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Amherst to issue $100 million in taxable bonds for working capital


Replies to: Amherst to issue $100 million in taxable bonds for working capital

  • johnwesleyjohnwesley - Posts: 4,610 Senior Member
    Nah. If anything they would cut swimming. I have nothing against swimmers (they have some of the highest gpas among jocks), however, it's high overhead coupled with small home team followings make it vulnerable among spectator sports.
  • ModadunnModadunn Registered User Posts: 6,263 Senior Member
    Cut Athletics? I don't think that's gonna happen, especially not to football or some others. First of all.. you would seriously tick off your alumni AND their wallets. There are a huge list of benefits to having athletics at schools, however, how would it be if at these small $$$ LAC's if they charged for admission like they do at BC or other schools where going to the game is a luxury not something you just do on a saturday afternoon. I think schools would lose a lot of their character and spirit without athletic competition. But it would surely change the admissions game, this is certain.
  • healanihealani Registered User Posts: 8 New Member
    interesteddad: where do you get your figures for % of endowment spent on operating budget per year at the LACs in recent years. Is there a list somewhere? Would be interesting to peruse that. Thanks.
  • healanihealani Registered User Posts: 8 New Member
    interesteddad, sorry, one other request: where do you get the per student spending figures?
  • interesteddadinteresteddad Registered User Posts: 24,177 Senior Member

    Both figures come from the annual financial statements. The per student spending is just the total operating expenses divided by enrollment.

    Endowment spending (and particularly endowment spending percentage) is a little trickier as there is not alway a nice, clean line on the financial statements. More colleges than not give the total dollars and the percentage either in the management discussion or the notes to the financial statements. Both are pretty key numbers in the way colleges evaluate their finances. Some don't spell it out as clearly. Some give contradictory or inconsistent numbers, which is really infuriating.
  • interesteddadinteresteddad Registered User Posts: 24,177 Senior Member
    I don't think that's gonna happen, especially not to football or some others. First of all.. you would seriously tick off your alumni AND their wallets.

    Tell me about it. One of the members of Swarthmore's Board of Managers when they decided to drop football in 2000 was Neil Austrian, former President of the National Football League. Not a happy camper.

    The number of Div III football programs continues to decline, though. The numbers are difficult for small LACs where 1 out of every 10 male students in each freshman class have to be football recruits. With an overwhelmingly white recruiting base for Div III sports, that undermines diversity efforts.
  • ModadunnModadunn Registered User Posts: 6,263 Senior Member
    ^Interestingly, Midd just announced it would be making cuts to Athletics - not teams - but definitely budgets that have remained flat for the past several years. It is also reported in their student paper that their endowment has fallen 300 million in the last year.
  • arcadiaarcadia Registered User Posts: 2,538 Senior Member
    It is also reported in their student paper that their endowment has fallen 300 million in the last year.

    At this point, it's reasonable to assume that most schools in this upper tier category are suffering endowment losses on the order of 20-30%.
  • interesteddadinteresteddad Registered User Posts: 24,177 Senior Member

    That article and those statements are so misleading that I honestly don't know even know how to react. It's very disappointing from Amherst whose nose just grew as much as Princeton's did with a similar line of BS this week. I think it's insulting to the Amherst students and community.

    There is only one reason that Amherst (like Princeton) is going massively into debt to fund operating expenses: they screwed up the management of their investment portfolios so badly that they can't even cover their own cash flow needs.

    It's not the operating expenses that are killing them (any more that they are killing all colleges right now), it's the cash call commitments from private equity and other limited partnerships in the endowment. Amherst has $503 million in cash call commitments on an endowment that is probably not worth much more than $1 billion. You dont see Swarthmore and Williams and Pomona issuing taxable bond debt to raise cash. If this were a "good thing" to do, don't you think these other similary well-endowed schools would be jumping at the opporutnity to take on crushing debt loads? They aren't doing it because they managed their portfolios with sufficient cash liquidity to cover their needs for several years.

