Meerts details university’s financial plan at meeting

Vice President for Finance and Administration John Meerts detailed the University’s 10-year financial plan at the WSA meeting on Sunday. The plan, known as the Long Range Projections (LRP), includes significant faculty salary increases, decreased draw from the endowment, and new fundraising campaigns.

“One of the things I’m worried about these days is the financial capacity of the University,” Meerts said.

Faculty salaries have been a topic of contention lately, as the rankings of Wesleyan’s average salaries for full-time, assistant, and associate professors have all been declining in a group of peer schools over the past several years. According to the 990 Form for the 2004-2005 fiscal year, compensation of officers and directors amounted to $1,692,856, and other salaries and wages totaled $65,060,944.

“We would like to be at number five or so [out of the 16 comparison schools for faculty salaries], but we’re not there, and we have been working on changing that,” he said. “What I’m saying today is that we’re going to find a way to turn this around [and] it will probably be in the five to six percent [increase] range.”

According to Meerts, faculty salaries are part of the LRP, which is based on many assumptions, including an average of nine percent annual returns on the endowment and increased gifts to the endowment. Over the last few years, endowment returns have been close to 15 percent, and the University received a record $35 million in gifts last year, $11 million of which went directly into the endowment. At well over $600 million, Wesleyan’s endowment is small in comparison with peer schools, and the University is at the bottom of a list comparing endowment money per student with peer schools.

“Last year we decided to bring [endowment draw] down from 7.4 percent to 6.4 percent this year, and eventually [it will be reduced] to 5.5 percent,” Meerts said. “Because we are relatively poor, we have to take out [a higher percentage draw from the endowment]. But only 25 percent of our operating budget comes from the endowment, whereas that number is 40 percent for Williams.”

Meerts said that the 5.5 percent target could be reached by 2010, one year earlier than originally projected. He also noted that the one percent reduction that has already taken place resulted in $3 million in budget cuts, and planned budget reductions will continue through the 2010-2011 fiscal year.

“Last year, we cut six staff positions out and we did not increase the rate of growth in some discretionary categories,” Meerts said, adding that nothing major will be cut that will negatively “change the status quo” for students.

“We’re trying to do as much as we can to maintain the services that we need,” he said.

According to Meerts, the Bond rating agency has given the University’s fiscal health an Aa3 rating with Negative Outlook

“[The negative outlook was] because of the 7.4 percent endowment draw, which we’re addressing, but we’re at our capacity to borrow,” he said, adding that the University has $200 million in outstanding debt.

To help ease debt in the future, a new fundraising campaign is set to start soon. There will also be fundraising specifically dedicated to the new science building, which Meerts estimates will cost approximately $140 million. The possibility of using environmental grants to help build fund the science building, which will be energy efficient, is also being looked into.

“We’re going to look into that and see what we can do,” Meerts said of the grants. “The building will be energy efficient. It really pays to worry about energy efficiency for those buildings.”

Meerts acknowledged that the woodframe houses need renovations as well.

“A big issue for us is the state of the woodframe houses,” he said. “We’ve been chipping away at [renovating] the dorms… I would agree that the woodframe houses are not in decent shape. That’s another 50 to 100 million dollar problem to address.”

Meerts also touched on the topic of tuition, which brings in approximately $55 million per year after approximately $40 million in financial aid is awarded.

“For planning purposes, we’re assuming a five percent increase in tuition, which is kind of on the low end of what it’s been lately,” Meerts said, noting that a five percent tuition increase would likely mean a 5.5 percent increase in financial aid.

Meerts was careful to note that all of the assumptions he discussed were based on a balanced budget, and if another scenario as economically devastating as 9/11 were to take place, the University would be setback several years.

The financial future of the University was also discussed at the recent Board of Trustees retreat.

“We took up a series of long term strategic issues with very heavy emphasis on finance as always,” said President Doug Bennet, commenting on the retreat. “I think we’ve gotten very good at our long term projections and dealing constructively with the fact that there’s not always money for everything. We feel fairly efficient, and I think the board agrees with that.”