Strategic Planning

Working Group K: Long-term Financial Health of the Institution information sheet

Members: Konrad Alt ’81, Towny Angell, Jane Buchan, Dennis Henner (co-chair), Lucas Illing, John Iselin ’14, George James ’77, John Kroger, Jan Kurtz, Ed McFarlane, Rennie Meyers ’15, Jan Mieszkowski, Ellen Millender, Jeff Parker (co-chair), Peter Steinberger

Our group’s charge is, in broad terms, to examine the medium-term viability of what is often called Reed’s “business model.” This business model consists of the broad set of college policies that have important impacts on the budget, including tuition level, college size, admission and financial-aid policies, endowment payout rate, debt policies, and policies related to operating costs: faculty and staff size, class sizes and teaching loads, salary and benefit levels, and the cost of prospective new buildings.

Our group is currently working with consultants from the Bridgespan Group to develop an expanded “financial model” of the college to help us understand how various changes would impact the budget over 5–10 years. This model is based on the budget model developed over two decades by Ed McFarlane, Jon Rivenburg, and Mike Tamada, which has been used from time to time at faculty, staff, and trustee meetings to present information about the budget.

We would like to be able to assess the budgetary impacts of two broad kinds of changes. First, we need to consider how changes in external conditions (those beyond our control) would impact the financial health of the college. Important external variables include changes in endowment returns, inflation, general college enrollment patterns, government higher-education policies, the academic labor market, and the policies of other colleges and universities. The second category of changes we wish to evaluate are shifts in Reed’s own policies—the elements of the business model listed above such as tuition, college size, admission and financial aid policies, etc.

The first versions of the model are taking shape and it will be refined in the month(s) ahead. Your feedback can help guide our research efforts. We would be interested in hearing from the Reed community about what kinds of scenarios you think are most important for us to evaluate, and about which of the various policies constituting the current business model you think could be changed and which are important to retain.