Knox will begin the year with a $3 million budget deficit, according to data released this week by the college.
President Teresa Amott and Treasurer Tom Axtell revealed the school’s dire financial straits Monday afternoon to a group of more than 70 faculty members.
“When you already have a half-time athletic director, a one-person career development center and faculty salaries that are $6,000 to $7,000 below market value, it’s not clear to me where we cut, even when we cut sacrificially,” Amott said.
Axtell called the current financial crisis “reminiscent” of the one two decades ago that nearly paralyzed the college.
And even with a $2.7 million increase in tuition and fees — the college’s single largest revenue source that “supports everything” — Knox still faces an unbalanced budget. The cost per student jumped to $44,424.
“It’s a real problem,” Axtell said.
When facing a deficit, Knox must tap into unrestricted bequests, a fund comprised of capital from deceased donors. These bequests are separate from the endowment, and spending them must be approved by the Board of Trustees.
But relying too heavily on the fund can be dangerous, Axtell said.
Knox once used it to foot $500,000 in repairs to Old Main after 80-mile-per-hour winds damaged the historic structure’s roof, he said.
If Knox uses the fund to patch the deficit this year, it may not have sufficient reserves to cover similarly unexpected costs.
“This is why we’ve made an irrevocable decision to move forward with the capital campaign,” Amott said. “But it costs money to make money.”
The second-year president announced last year plans to promote events, research, major gift officers and travel.
But those changes have arrived slower than expected.
“We haven’t built any new academic buildings since 1972, areas like career development are inadequate and we’re no longer in the game for students who can afford to pay full-cost,” she said. “People who don’t have as much need aren’t coming here because everyone is chasing them.”
Amott defined “higher-income” students as those from households earning $80,000 or more. Several faculty members gasped when Amott shared the figure.
“I get letters from parents saying, ‘We love Knox. The history and faculty are fabulous. However, as we looked around campus, we couldn’t help but wonder about Knox’s ability to provide our children [a top-tier college experience]. As much as we love it, we couldn’t justify sending them to Knox,’” Amott said.
She cited Coe College and Beloit as similarly sized colleges with “shinier, new” buildings — the schools that are outdrawing Knox for higher-income students.
“If we got Alumni Hall done, that’d be a huge boost in meeting both space needs and marketing needs. But the problem is, we’re grossly underfunded in meeting our capital reserve needs,” Axtell said
Faculty pay raises and renovations to the Science and Mathematics Center will “never happen” without a capital campaign, an effort already 10 years too late, Amott said.
She advocated improved marketing of what already exists at Knox: study abroad programs, internship opportunities and community service involvement.
“Those are the aspects that draw higher-income students,” Amott said.
Knox’s other option is requesting aid from the Board of Trustees to create a higher endowment. Amott, however, suggested trustees have become more frugal in an uncertain economy.
“Older alums in general are our largest donors, but right now, they’re concerned about the volatility of the markets. They’re saying, “After I’m gone, you can take what’s left,’” she said.
To exacerbate the problem, an “exceptional amount” of students have begun to graduate a year early, which has left Knox significantly short of their anticipated budget, Amott said. On-campus enrollment dropped this year despite the second-largest freshman class in school history.
This summer, Knox officials determined they would need to increase the endowment by $60 million to “close the gap.” Ideally, the college would devote an estimated $108 million to capital projects: $11 million more to Alumni Hall, $5 million to the Auxiliary Gym and $3 million to athletics, among other goals.
Amott reiterated her stance that Knox must increase enrollment to at least 1,600 students. The college hopes to soon be able to purchase St. Mary’s Square Living Center, 239 S. Cherry St., which could provide as many as 250 additional beds.
But for the foreseeable future, Knox’s financial woes remain.
“We don’t think this will rebound in three years. There are no rabbits in this hat. I still think we can do this. We just have to do it at a faster pace than a reasonable scenario would permit,” she said.