Are Christian Colleges Good Financial Stewards?

Part two of a series of posts following up on comments on my open letter urging American churches to recommit to Christian higher education by increasing their direct and indirect financial support of colleges like Bethel.

“This one is tough for me,” commented a reader named Mike, in response to last Tuesday’s open letter, “as I wonder how well institutions of Christian Higher Ed have practiced stewardship.” It’s an important response to my argument that Christian churches and denominations ought to reverse the trend of declining financial support to Christian colleges:

If schools like Bethel can’t be trusted to make prudent use of the funds given to them, why increase giving?

In particular, Mike raised the problem of colleges (and this is hardly unique to Christian institutions) building expensive new facilities. He wrote, of the building that stands on the other side of my office window:

…Brushaber Commons, while beautiful, cost somewhere in the neighborhood of $30 million. How many jobs could that have saved? And for how many years? And what would Bethel’s financial future look like if $30 million had been added to the endowment? I know that it would have meant continuing to eat in a cafeteria that wasn’t state of the art and gorgeous. But at the end of the day, sometimes you lie in the bed you made.

It’s not the first time I’ve heard this grievance. (I’ve addressed it from a different direction in my series on Christian colleges and social class.) The obvious response is that offering such amenities is vitally important in the recruitment race: while we professors would love to believe that most college students make so crucial a life decision primarily on the basis of academics (and science buildings seem to be the hot new campus improvement), we’re told that dining, leisure, exercise, and other such facilities make a big impression on prospective students.

Perhaps. But that comes with important costs. I’ll oversimplify for the sake of prompting more conversation, but it seems that such building projects require one or both of the following: going into debt and/or directing fundraising away from building endowments.

Now, by some measures I’m not sure that Christian colleges — on the whole — are much worse stewards of what’s been given them than their peers. (High praise, that.) I didn’t have time to dig into IPEDS financial data from the Department of Education, but I can take a short cut and revisit the financial analysis conducted by Bain and Co. in its “Sustainable University” brief. According to Bain, the median member of the Council for Christian Colleges and Universities (CCCU) saw its equity ratio decrease by 1% over the period 2005 to 2010. By comparison, the median for the entire sample examined by Bain was -2% in that category.

Or consider another type of religious college: the twenty-six colleges and universities partnered with the Evangelical Lutheran Church in America (ELCA). Not only were they more likely than their CCCU cousins to be classified by the Bain Brief as being financially unsustainable (42% of the Lutheran schools received this designation; 32% of CCCU members) or at risk of that status (35% vs. 32%), but their median equity ratio declined by 3%.

Now Bethel’s equity ratio declined by 19%, according to Bain, which means that Mike probably isn’t all that reassured about how we’re taking care of what’s been given to us. Nor would it encourage the friend of a friend on Facebook who implicitly, unfavorably contrasted Bethel with Grove City College, a conservative Presbyterian school in Pennsylvania that has a lower net cost — in part, this person argued, because its leaders avoid debt, generally engaging in renovations and new construction only when they have cash on hand.

But I’ve probably said enough about Bethel, so instead consider the case of an even better-known Christian college: Calvin College, whose debt grew to $115 million between 1997 and 2012. In November of last year, the student newspaper, Chimes, reported that the Grand Rapids, Michigan school faced a 10% budget shortfall:

Spoelhof Fieldhouse at Calvin College
The $35 million Spoelhof Fieldhouse Complex – Calvin College

Aside from rising costs [in health care, technology, and faculty compensation], Calvin is also facing significant debt payments starting around five years from now as a result of its use of debt financing. Debt financing allowed the college to earn investment return on money donated towards building projects. Calvin borrowed the money to construct buildings like the Fieldhouse, and invested the unused borrowed funds and incoming donations. The expectation was that the investment would make more money than the debt cost to service.

This strategy was successful until the stock market crash in 2008. The crash especially hurt Calvin because several large debt-financed building projects, like the Fieldhouse, were begun not long before it. Since 1997, Calvin has spent $32 million more in debt service payments than the yield on related investments. Large market losses in 2008-09 are the main cause.

Calvin’s vice president for administration and finances resigned, faculty professed themselves flabbergasted, and the newly inaugurated president, Michael Le Roy, was forced to begin his tenure with a prioritization process that, this past March, eliminated twenty-two faculty and staff positions en route to cutting $4.7 million from the budget, not quite half the total that needs to be trimmed over five years (by which time debt service is expected to consume 10% of the college’s operating budget). Tuition was raised by nearly 5%.

