2021-22 Interim Operating Budget Summary
We expect an average student enrollment of 1,600, with 1,520 students residing in campus residence halls. During the pandemic, total enrollment was 1,450, with approximately half of those students living on campus.
Term Bill | Financial Aid | Endowment | Gifts and Grants | Other Income | Operating Expenses | Compensation | Benefits | Non-Personnel Expenses | Contingency | Capital Budget | Transfers | Debt Service
The underlying costs of providing a Swarthmore education to our students continues to grow. Despite the growth in our cost base, and the challenges presented by the pandemic, the College froze tuition for the 2020-21 academic year. In the prior five years, term bill increased by amounts ranging from 3.0% to 3.9%. The 2020–21 budget brings the cost of attendance (term bill) for full-paying students to $73,208 for the upcoming academic year. These costs include tuition, room, board, and mandatory fees, and represents an increase of 2.95% over the 2020–21 fiscal year. This increase is less than the rate of inflation over the past two years, and reflects a recognition of the economic impact the pandemic has had on many families.
The budget affirms the College’s commitment to its need-blind admissions policies and loan-free financial aid to meet the demonstrated need of its students. The 2020–21 budget includes no changes in financial aid policy. Since financial aid awards are calculated based on a family’s ability to pay, the amount of the family’s expected contribution remains relatively flat throughout an aided student’s time at Swarthmore. When setting student charges, we consider not only the increased revenue from full-paying families, but also the corresponding increase in financial aid to meet the full demonstrated need of our students. We expect that approximately 55% of our students will receive need-based financial aid from the College, with an average award of $53,900 per aided student for 2021–22.
The budgeted spending-rate calculation has four components: base operations, financial aid, capital renewal and replacement, and debt interest. In order to meet the current needs of the College and to preserve intergenerational equity, the College’s spending policy is designed to maintain a spending rate between 3.5% and 5.0%. Because of the extraordinary challenges of the pandemic, the Board authorized an increase of the spending rate for budget-supporting units to 5.21%. The approved interim operating budget assumes a spending rate of 4.77% based on the endowment’s market value as of June 30, 2020. A finalized spending rate for 2021–22 will be based on the market value at June 30, 2021.
This category includes the Swarthmore Fund and some federal and state support. Although the projected level of Swarthmore Fund gifts is exceeding our original target by more than $1 million, we have maintained a budget of $4 million for the Swarthmore Fund for FY 2021–22. The expected level of federal and state support will revert to the typical level of support of $567K, with no expected changes in federal support for student work study and institutional support from Pennsylvania. We anticipate that federal government grants for 2021–22 will be consistent with the level of grants in 2019–20.
The approved interim budget anticipates an increase of certain line items. Revenues from application fees have grown as a result of the increase in student applications. Interest income also has increased due to the higher level of operating cash. The budget for rental income for housing rentals is expected to increase by inflation while mortgage interest continues to decrease.
Departmental income includes activities from events management, including facility rentals and summer student housing; dining operations income; and sales at the Campus and Community Store. For 2021–22, departmental income budgets will remain constant with FY 2020–21 levels. We do not expect to have many facility rentals for summer camps during summer 2021; however, we expect to provide summer housing for a limited number of students performing research or working for campus departments. Dining operations income will increase by $78K to $527K as the College sees a return to activity for faculty and staff members at campus coffee bars and Essie Mae’s.
We recognize that over this past year, budget managers in departments and programs across the campus have exercised considerable restraint on non-personnel spending. Because of their valuable efforts, we have been able to retain employment and benefits throughout the pandemic while facing increased costs, like extensive COVID-19 testing of our campus community, associated with our response to the pandemic. As we move toward a return to normal operations and come out of the austerity measures currently in place, we expect that some of the lessons learned from pandemic-related budget disruptions will help financial managers continue to provide prudent fiscal management.
The College’s compensation for faculty has a long-standing practice of using peer data to determine market-based adjustments for continuing faculty. Consistent with prior practice, salary data by rank for each school is obtained through the American Association of University Professors’ annual faculty salary survey. Based on the work of the Faculty Compensation Committee, a joint committee of faculty and Board members, the reference group was recently updated to a new group of 14 schools. The budget includes a proposed adjustment to increase starting salaries and address issues of compression at the assistant and associate professor ranks to maintain our competitive position. There will be increases for all continuing instructional staff.
