support that in every way possible.”