Pomona Safe, Others Face Budget Cuts
By Kyle Warneck
Staff Writer

The effects of the economic downturn are beginning to be seen on college campuses across America. Just as states governments are cutting education budgets to meet short falls, even America's most elite colleges are feeling the pinch. Almost every school is feeling some economic anxiety.

The University of California system has decided to raise tuition mid year. Students can expect to pay more for their classes starting in the spring semester. Duke is debating large faculty cuts to cover its budget deficit. Liberal arts schools are also being forced to cut back. Claremont McKenna, Pitzer, Scripps and Harvey Mudd are all trimming spending to varying degrees. Albertson College of Idaho has a 1.9 million dollar budget shortfall out of a 20 million dollar budget. A 10 percent loss in a college's budget is considered a major problem, and Albertson looks more and more like the rule and not the exception.

Middlebury College in Vermont announced last week that due to sustained endowment it losses it too would be cutting its budget by $11 million. Those cuts will include campus modernization, overtime pay, and Middlebury's off campus winter study programs. Nevertheless, the school will not be cutting its financial aid programs.

After two years, the stock market has not begun to recover and most colleges are tightening their budgets in response, but not Pomona College. Despite the general economic gloom, Pomona's financial outlook remains promising.

Colleges and universities are having budget problems due to a decline their endowments and investments. Many schools invested aggressively during the strong years to maximize their gains. This investment strategy has come back to haunt these institutions. Claremont McKenna lost nearly 20 percent of its endowment during the downturn. Other sources of revenue have also been cut back. Charitable contributions are down everywhere. Uncertain economic conditions have reduced alumni giving. These trends are affecting not just colleges and universities but also foundations and non profit groups, such as the Los Angeles County Museum of Art which earlier this year shelved plans for a new facility. The usual sources for grants are also cutting back. There is just less money available to make up for these losses.

Most colleges were caught unprepared. The transition between the wave of unprecedented economic growth and today's dower economic forecast has been a bumpy one. Budgets at most schools have been built around the economic boom of the 90s. Now that wave of success is over, schools are shifting their spending strategies. Pomona Treasurer Carlene Miller said, "It is possible that they [colleges with deficits] were more aggressive in the management of their resources during the up years in the financial markets and are now having to make adjustments."

Meanwhile, the costs of running a college have gone up. Essential items like electricity and health insurance have become substantially more expensive. Colleges face some of the same problems facing businesses. Operating expenses are growing while revenues are shrinking. This formula has left many colleges in danger and many more looking for ways to cut corners. The mounting bills are starting to cut into budgets for other programs.

Not at Pomona. Pomona's budget is secure despite the surrounding economic turmoil. Although Pomona's endowment nearly tripled over the last ten years, its investments were secure even when the dot com bubble burst. Pomona's budget of approximately 93 million dollars for this school year has grown at a rate of about 4 percent a year. Given those conditions, Pomona expects continued financial health without having to cut back. There are no drastic measures planned at Pomona.

Many in the administration point to the wise investment strategy of Treasurer Miller and others involved in managing Pomona's investments. "Our endowment performed exceptionally well in the late 1990s and we have been able to retain a great deal of the gains achieved in those years, despite the negative condition of the financial markets over the last couple of years," Miller reported.

Cautious spending and careful investment have allowed Pomona to escape the problems plaguing other liberal arts schools. Pomona will be able to avoid the ugly choice between cutting back and raising tuition. Even if the bubble burst for the rest of the country, the Pomona bubble has continued to protect the college from financial peril.