A TRUSTEE FROM YOUR SCHOOL IS driving across town to the quarterly board meeting on campus. As chair of the finance committee, he's preoccupied with the routine discussions that the day will hold - budget review, the upcoming audit, refinancing debt - when he notices the gas light on his dashboard. He pulls into the nearest service station to fill up, and when the handle clicks off, he turns to check the dollar amount. The price he sees -- well over $80 -- is not unusual for his SUV, but with his mind on the financial health of the seminary, the questions come hard and fast:
Energy costs and the big picture
Given the diversity of theological schools in the U.S. and Canada, institutions naturally react differently to external economic pressures. For many seminaries, rising energy costs represent the "canary in the coal mine" for broader issues that theological schools are beginning to face. Colleges, universities and seminaries alike are being pinched by increased expenditures on the one hand -- as schools are paying more each year for electric, heating oil and natural gas -- and decreasing revenues on the other, as students are changing enrollment behaviors to cope with rising gasoline prices and other economic hardships.
Curtis Haynes, vice president for finance and operations at Lutheran Theological Seminary at Philadelphia, serves as a Governance and Finance Mentor for In Trust. He explains that both administrators and finance committees must pay attention to issues of rising energy costs and how they ripple across an institution. Energy costs of all kinds will continue to increase, he says, and theological schools must therefore be proactive and address these potential costs without passing them on to students through tuition.
At Sioux Falls Seminary in South Dakota, President Michael Hagan sees the ripple effects of rising energy costs, both for the institution and the economic ecology that supports it. The school, affiliated with the North American Baptist Conference, is experiencing rising expenses on several fronts and is taking a multistep approach to cope with the slumping economy.
The school began preparing for increasing utility costs when it sold its aging campus and started construction on a new facility adjacent to Augustana College, not far from the seminary's current home in Sioux Falls. The seminary is working toward LEED certification for the new campus, which will be ready for move-in by fall 2009 and will decrease utility expenses by 25 to 50 percent. The seminary has also entered into an agreement with Augustana to share energy from an on-site generator that supplements energy supply during peak usage.
The impact of high energy costs on students is also a point of concern for Hagan. The only ATS-accredited institution in a 200-mile radius, Sioux Falls Seminary draws its 135 students from a large geographic area. Hagen reports that many students in the region commute 50 to 100 miles each way to attend classes. As gas prices soared over the summer months, the school's administration worried about the impact on their students' ability and willingness to take as many courses as they had the previous year. Sioux Falls Seminary already offers stipends to help incoming students move to the area, so the president's cabinet also considered adding a gasoline stipend to students' financial aid package, to help defray the costs of commuting.
Though Hagan does not expect gas prices to be a big variable in students' decisions to come to Sioux Falls Seminary, he says the school is nevertheless planning to "take classes to the students" by using more hybrid courses, which combine online and in-person formats, and intensives.
In the end, Hagan sees the economic impacts of energy costs as an institution-wide concern. "It's really a global [institutional] issue and not just one piece," he says. "We must continue to find ways to be economical in the long run and maintain financial viability."
Economic effects on student behavior
At Phoenix Seminary, a freestanding nondenominational school in Arizona, administrators are focused on the tuition side of its revenue stream in the face of tough economic times. The school's registrar, Lee Richards, explains that the student services team is keeping an eye on how the economy is affecting student behavior. Most of the school's students live in the Phoenix metropolis, he says, and the seminary does not have any oncampus housing. Given the rapid spread of the Phoenix suburbs in the past decade, students can live in the metropolitan area and still drive up to an hour to attend classes twice a week. Some students commute from Sedona to the north or from Tucson to the south -- each more than 100 miles one way. Even as gas exceeded the $4 mark over the summer, Richards did not know if enrollment would be affected by the increased costs of commuting. He had noticed, however, higher enrollment in the school's weekend intensive classes and courses offered by its Institute for Theological Studies, which offers online classes.
The board and administration at Logos Evangelical Seminary, a school of the Evangelical Formosan Church, is also taking an institution-wide approach to tough economic times. Located in El Monte, California, the school is experiencing decreased revenues because of lower enrollments and fundraising challenges. Sonny S. Gan, director of business affairs, reports that the seminary is feeling the overall pains of a sagging economy. As a result, the school's board of trustees over the summer approved a 10 percent reduction in the current budget and instituted new financial control mechanisms, including more periodic budget reviews to monitor variable expenditures.
Even so, Gan is concerned about economic impacts on fall enrollment. He says this is a significant concern for the school's non-degree training institute, which serves local pastors in the area and provides a steady revenue stream for the seminary. Many of these students, who primarily serve congregations of Chinese-speaking immigrants, hold fulltime jobs during the week while serving in church ministry on weekends. As inflation continues to rise, he explains, the disposable income these pastors can spend on continuing education decreases.
Fundraising in a struggling economy
The effectiveness of development efforts during negative economic trends is a natural concern for development officers and board members alike. Common sense might suggest that as the stock market slumps and inflation increases, giving will decrease. But campaign consultant Duane Dyer suggests otherwise.
Dyer, who is executive vice president for Hartsook Companies Inc., is consulting with Claremont School of Theology, an institution of the United Methodist Church in Southern California, and has nearly 40 years of development experience in higher education and other nonprofit organizations. He suggests that the "common sense" reaction to an economic downturn -- to assume the worst -- is usually counterproductive, and may even be a self-fulfilling prophecy. Instead, he says, boards should avoid the impulse to "affirm the negative" and accept the news of economic gloom uncritically.
"The reality is that there are some sectors in 'these economic times' that are in bad shape," he says. "But the more we affirm the negative, the more difficult it will be to maintain or improve gift income." He further reports that the nonprofit organization Giving USA reports philanthropic support continues to increase every year, regardless of the broader economic landscape. In economic downturns both real and perceived, numerous sectors always benefit, he says. Therefore, development officers should educate themselves with research about the economic environment to become aware of where growth is happening and where real economic hardships are occurring.
Other organizations will be soliciting your donors, Dyer says, so development officers and board members in theological education should remain active and aggressive with development efforts. "The cultivation process does not change, the need does not change, and the opportunity for doing something significant within the context of 'these times' should be a major card in your message deck," he says.
Likewise, Dyer suggests that external factors should not be a major concern when making the decision to begin or go public with a capital campaign. "If the institution or organization has not done rigorous internal due diligence and is not prepared to present its case effectively to the prospect pool, then it should not enter into a campaign, regardless of economic situation," he says. Campaigns should only be launched if the board, first and foremost, is confident in the school's mission and its ability to succeed.
Most important, when faced with economic hardships, boards must lead with their personal giving and work on behalf of the president to expand the donor pool and increase gifts. "The board, with its own giving, gives credibility to asking for support from prospects and established donors, both in the annual fund and with capital giving," Dyer says. This demonstrates not only the confidence of the board but their sense of ownership of the school as well.
At the end of the day, the concerned trustee at the gas pump may not have all his questions answered -he may not even know the right questions to ask. But keeping a critical eye on data from across the institution is the starting place for a board's fiduciary responsibility to its institution.
"Avoid being a contributor to a self-fulfilling prophecy," Dyer warns. "The markets and economic landscape are greatly influenced by emotion."
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