    Coming out with a line of BS that borrowing $100 million (which is in effect being used to buy additional leveraged positions in failing private equity partnerships) is smart is just plain silly. The interest costs on that taxable bond are about $5 million a year. That's an additional $5 million a year in budget cuts that Amherst has to make every year.
  • ModadunnModadunn Registered User Posts: 6,263 Senior Member
    Not saying I disagree with Interesteddad in the least. What's worse, IMHO, is that this is a "newspaper" that is ostensibly run by students and there was no question to the party line of the administration. It definitely disappoints me that the students of Amherst, who should be quite inquisitive and intelligent, would just blithely write an article that offered nothing more than a press release. Is it truly a student run paper or is there an editorial control by the school? Seems to me that any mention of a school's endowment would spur some spirited articles about who is watching the hen house. If this is the only resource of news on campus for students, I am seriously not impressed, especially when dealing with issues of this magnitude.

    To be fair, I have found myself unimpressed with much of student journalism of late. I read every paper to every school my kid has applied to, and it seems to me that there is a level of passivity that would have been completely unacceptable when I was in school -- and no, it wasn't during the 60's. Certainly, there is a way to disagree or question authority without causing riot, but to not question at all? I fear that we have truly turned into the Prozac nation that glosses over and ignore concerns hoping they will rectify themselves or that they don't affect us personally.

    Yep, pretty disappointing.
  • interesteddadinteresteddad Registered User Posts: 24,177 Senior Member
    It's a two-fold problem. The quality of the student reporting of financial issues has been pretty superficial. This is particularly surprising given than the Economics departments are often the largest majors at many schools, that "investment banker" is a popular career goal, and that college finances have a direct impact on the students.

    The other part of the problem is that administrators have been quite happy to take advantage of the student reporters' lack of knowledge and resulting failure to ask the right questions. It's not an easy topic. Student reporters cannot be expected to recognize all the BS flags that might be waved in front of them. I would like to think that an honest educator would at least try to give some background to a reporter instead of taking advantage of the fluff questions to mislead the community. I really believe that the colleges who are honest, transparent, and comprehensive in discussing their planning will be the winners here. There's no hiding. Every college in America is going to make painful cuts.
  • NorthCountryCatNorthCountryCat Registered User Posts: 70 Junior Member
    What is the source of Middlebury's endowment performance listed above? The detailed data on the website lists a 20.2% decline for the fiscal year (July 1 to Jan 31), and the decline in value of about $220M, not $300M. The high water mark, some 20 months ago was reportedly $935M, so overall decline from high point is around $270, not 30% this fiscal year.

    Interestedad reports Midd's fast growth as a particular problem, but some of the growth has generated additional revenue, rather than drained the College (again, according to the very open meetings the administration has been having on campus --- the videos are available on Middlebury's website:

    On Financial Challenges).

    Monterey in particular has not cost the College any operating $$, but has attracted record fundraising in 2006 and 2007. Its sites abroad in China and Alexandria, Egypt, generate revenue as more than 40% of attendees in the Middlebury programs abroad are non-Midd students and pay full tuition.

    That said, Middlebury is greatly leveraged, but has managed its liquidity far better than many wealthier peers. The CFO does a good job explaining the liquidity challenge, but notes the College's cash position is still strong. Like many other schools, Middlebury has cash call commitments that are large (stated at about $165M).
  • interesteddadinteresteddad Registered User Posts: 24,177 Senior Member
    Here's a little backgrounder white paper on why growth strategies are risky for private colleges and universities. Middlebury's expansion plans are one of the three examples used in the white paper.

  • johnwesleyjohnwesley - Posts: 4,610 Senior Member
    ^^There's nothing in that paper that couldn't have been written by the average Williams CC forum poster. It's basic premise is that a private college shouldn't expand because it will ruin its standing in some unnamed institutional hierarchy. Presumably Prof. Winston is talking about the USNews rankings.

    His treatment of the topic of economies of scale is typical; it pretty much limits itself to a discussion of the inevitablity of small academic departments, yet, never mentions the possibility or desirabilty of *administrative* economies of scale. I'm not sure who Gordon Winston is. I'm sure he's a wonderful classroom performer, but, the whole thing is bathed in pre-meltdown self-congratulation.
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