Follow the money and see where it goes

How does the school generate income? And where does our tuition go?

Kayla Williamson | Editor-in-Chief

One of President Brent Ellis’ priorities when he took the leadership role was fundraising and increasing endowment (the school’s savings and investments.) While the budget for Ivy League university Harvard is $78 billion and Spring Arbor University (SAU)’s rival, Indiana Wesleyan’s, 2016-17 budget is $178 million, Spring Arbor’s revenue and contributions in 2014 totaled $72 million.

As SAU continues to grow and expand, donor contributions, tuition and other supplementary projects are key sources of income, Ellis said.

The recent additions to campus–the new tennis courts, the E.P. Hart memorial for SAU’s founder, renovated locker rooms, English mural and nursing program–were all contributed by donors.

“Part of what you do within these donor relationships is people fall in love with the university and they have interests and they have passions that are focused in certain areas, so you really want to empower people to be involved in things they’re passionate about,” Ellis said. “I think every one of these gifts really is a manifestation of the person’s passion for Spring Arbor University.”

Ever wonder how the school makes money and where tuition money goes? President Ellis answers all your questions.

The Pulse (TP): You’ve actually worked in fundraising before you were president in Advancement right?

President Brent Ellis (PE): Yes I did. I still work in fundraising. (laughs) But for four years while Chuck Webb was president, I was the Vice President of Advancement. The chief fundraiser at the time.

TP: How do donations work? Do you go out and find donors for specific projects or do they come to you with projects?

PE: Both. At times projects are driven by the institution based on its needs. At times projects are driven by donors who have certain ideas of what they want to do, and then at times, like with the Kauffman Center, it’s, “I want to do something to honor Ken Kauffman, what could we do?” Really, it runs the gamut. And there are times we say no. I’ll just throw out a hypothetical. If someone says, “Brent we’re going to give you $20 million to build a science building, but we want you to teach these certain components of stem cell research” or something that could be controversial, we generally will say no. If it’s consistent with what we have set for priorities for the institution and allows us to fulfill our mission in greater ways, then by all means we’ll accept it. We will do that in a manner that it doesn’t impact student tuition, and we don’t divert tuition funds towards those projects.

TP: What does tuition actually go towards?

PE: The operations of the institution. Our operational budget is in the neighborhood of $70 million and tuition funds a portion of that broader operational budget. Tuition does not cover the full cost of running the institution. We have endowment dollars. We raise money. There are a variety of different things we do to have the income necessary to run the institution. The majority of the operational budget is personnel. Salary and benefits. It pays for our faculty and staff. The other big portions of it would be some of our licenses (i.e. Blackboard), computers we provide and infrastructure.

TP: Like Wi-Fi?

PE: Yeah, Wi-Fi. Athletic teams and coaches, it’s all through tuition dollars. Anything that is a consistent recurring cost on an annual basis, that is what tuition goes to, and nothing outside of that. I think tuition covers 85 percent of our operational funds. About 15 percent of our operational budget is outside of tuition dollars.

TP: One of the incomes of the school would be donors and tuition, and where does the rest come from?

PE: Endowment. It’s investments people make. We draw four or five percent on an annual basis from endowment to fund operational expenses. And then there are other auxiliary enterprises, like summer camps and leasing facilities.

TP: So tuition would be directly correlated with enrollment, and so as enrollment goes up or down the operational budget would go up and down?

PE: Yes.

TP: And so that affects how many professors we can hire or facilities we can update?

PE: Right. Some of the operational dollars go to what we call broadly deferred maintenance. It takes on different projects that would be helpful for maintaining facilities throughout their lifespan.

TP: How do you predict the budget? Do you know at the beginning of the year how many students come?

PE: We base our budgets on three year averages. So right now we already know what next year’s budget is going to be because we know what we’ve enrolled this year. Our new student class is up 20 students from a year ago, which is great. That then becomes the target for their recruiting efforts the following year.

TP: So it really depends on admissions, too.

PE: Absolutely. Enrollment is significant. Schools like Spring Arbor are often times referred to as tuition driven. We say we’re tuition dependent. Because we do depend on tuition dollars to run the institution. If all the students left, we wouldn’t have access to funds to be able to maintain the institution. There are some schools that would have significant endowments that say we’re really not tuition dependent. It doesn’t really matter what we charge, like Princeton or Yale or Harvard, they can charge whatever they want. Their endowments are so big that they can live off of their investments. It doesn’t matter. If they had years where they had zero students they could continue to operate. We couldn’t. We have to adjust our budgets based on our enrollments.

TP: So endowment is a really important part of your job as fundraising?

PE: Endowment is an enormous focal point to what we’re doing. When I came here seven years ago, our endowment was just under seven million dollars and our expectancies (potential future donations through wills) were about 18 million. Now our endowment has more than doubled, so it’s over 15 million, and our expectancies have gone from about 18 million to about 55 million which is great. We’re on our way, but part of the problem was, if you go back into the mid 80s, our endowment was about $250,000. There was a mentality for a lot of Christian institutions to say if you build endowment, you were removing your dependency on God to provide you on an annual basis what it takes to survive. I think God can provide endowment to provide, it’s still His provision. Whether it’s tuition dollars or endowment, it’s all God’s money. So I don’t agree with that philosophy so we’ve put a strong emphasis to try to build the endowment. The more we raise the better job we can do to keep tuition low. And I know it doesn’t seem that way. In the last several years the  average increase has been at 3.5-5 percent, which is lower than the national average. I know it’s expensive, but we are in the bottom quartile of institutions. There are more than 75 percent of private Christian institutions that have higher tuition rates than Spring Arbor. We do intentionally try to stay in that bottom quartile to try and make it as affordable as possible.

TP: Why does it increase every year? Is it inflation?

PE: The primary driver to that is healthcare. It’s an issue institutions face outside of higher education as well. We don’t pay the highest salaries, so we try to provide more significant benefits. So, that’s what has been done. We know what our budget as far as targets for enrollment next year goes. We have no idea what the increase in our health care premium is going to be. So, all of that becomes very difficult to predict. That and technology are the two main culprits. As technology becomes better it costs more and people’s expectations of that increases. What was really rare and uncommon 15 years ago (i.e. Wi-Fi) is now expected.

TP: One last question, so all of these five dedications, they have nothing to do whatsoever with parking passes and paying $50.

PE: Absolutely zero have to do with that.

TP: So the $50 goes straight to campus safety and the new parking lot?

PE: Nope, has nothing to do with the new parking lot. The $50 only goes towards campus safety budget and allows them to have some funds to make sure that we are a safe campus.

TP: So where does the new parking lot come from?

PE: That was part of the tennis court project. One of the things that we were required to do by Spring Arbor Township is to replace the parking lot that we lost. That was part of the project cost.

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