2012-2013 Budget Shortfall / Campus / Featured / News / February 27, 2013

The financial tightrope: Making a perfect storm

finance_series_week4-05By late 2000, Knox College was teetering.

The endowment had dwindled, tuition had grown nearly 7 percent and Alumni Hall had been vacant for 23 years. Top administrators feared for the “continued existence of the college,” according to the most recent institutional self-study.

As Knox struggles to make ends meet in the face of a $1.2 million budget shortfall, officials point to the 1990s, when overspending was rampant and mismanagement created a financial situation the college is still trying to overcome.

For years, administrators hiked tuition and “deliberately overspent” the endowment to pay for their enrollment-increase strategy. During this era, they hired new faculty, created a campus-wide computer network and updated academic and residential buildings.

They hoped to recoup the shrinking endowment through donations and loans.

In 1995, then-President Rick Nahm launched the Knox Now! campaign. The seven-year project led to the largest gift in school history, an $11 million pledge from James Kilts ‘70 in April 2001. But there was a catch: the money, which the college desperately needed, would not be available until after Kilts’ death and the actual sum could change based on global financial markets.

This type of donation, a “deferred gift,” comprised more than 60 percent of the $125-million campaign. Successful fundraising campaigns typically limit deferred gifts to about 25 percent of all donations, Vice President for Advancement Beverly Holmes said.

“In reality, my feeling [was] this was more like a $46 million campaign, not a $126 million campaign,” Holmes told The Knox Student last May.

Although initially lauded as a success, Knox Now! did “little to advance the college,” the self-study said. The campaign failed to raise the necessary funds to revamp Alumni Hall and the college swimming pool, two of the project’s foremost goals.

Meanwhile, Knox’s financial leadership had rapid turnover. Between 1991 and 1999, the college employed six different vice presidents for finance. Ira Goldberg ‘76, for example, left after just one year, taking a job with the Argonne National Laboratory in Chicago.

This meant no historical analyses or long-range projections, which led to poor planning and a misguided budget strategy, according to the self-study.

Finance, from front page

As the endowment shrunk, budget managers did not cut spending or “make sure the college was living within its budgetary constraints,” the self-study said. Furthermore, the physical budget was clunky, paper-driven and rarely changed year-to-year.

This created an awkward system of oversight. Dean of the College Larry Breitborde was listed as the “primary reviewer” for hundreds of accounts, which lacked summaries to show how they fit into the larger budgetary picture. Breitborde was not available for comment for this article.

Adding to the problems, past fundraising efforts have been hampered by a longstanding “office culture of reticence” toward asking alumni for money, according to the self-study.

The Sharvy G. Umbeck Science-Mathematics Center, the campus building often cited as most in need of updates, is named for a president who promised to never ask alumni for donations. The perceived culture of reluctant donors may stem from the legacy of Umbeck, Knox president from 1949 until 1973, the report said. Umbeck, instead, hoped to rely solely on corporate gifts.

In the years since, Knox officials have battled ongoing budget deficits, which largely stem from organizational problems in the 1990s. This year, Knox must cut $1.2 million by June 30 to balance a $3.6 million budget deficit. At their February meeting, the Board of Trustees approved a 7 percent endowment draw — up from the usual 5 percent — for the next fiscal year.

The decision is part of a 10-year plan President Teresa Amott presented in January: Knox hopes to increase enrollment by 60 students each year through 2016 and raise the endowment $10 million each of the following six years. She projects the plan will give Knox a $5.5 million surplus.

“There’s no other way for a tuition-dependent institution to solve this kind of problem,” Amott told faculty members in January. “It works, and it’s our only hope.”


Matt McKinney
Matt McKinney is a senior majoring in creative writing and minoring in journalism. His experience with journalism ranges from a year as co-sports editor for TKS to an internship with the Chicago Sun-Times, where he used his Spanish language skills to report a front-page story on changes to federal immigration policy. He has also written for The Galesburg Register-Mail and Knox’s Office of Communications. Matt is the recipient of the 2012 Knox College Kimble Prize for Feature Journalism and two awards from the Illinois College Press Association, including a first place award for sports game coverage. He is currently interning virtually with The Tampa Bay Times and will pursue his master's next year at Northwestern University's Medill School of Journalism.

Tags:  budget Deficit endowment finance series finances Ira goldberg knox now! Rick Nahm sharvey umbeck smc Teresa Amott

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Mar 02, 2013

Does anyone else have a hard time believing that a president from 40 years ago still affects donations today? If people don’t want to donate, I think it’s more likely that they just weren’t happy with the school.

The enrollment thing might work temporarily, but I think it works against the school in the long run. If you’re cramming students into “transitional housing,” having class sizes that average 30 students, and offering no academic or career guidance, you’re not going to have a lot of students wanting to donate in the future. They are going to feel ripped off.

May 18, 2014

While in the dot.com period, Grinnell increased its endowment by more
than a billion dollars. Please don’t blame Sharvey Umbeck . Truth of
the matter is that Roger’s tenure showed no marked increase in endowment funds.

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