Tuition dollars fund expansion

As the University embarks on some of the most expensive building projects in its history, it is increasingly reliant on tuition dollars to fund that expansion – something University President Steven Knapp said he would like to alleviate.

Last year tuition represented 56 percent of the total operating budget, almost 20 percent higher than other schools. Tuition dependency is a statistic generated to assess how much of the annual operating budget comes from tuition.

“It is something that I am definitely aware of,” Knapp said. “Our institution is dependent on tuition for operation.”

The primary reason for this dependance, administrators said, is a lack of fundraising to support the school’s rapid growth. Until 2010, it is estimated that 90 percent of total revenue will come from students – through tuition, housing and other fees, according to the capital budget. This number has grown in the past decade.

The figure gives a glimpse into GW’s high tuition, often a criticism of the University. While some schools rely on fundraising dollars and endowments, the bulk of GW’s operating budget comes from the check each student cuts. If enrollment were to dip, it would result in budget cuts, said Lou Katz, the executive vice president and treasurer.

“What’s happened is the tuition side has grown at a faster pace than investment income and giving,” Katz said.

Since 2004, the University’s reliance on tuition dollars has risen about 3 percent, whereas the same number is falling at similar schools. Boston University and New York University have 46 and 48 percent dependency on tuition – about 10 percent less than GW, according to the capital budget.

Katz said this puts pressure on enrollment to remain steady and tuition to increase no less than inflation.

When GW announced Knapp as president last December, he said one of his first priorities was to increase fundraising efforts. In an interview last week, Knapp said he wants to increase the endowment to help supplement costs, especially financial aid.

“We will make serious efforts to ensure that students who are qualified can come here by increasing resources we have for financial aid,” Knapp said. “I don’t feel comfortable having us be at the top of (the price range for tuition).”

Out of the $118 million paid out for financial aid last year, most of that came from tuition dollars. Only $2 million came from the endowment or from restricted funds that donors earmarked for aid.

“We want to become more efficient in spending and target more money at displacing the tuition money used in financial aid,” said Robert Chernak, senior vice president for Student and Academic Support Services.

GW’s endowment has increased from about $680 million in 2004 to more than $1 billion this year. That only pays out $46 million annually to operating costs – less than $3,000 per student from endowment. The same per-student payout is more than $100,000 at Princeton University.

To boost the endowment, more than $3 million is being added to the budget of the Division of Development and Alumni Relations.

“Increasing giving has been a growing priority in the last year and the University is investing more, not just because of tuition dependence, but because we want to make GW stronger and stronger,” said Laurel Price Jones, GW’s vice president for Advancement.

Since 2005, donations to GW have increased 50 percent to $81 million. Recent fundraising initiatives include a Parents Fundraising Council, more emphasis on international fundraising and a focus on obtaining principal gifts worth more than $1 million.

Katz said spending money on the campus has garnered a better relationship with alumni – who leave feeling more connected to the school. These risks were necessary to bring the school out of its days as a commuter campus, he said.

The campus continues to grow rapidly, as the University begins work on several new housing options – including a $75 million residence hall adjacent to the School Without Walls.

Knapp said he does not feel ambitious building projects like these are unsafe given GW’s tuition dependency because these are paid for by the capital budget through bonds, naming rights and room and board fees.

The University’s outstanding debt is projected to increase by more than $100 million in the next three years due to these projects, according to the capital budget,

Chernak said the administration recognizes the need to monitor costs. “We are trying to be more efficient in the way we run the institution so that maximum revenue can go back into our primary academic mission,” Chernak said.

At the same time, he said cost cutting in the past has nearly resulted in student revolts. When Colonial Invasion and GW Reads, a free dorm newspaper service, were eliminated last year, there was a significant backlash.

“The students were very upset, and the (Student Association’s) two highest priorities were to reestablish them,” Chernak said. “We can’t be penny wise and pound foolish.”

The University, Chernak said, does not plan to bring in a larger freshman class to add tuition dollars.

“We did the exact opposite this year,” Chernak said. “We brought in a smaller freshman class because we didn’t want to prostitute our class. They have higher SAT scores and higher class rankings than ever.”

Knapp said the University has instead focused more attention on increasing the retention rate of rising sophomores – to alleviate pressure from the freshman class. This rate is currently at 92 percent and he said he aims to increase that to 95 percent.

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