Financial Information

Some Research from Robert J. Alvarez, ’96

     Here are a couple of observations from a quick look at the financial reports. The below are based solely on the “Annual Financial Reports” that Wesleyan posts here. The last information available is for the year ending  June 30, 2011, so we can’t be sure what has happened this year. There are lots of ways of presenting numbers like this, and I am sure there are nuances lost when looking only at these formal reports. That said, these are the audited financial statements of the University, and hence they are a reasonable place to go to assess our financial condition over time.
  • Is financial aid a growing burden? Not according to the numbers. In President Roth’s blog post he said that, “Over the past 20 years, the percentage of the tuition charges that goes to financial aid has risen steadily.” That may be true early on (I’d need earlier reports to check), but it is not true over the 2003-2011 time frame. In 2011, scholarship spending was 34.3% of tuition. The average since 2003 was 34.9% (median was 34.6%). So in 2011 we were actually below those recent trends. Stepping back, what is striking about this % of tuition spent on scholarships is how stable it has been over time, rather than rising. Given the economic downturn in recent years, as well as the move to reduce loans starting in 2008, one might have expected to see a jump in this percentage. That has not been borne out by the audited financials, however.

Chart of Scholarship Spending as Percentage of total tuition and of Gross Student Charges from 2003-2011.


  • President Roth also states that, in talking about our policy moving forward: “For Wesleyan this means just under a third of our tuition charges will go to financial aid. This is approximately the percentage of the budget devoted to aid from 2000-2008.” Actually, such a figure would represent a significant reduction from recent practice, as the chart above shows. Further, if reports are accurate that the University then sees reducing the discount figure to 29% over a few years, we are talking about much more than simply “capping” financial aid reliance going forward; rather, we are talking about fundamentally shrinking the share of our resources we are willing to commit to scholarship aid. To support that, I think most of us would have to believe that Wesleyan was in a financial crisis; I’m not sure that our results support such a conclusion (see below).
  • Is talking about aid as a percentage of tuition the right way to frame this debate? No. Scholarship aid is (obviously) based upon the total student budget, not simply tuition. So when talking about the discount to gross charges, it is important to include room and board charges as well. To compare total scholarship aid to only tuition has the optical effect of artificially inflating the percent of gross charges that are discounted. Instead of talking about the 34% of tuition being met by grant aid, we should be talking about the 27% of gross student charges that are being covered by grants. The latter figure more accurately reflects the burden of financial aid on the University.
  • Even if the financial aid burden is not growing, is the financial position of the school deteriorating to the point that it needs to be lessened? No. Despite the economic turmoil of the past few years, Wesleyan has steadily increased “profit” – or its revenue less expenses – in recent times. This is true both in absolute dollar terms as well as a percentage of revenue. Pointing this out does not suggest we are “rolling in it;” to the contrary, I am sure that this strong performance is partly the result of careful management and cost controls. That said, the audited financials simply do not suggest that an ever growing financial aid burden has led to a deterioration of Wesleyan’s financial condition.
Revenue Less Expenses as percentage of revenue 2003-2011

  • Looked at another way, growth in scholarship aid has largely matched growth in student charges, not eclipsed it. Since 2003 total scholarship aid has grown 5.7% a year, the same as gross student charges; the rates have been nearly identical during President Roth’s tenure as well. Once again, the audited financials do not show scholarship aid trending upwards in recent years any more than the underlying charges have been. Raise charges by x%, and our grant aid has gone up by the same %, an unsurprising result.
Chart of Compound Actual Growth Rate with details of different revenues and expenses

  • Much to his credit, President Roth has overseen a significant curtailment in the growth of certain expense categories. While he has continued increases in the instruction and research budgets in line with what he inherited, he has curtailed the growth of other expense categories. In his first year in office, expenses excluding instruction and research were 48.5% of revenue; in 2011 they were 44.3%. While total revenue growth has slowed over the past few years, expense growth has slowed as well, allowing Wesleyan to remain in the black (and to an increasing degree, as illustrated above). This has required real institutional discipline, and should not go unnoticed.
  • President Roth makes reference to the debts incurred in the 1990s, yet our long term debt burden doubled in the years immediately preceding his administration. While there are certainly other forces at play here – and many projects were at least partially funded by special gifts – it is hard not to notice that this spike coincided with many of the building projects on campus around that time. Again, to his credit, both the growth in debt and the spike in PP&E spending has stopped under his leadership. It is important to note, though, that our debt load and its growth would seem to have very little if anything to do with our financial aid practices.

Chart of Plant, Property and Equipment Spending versus Long Term Debt 2003-2011


     How would I sum up this quick first look at the numbers, albeit with the stipulation that additional information could lead me to change my mind? The available audited financials do not support the contention that scholarship aid has been growing as a share of our charges, and the overall financial performance of the University in recent years does not seem to dictate that the rather stable discount rate we use needs to decline at this time. That is not to say that Wesleyan could not be in better financial shape; it most certainly could be, and, for example, our relative endowment weakness is well known. However, given the drastic changes that are being considered by the Board and the administration, I expected to see a much more compelling case in the financials that action was needed today. I did not see such evidence. Absent additional information, I would say that altering our need blind practices today seems to be more a matter of choice than necessity. I think a sound, principled case can (and should) be made for continuing our current need blind policy at this time.
     In order to get more comfortable with these conclusions, I’d love to see 1) additional historical information (to the early ’90s) to look at how the financial aid budget has grown over time, and 2) future projections for the University – both with and without the financial aid changes President Roth has proposed. The latter I think is especially important to be released and examined publicly. The community is being asked to accept a tremendous compromise to what many of us consider the essential character of Wesleyan; as such, I think it is only fair that we get to look in detail at how much exactly we would be saving as a result. If the case for making these changes is as strong as I assume the administration in good faith believes it to be, there is no reason such projections shouldn’t be subjected to public scrutiny.


Questions about this information may be directed to Mr. Alvarez’s gmail: robertjalvarez.


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