Lutherans in Minnesota

Lutheran colleges struggle with downturn, find creative options

Lutheran colleges in Minnesota are facing the challenge of a severe economic
downturn with, for the most part, a spirit of cautious optimism. That’s the
main finding of a Metro Lutheran survey of leaders of the state’s four ELCA
colleges — Augsburg, Concordia in Moorhead, Gustavus Adolphus, and St.
Olaf — and Concordia University–St. Paul (LCMS), and Martin Luther in New
Ulm (WELS).

Enrollment figures for the fall term this year were on target, retention of
students in the second semester was solid, and applications for the 2009-10
year are holding up so far. Contributions to annual fund drives, with some
struggle, will reach targets or come close. But leaders remain cautious
because students and their families will still be vulnerable to such economic
hardships as job losses and drops in the value of their savings in the months
ahead. That could affect enrollment figures in the fall.

In addition, all the colleges have experienced sizable drops in the value of
their endowments, and that will cut into one source of income
How currently favorable application figures will translate into actual
enrollments in the fall “is less predictable than it used to be,” said Linda
Brown, vice president for finance and treasurer at Concordia College in
Moorhead. “While we’re confident with where we’re at now, it bears
continuous monitoring.”

Virtually across the board, the colleges have stepped up their contacts with
prospective students and their families, watching for changes in the financial
situation of these people and making them aware of sources of financial aid
that are available.

“Personalizing” is the term Augsburg President Paul Pribbenow uses to
describe this significantly closer relationship. Gustavus Adolphus in St. Peter
has increased its outreach to prospective students and their families by
hosting a series of informational meetings in Duluth, Minneapolis, Roseville,
St. Cloud, and Owatonna to acquaint them with financial assistance that is
available.

Many of the colleges are giving top priority to maintaining or expanding
sources of financial aid for students. This is causing pressure on budgets
since a major source of these funds has been income from their endowments.
And those endowments have suffered serious losses, generally in the 20-30
percent range that parallels declines in the financial markets nationally.

At Concordia in Moorhead, the value of its endowment plunged 28 percent to
$57 million in 2008. That has resulted in a loss of $1 million in income — 4.5
percent of its operating budget. Yet the school will increase its budget for
financial assistance by 9 percent in the coming year, drawing on institutional
resources to augment funds from its endowment, according to Brown.

St. Olaf College in Northfield, with by far the largest endowment of the
Lutheran colleges in Minnesota, saw the value of these funds drop by 24
percent to $246.7 million in 2008. But President David Anderson said there
would be no reduction in funds available for financial aid. “Indeed, we are
reaffirming our historic commitment to meet the demonstrated financial need
of every student we enroll,” he declared.

Anderson said St. Olaf’s approach to the economic downturn “is patiently and
persistently to work towards the goals of the college, exercising caution and
prudence in a difficult environment.” Specifically, he said, “We are reducing
the total dollars in next year’s budget for compensation, holding
departmental operating budgets flat, deferring some facility-renewal projects
and carefully evaluating the timing of our renovation of the old science
center.”

Both Anderson and Concordia Vice President Brown cited the sound business
practices of their predecessors as an advantage as they confront the current
recession.

“Concordia has a history of conservative budgeting practices, and so we have
some of those kinds of enrollment contingencies built into our budget that
enable us to weather some of this current volatility,” Brown said.

Concordia University in St. Paul, with an endowment in the $20 million range,
has been hit less hard than the other colleges that have larger amounts of
investment funds. The school made the “critical decision” to go ahead with a
three percent increase in pay for its faculty and staff members, according to
Eric LaMott, vice president for administration and chief operating officer.
“Our biggest investment is in our people, and we wanted to support them as
much as we can,” LaMott explained. However, he said, the drop in
endowment income will mean much tighter budgeting for next year, and
departments have been told to cut expenses to what is essential.

The St. Paul school is counting on a continued increase in enrollment in its
graduate program in education to help offset some losses in income. And it
also expects to benefit from aggressive courting of students completing two-
year programs at public community colleges in the metro area.

However, Concordia did experience a recession-related enrollment problem
this spring when it had to drop the planned start of a graduate program in
Christian Outreach after some students pulled out for economic reasons.
At Gustavus, the endowment has fallen by 28 percent to $81.5 million. Nevertheless, said President Jack R. Ohle, “We will work hard with students
and families to keep the total cost of an education at Gustavus as affordable
as possible by increasing financial aid and holding institutional expenses in
check.”

However Gustavus has not ruled out some increase in students’ costs.
Trustees are committed to keeping the increase in tuition, room, board, and
fees “as small as possible,” Ohle said.

Augsburg stands alone among the colleges in being caught in the midst of a
major capital fund drive when the economic situation reached crisis
proportions.

The college launched a $40-million drive to construct a science-business-
religion building in May 2008. President Pribbenow calls the project “very
distinctive” and “exciting” and said the school had hoped to raise 70-75
percent of its goal and start construction in 18 to 20 months. But the
economic situation has affected donations, and it will likely be 30 to 36
months before ground can be broken, he said.

Augsburg has seen its endowment fall by 25 percent to about $24 million, but
Pribbenow said the loss in income for operations will probably be only
$150,000 to $200,000 Amid a strong overall enrollment picture, the college
saw a dip in the number of students signing up for its adult undergraduate
program during the second trimester this year and attributes this to economic
factors.

Regents of the Minneapolis college have approved a tuition increase that is
less than originally projected and the college is being “very vigilant” in
watching every expenditure area in its budget, Pribbenow said. “But at the
same time,” he asserted, “we’re not treating this as a crisis and that’s all.” The
college, he said, “is encouraging innovation on the revenue side,” looking for
new avenues to increase income.

Augsburg has long experience in setting up courses in churches and
communities, the president pointed out, and has just begun a master’s
degree class in business administration at St. Stephen Lutheran Church in
Bloomington. Regents have also approved purchase of a new facility for the
college’s education program in the African country of Namibia, replacing a
site it has leased for 14 years.

Pribbenow said that during the economic downturn in the early 1980s, a
number of colleges branched out in the area of adult higher education, doing
such things as holding evening and Saturday classes for adults who were
employed weekdays and adding graduate programs. These schools, including
Augsburg, are now reaping the benefit of those investments and have a
model that provides options for them in reacting to the current downturn, he
said.

The picture at Martin Luther College, the WELS institution in New Ulm,
appears darker than at the other schools.

While enrollment is holding steady at about 700 during the current economic
downturn, that comes against a background of “significant” declines over the
past five years, the college says. It also reports declines of up to 27 percent in
the value of its endowment funds.

In response to this situation, the college says it is stepping up recruitment
efforts in its preparatory school, Lutheran high schools in the area, and
public schools. Representatives of the college are even increasing their
presence at the elementary school level.

Martin Luther’s mission is to train future pastors, teachers and staff workers
for WELS’ public ministry, and the college says staff members are working
with President Mark Zarling to keep that mission before synod leaders and
congregation members.

Summing up, the college says “times are challenging but not desperate,
difficult but not awful.” Referring to a statement by Zarling, it says “there are
actual blessings that come from challenging times.” Zarling has also urged
the college’s constituency to “fight anxiety with appreciation for all we have in
Christ.”