The Gustavian Weekly

The Breakdown

By Tom Lany Web Editor | October 23, 2009 | News, Top Stories

An in-depth look at how gifts structure Gustavus’ budget and where gifts actually end up

Picture 2To support the College and its educational endeavors, Gustavus Adolphus College takes in and spends about $100 million each year. The Weekly recently took a look at the College’s finances, and how giving to the College plays a role in its budget.

Students often wonder where the College spends its money. “Sixty-three percent of our expenses go for salaries and benefits,” Vice President for Business and Finance and Treasurer Ken Westphal said. The College has significant costs in the areas of Physical Plant, study abroad programming, student services, the library, and technology.

Even though you look and you see a beautiful campus, in the end it is still providing the experience in the classroom and support services … [that encompasses much of the budget],”  “While this number is similar to other companies who provide services, our expenses are much higher,” Westphal said.

The College works to keep these expenses as low as possible. “We have found it very effective to use consortiums to get better pricing.  For example, [for] our property insurance, we are in a consortium of about 125 Colleges and universities.  By putting those 125 schools together, we get the buying power of a Fortune 500 company,” Westphal said.

“When you think about most service organizations, … generally those are organizations where there is a very nice gross profit margin. The irony in higher education, … is when you take the revenue that we get from students for tuition, room, and board and contrast that against the expenses of running the place, we are running anywhere from a six to seven million dollar loss every year,” Westphal said.

How does the College get the money to pay for these programs?

With a budget of this nature, the College relies on gifts to cover the amount that tuition does not cover. “Without philanthropy, without giving, Gustavus Adolphus College doesn’t exist,” Vice President for Institutional Advancement Thomas Young said.

“It’s founded through gifts, it grew through gifts, it was supported by men and women who thought that the mission and values of this place were important enough that they would give of their resources,” Young said.

“This place would not keep its doors open if we did not have the generosity of donors, either through current-year gifts or long-term endowment gifts,” Westphal said.

“We already ask for a significant investment from students and their families, but the fact of the matter is after tuition is paid, the College and its friends, and those who are passionate about it support the work around here with eight and a half million a year in revenue,” said Young.

“I think that students are our future, so I think it is important to give money to the College,” Sophomore Sarah Schumacher said.

“If we want the College to be as good as we expect it to be, that will have continue in the future, and actually grow, significantly,” Young said.

Types of gifts

“Money given to the College comes in two different forms. Some money comes to the College in the form of gifts to be applied to the current year’s budget, defined as current money,” Young said.

“You could get a scholarship out of current money, which means it comes in to the College’s coffers and goes out. It means that the donor put $5,000 in, and the College awarded that $5,000 to the student.”

“For many donors, supporting scholarships is critically important, because so many graduates of the College received scholarships that enabled them to go here,” Young said.

“Other funds come in the form of gifts to the endowment. These gifts are put in an investment account, and only the interest generated is spent each year,” Young said.

“The beauty of and the challenge of endowment is that it takes a little whole to get going because a $100,000 outright gift puts $100,000 into the current year’s budget. $100,000 into the endowment is wonderful. It puts $4,500 in to the budget, but it does so forever,” Young said.

“Out of the endowment, we get about $4.5 million a year. A significant portion of that goes into scholarships,” Young said.

Growing the endowment

“We have about $90 million in our endowment today. One of the recommendations coming out of Commission Gustavus 150 is to increase that by $150 million,” Young said.

“The combination of Commission Gustavus 150 and the new branding will give us the opportunity to invite more significant endowment gifts than we ever have in the past. We are able to articulate in a really articulate way the value of philanthropy at Gustavus,” Young said.

“The new message and the new vision will resonate both with current donors and attract new donors who understand more fully what is unique about a Gustavus education,” Young said.

Budget struggles

“There is no doubt that last year especially was a difficult year.  Funds that went into the operating budget last year … exceeded the goal.  Gifts that were traditionally given through appreciated stock were much harder to come bye, and not surprisingly so. The market was down 30 to 40 percent, and we start to see that coming back now,” Young said.

“Budgets are very tight, and we’re doing a great job of stewarding the resources we have, but we haven’t had any layoffs like other Colleges have,” Young said.

Cost of giving

While many people think of giving as something that only benefits Gustavus, the cost of receiving the donations is high.

According to Gustavus’ IRS Form 990 for June 1, 2007 through May 31, 2008, the College received $11,940,744 in direct public support. At the same time, the school spent $3,130,996 on fundraising activities. This means that 26.22 percent of the amount of the total amount of support was spent on fundraising.

“I think that would be probably ballpark norm for most schools. I would say that if we could be at that number, or a penny or two lower, I would say that would be exactly where we would want to be,” Young said.

“If you are not in [a] campaign [cycle] and [the percentage you spent on fundraising is] down half that much, I would argue you are not spending enough money; you’re leaving money on the table. If you’re trending north of thirty and onto forty, you’re either overstaffed or under fundraising,” Young said.

“Even though it is really expensive, I think it is still important to … keep in contact with alumni,” First-year Allyson Voss said.

Saying “Thank you”

The advancement office gives students who receive scholarships have the opportunity to thank the people who help make their education possible each year. Young reminds students about the importance of thanking donors.

“When that note goes back to the donor, it tells them they made a good investment. When you have a chance to say thank you, do so. To say thank you to [the donor] reminds them that there are students here that are living out what they had hoped their money would help do,” Young said.

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