@BB why do you feel compelled to attack anyone critical of Earlham?. @ucbalumnus is entitled to their informed review. I would personally consider the likelihood that schools such as Earlham whose endowments have declined significantly based on deficit spending will have to make adjustments to financial aid policies, course offering and other strategic options or risk insolvency like numerous other peer institutions.
I base this on Moody’s commentary after two downgrades and an ultimate withdrawal of their rating of Earlham. The following is directly from Moodys…
Pl
"Moody’s Investors Service has downgraded Earlham College (Earlham) to Baa1 from A1. The outlook is negative. The downgrade to Baa1 reflects deepening operating deficits which are expected to last for an extended period of time as the college invests in repositioning itself to address fundamental student demand challenges.
SUMMARY RATING RATIONALE:
The downgrade to Baa1 from A1 is driven by Earlham’s challenged student demand, with declining net tuition revenue since 2009 leading the college to a position of fundamental financial imbalance. As the college works to implement its strategic plan that invests in its campus facilities, academics and the student experience, expenses will continue to grow. We now expect increasing operating deficits in the medium term, with declining deficits throughout the decade and potentially longer depending on the success of the college’s repositioning efforts. Sustaining the college’s rating at this time are significant expendable financial resources, providing it with an extended period of time to address current challenges. Our rating factors in some decline in financial reserves to fund the plan, but we also note that the college’s rating is increasingly vulnerable to financial market losses since its resources are the primary credit positive. The negative outlook reflects the possibility of further credit deterioration should operating losses or declines in liquidity be even greater than currently expected.
CHALLENGES
*Total net tuition revenue has declined by over 22% since 2009 with tuition discounting rising to nearly 60% as the college faces a challenging market environment.
*As it attempts to distinguish itself over the next several years, educational expenses per student, which are already up by over 20% over the past five years, are likely to climb further.
*With limited revenue growth in the near term, and an outlined strategy relying on investments with plans to implement cost reduction initiatives, Earlham’s operating deficits will be larger than previously expected and are now expected to extend through the end of the decade.
*Earlham’s historic balance sheet strength could erode as it uses supplemental endowment draws to fund its strategic initiatives if investment returns cannot offset the draws.
*The college has a high age of plant at nearly 22 years (Moody’s calculated) although recent capital investments underway (largely funded by Series 2013 bonds) should help campus facilities and recruiting. However, the college reports low deferred maintenance needs for the campus and the calculated age of plant will be lower when the new buildings come online.
*Although the strategic plan is approved and being implemented, it will take time for any measurable results to emerge."
@BB you keep asking why different members are commenting on schools they know nothing about (as opposed to you based on your son being an Earlham student). Moody’s is a professional financial credit rating agency that Earlham paid to provide an independent financial analysis of their credit worthiness on a forward looking basis to facilitate the sale of Earlham backed municipal bonds. BB I hope we can agree with that the damning views of Earlham’s financial situation as outlined in Moodys published report are unbiased and informed and shouldn’t be dismissed as you do those of others?