Tim Downs, chief financial officer and vice president of finance and administration, updated the campus community on Ithaca College’s projected deficit and its capital priorities in the first ‘Dollars and Sense’ presentation of Spring 2024 on March 14.
Financial summary
Downs started by giving a summary of fiscal year 2024 (FY2024) which will end June 30. Downs said the college went into the 2023–24 academic year with a deficit of $12.5M but forecasts that by the end of FY24, the deficit will be $7.6M. A deficit refers to a situation where the college’s total expenses are greater than its total revenue.
“Right now we are trending slightly favorable to [the $12.5M deficit],” Downs said. “About $5M favorable. But I still want to remind people that it is a deficit. While we want to celebrate that we are getting better, we are still in the negative by about $8 million this year.”
Downs said the biggest drivers for a more favorable deficit are vacancy savings, employee benefits and the college’s short-term investments. Downs said the college’s short-term cash investments amount to about $2M because of the 5% interest rate that they earn. Short-term cash investments are not a part of the endowment, which refers to cash from sources like gifts and donations.
Downs said the college sets aside a number that accounts for its spending on employee benefits like health insurance and the college has been above it by $2M. This depends on multiple factors like how many employees use the college’s health insurance plan and how often they use it.
“Our benefits continue to track under our budgeted numbers,” Downs said. “That is one of the hardest numbers to budget for because we are self-insured on the medical side. We always make an estimate of what that is and that is predicated on how many people use it [and other factors] … so we tend to be slightly more conservative on that side.”
Approval of the budget by the Board of Trustees
In May, the Ithaca College Board of Trustees will approve the college’s operating and capital budget. An institution’s operating budget refers to the recurring costs associated with its day-to-day operations and its capital budget refers to costs associated with capital investments in assets for the future. Downs emphasized that operating costs do not compete with capital costs.
In February, Downs gave the board of trustees an outlook of the budget that will be approved in May. Downs said he told the board of trustees that while the deficit is going to continue over the next couple of years, it will be more favorable as enrollment normalizes, which it is projected to. This is because as enrollment increases, so will the college’s revenue which will help reduce the gap between revenue and expenses.
Downs emphasized that normalizing enrollment rates is different from increasing them. Normalizing means getting the enrollment rates back to what is considered “normal” before the pandemic destabilized enrollment.
“We’re really now focused on the climb back out,” Downs said. “We’re really not growing our enrollment, it’s really our enrollment is going to return to a more normalized baseline.”
Downs said the Class of 2024, which started at the college during the COVID-19 pandemic in Fall 2020, has low enrollment with just a little over 700 students graduating in May.
Downs said that normalizing the enrollment rate is important because it is correlated with long-term financial impacts.
“If you miss the [target enrollment rate], you live with that for four years,” Downs said. “So for four years [the impact of] that [COVID-class] is circulating.”
Downs also said the annual employee review process, which commenced March 4, plays a role in the college’s finances because high-performance employees might receive a salary increment that would need to be accounted for or added to the budget.
One of the operational challenges Downs highlighted in his presentation was the salary gap for faculty. At the March 5 Faculty Council meeting, Melanie Stein, provost and senior vice president for academic affairs, said employee salaries have been low for all faculty at the college when compared with other institutions. Downs said the salary gap to the market is between 10% and 15%.
When asked about what might attract faculty to continue teaching at the college despite lower compensation, Downs said faculty should consider non-monetary benefits like the ability to create an impact on the college community. Downs said the college is working on reducing the salary gap.
“We all know across the hill, they can outbid us any day if they want,” Downs said. “We have work to do, and we acknowledge that. … Are we going to pay more than across the hill? No. But can we get closer to that where it is much more competitive? Absolutely.”
Capital priorities
Downs said the college has to invest in infrastructure improvement — which would be accounted for in the capital budget — because of factors like wear and tear and aesthetics. Downs said capital investments are funded by separate sources like debt, cash reserves and gifts.
“Those types of things, we get to spend one time to make the renovation or the building,” Downs said. “We can’t hire somebody one time because we have to pay their salary for next year and the year after [so capital costs do not compete with operating costs].”
Downs said the college’s capital priorities are maintenance of core systems like heat and lighting, targeted capital investments on high-impact low-cost projects like the renovation of the Textor Hall area and strategic philanthropy efforts from gifts and funding. Downs said the annual budget for maintenance of core systems is about $12M and $6M for targeted capital investments. Downs said there is no budget for strategic philanthropy because that depends on acquisition efforts.
Downs said the college wants to focus these capital priorities on academics, dining services and student housing. He added that the college is looking at the quads as an area for improvement because it houses about 1,100 students and is a central location on campus.
Toward the end of his presentation, Downs highlighted the benefits of Collegiate Travel Planners, which replaced its old travel partner Direct Travel and underused benefits like the high savings account for high deductible health insurance plans.
“I think our benefits are really great especially when you’re comparing to industry, not necessarily other higher ed institutions,” Downs said.
Editor’s note: The Ithacan accessed the virtual recording of the ‘Dollars and Sense’ presentation to write this article since the presentation took place over spring break.