However, Calvin also surpassed its annual fundraising target by several million dollars before the fiscal year was even done. Perhaps not coincidentally, members of Calvin’s denomination — the Christian Reformed Church in North Americagive a higher percentage of their income (6.1%) than any other church group’s membership. I’m not sure what the figure is for Bethel’s denomination (and it might not be available — its giving data didn’t appear in the last Yearbook of American and Canadian Churches that I could find), but the evangelical average is 3.7%, with mainliners at 2.6%. All of which probably factors into the original problem of churches and denominations being willing, or perhaps able, to support higher education.

In any case, it does seem that some religious colleges and universities are able to engage in expensive building projects because they’re so successful at development, such that I’m not sure that debt is a major problem. For example:

Anderson Athletic and Recreation Complex at the University of St. Thomas
The Anderson Athletic and Recreation Complex – University of St. Thomas

The day after I posted the open letter, I happened to be a few miles south of Bethel, on the campus of the University of St. Thomas. Though twice as big as Bethel (in enrollment and budget), UST is one of our peers in the Minnesota Intercollegiate Athletic Conference and Minnesota Private College Council. In October 2007 St. Thomas approved a half-billion dollar capital campaign; five years later — despite the onset of the Great Recession — the school announced that it had raised $515 million from over 43,000 donors. (Now, about two-thirds of that came in the form of pledges and bequests…) About 10% of what was raised built the building where my wife was giving a guest lecture last week: the Anderson Athletic and Recreation Complex, all funded through private gifts. While Katie was talking to St. Thomas students interested in occupational therapy, I sipped a cappuccino across the way in an even bigger, newer building named for the same generous donor, the Anderson Student Center (price tag: $66 million).

This brings us back to Mike’s original point about the Brushaber Commons… Bethel has a cafeteria that’s “state of the art and gorgeous” (there’s a reason we get an A from Campus Prowler for dining). and perhaps that’s what it takes for us to compete for some of the same students with a school like St. Thomas. But even to the extent that we can kind of keep up in that facilities race, we’re falling far behind in other respects. In addition to the building projects, the UST capital campaign not only yielded $142 million for financial aid, but over $280 million that will gradually be added to that university’s endowment. I recall some endowment target being built into the original capital campaign that funded the Brushaber Commons, but even if that growth materialized (and many pledges fell through because of the effects of the financial crisis) our endowment remains less than a tenth the size of St. Thomas’s. (We do have the better football team, at least this year.)

Likewise, the median endowment per FTE student at ELCA colleges and universities is over $23,000 — almost three times the same statistic for the CCCU. Which is probably a key reason why the ELCA consortium has fewer members receiving Cs and Ds from Forbes for financial health (three in five, not three in four).

For more on this topic, see a recent post by a former Bethel philosophy professor, who likewise focuses attention on the problem of endowments. But he also raises two problems I haven’t dealt with: the overall weakness of denominations themselves, and the question of whether evangelical schools graduate enough students going into careers that will permit sizable giving down the road.

Next week I’ll wrap up this brief set of follow-ups by considering the concern that Bethel is also, in effect, a poor spiritual steward — of churches’ youth and of a denomination’s doctrines. (Sneak preview: I’ve got much less time for this argument than the other stewardship one.)

<<Read the first follow-up to the open letter                    Read a final follow-up>>


One thought on “Are Christian Colleges Good Financial Stewards?

  1. Speaking of individual giving to denominations… http://www.religionnews.com/2013/10/24/report-church-giving-reaches-depression-era-record-lows

    According to research by Empty Tomb (the source of the 3.7% evangelical average cited above), giving in Protestant denominations has fallen four straight years now. Of particular interest for those of us in Christian colleges hoping for more support from churches:

    “The steepest monetary decline was in the area of ‘benevolences,’ spending that does not apply to a local congregation’s needs but includes things like seminary support or missions work. Giving to benevolences was at 0.34 percent of a person’s income, a decrease of 48 percent since 1968 — its lowest level since that time period.

    “Altogether, the report found, churches had $87.2 million less to spend in 2011 on work beyond their congregations than in 2010.”

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