The budget proposal includes a total pool of 2.5% for staff salary and wage increases for continuing employees. This increase is 0.6% greater than the current year’s inflation assumption. In addition to the merit pool, the proposed salary budget includes an adjustment to the staff minimum wage to $15/hour for non-student hourly employees. The new minimum wage is the result of an extensive review to ensure a living wage. (Please note: The student employment working group is continuing its ongoing review of position descriptions and related classifications. This will be followed by a review of appropriate compensation for student employees.)
The 5.0% increase in the benefits budget is the result of the continued annual increases in health insurance costs. In 2021–22, the College anticipates 4.4% of incremental costs for medical coverage. Retirement plan allocations and employer tax payments are anticipated to increase consistent with the rate of salary increases. Tuition benefits are expected to increase from the annual increase of tuition. Retiree medical benefits have been increased in a one-time adjustment from the increase in retirements in recent years. There are also one-time increases to the budgets of disability, life insurance, and down-payment assistance programs to reflect the recent year’s actual benefit expense, adding $100K.
The proposed interim expense budget reinstates approximately $4.8 million of the $5 million that was reduced as a result of the pandemic. Of this amount, $3 million will be reinstated immediately and the remaining $1.8 million will be added to the budget in the spring semester as necessary. The proposal also includes $1.4 million of incremental increases for immediate nondiscretionary departmental needs. Many of these increases are related to routine increases in existing ongoing activities and the costs of maintaining campus technology.
Funding for the restoration of expense budgets will derive from two sources: an anticipated $1.5 million in government assistance from the American Recovery Act and a transfer from operating reserves.
Highlights of non-personnel expenses follow:
- Bookstore, cost of sales: The bookstore’s cost of sales includes the Textbook Affordability Program 2020–21, which provides an allowance for each student to purchase required texts and course materials.
- Food service, cost of sales: We are assuming a full restoration of on-campus food service expenses and the gradual restoration of OneCard expenses for off-campus dining options for students.
- Off-campus study: Off-campus study programs are expected to be at 50% of 2019–20 levels for the fall semester and a more typical participation rate in the spring semester.
- Travel and professional development: Because of ongoing travel restrictions associated with the pandemic, we plan to build back the travel budget over time. We will be developing policies and procedures regarding travel with an emphasis on the health and safety of travelers.
- Facilities operating expenditures: Facilities operating expenses are increasing by $225K for a variety of maintenance projects. Around $150K of these are one-time repairs or maintenance expenses not associated with the capital budget appropriation for deferred maintenance.
- Memberships, printing and postage, services, supplies and other: We plan to add $1 million or 6.6% of 2020–21 budgeted amounts in these areas for the coming year. These represent programmatic needs and contractual increases.
- Student payroll and fellowships: Student employment is expected to take place as usual in the fall, and we are restoring student salary budgets. The student employment working group is continuing its ongoing review of position descriptions and related classifications. This will be followed by a review of appropriate compensation for student employees.
- Real estate taxes: The county has gone through a real estate tax reassessment, which has increased taxes on taxable College properties including faculty housing and the Inn at Swarthmore.
- Utilities: Utility costs are impacted from implementation of energy conservation initiatives. Due to the return of normal operations, the utilities budget will essentially return to pre-pandemic levels.
Because of ongoing uncertainties regarding our emergence from the pandemic, we have budgeted a contingency of $2 million. The adequacy of the budget contingency will continue to be monitored throughout the year
The proposed 2020–21 Capital Budget was reviewed and approved by the Finance and Property committees in the February joint committee meeting. The allocation of endowment spending to support the capital budget increased by $2.5 million from 2020–21 to $14 million.
An annual transfer from reserves includes support for scholarships from endowment funds through accumulated restricted fund balances. Funding for the restoration of non-personnel expenses will come from the transfer from government funding for the CARES Act and from the operating reserve deriving from past budget surpluses.
The College’s debt is all fixed-rate, and the interest expense is the College’s contractual obligation. The budget includes $12.9 million in interest costs and $6.3 million in principal repayment. Additional debt service on an anticipated tax-exempt borrowing of $73 million in summer 2021 has been fully incorporated.