University finances OK in economic crisis

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  • Marquette University's finances remain stable despite the economic crisis.
  • The university expects to maintain a balanced budget in fiscal year 2009.
  • The market value of Marquette's endowment fund has declined in the last few months.
  • The university will likely institute a "modest" tuition increase next academic year, while possibly offering a "modest" increase in compensation for faculty and staff.

The financial situation at Marquette University appears to be healthy in the face of the current economic crisis, but analysts predict the school will still feel repercussions.

The university's finances are stable because it budgets conservatively, plans ahead and has "strong operating and capital budgeting controls," according to an October report from the Office of Finance.

"While no one can predict with any certainty where the current economic downturn is headed, Marquette's overall financial standing remains strong, even in the midst of global economic uncertainty," said Tim Olsen, communication manager in the Office of Marketing and Communication.

Marquette's finances were recently given an A2 rating by Moody's, a major credit rating agency, according to the report. Only five Catholic universities have a higher rating.

Olsen said that the university expects to maintain a balanced budget in fiscal year 2009. This confidence stems from a large freshman class in the fall and the amount of donations to the university's annual fund secured so far this year.

This year's class totaled approximately 1,950 enrolled freshmen, according to Marquette's reported student demographics on its official Web site.

Similar to most universities, Marquette has experienced a decline in the market value of its endowment fund in the last few months, Olsen said.

"Our strategy for the endowment remains focused on the long term," Olsen said.

Although tuition expenses may rise next academic year, the plan is to keep the increase "modest," Olsen said. The university may also offer faculty and staff a "modest compensation package increase," he said. Both measures will likely be announced early next semester.

The university has a salary pool managers use to grant increases to individual employees on a merit basis, said Mary Pat Pfeil, senior director of university communication in the Office of Marketing and Communication.

The university's financial stability should also allow it to avoid job cuts, Olsen said.

Marquette's current cash reserves are protected because the school's operating funds are diversified and invested solely in AAA securities, according to the financial report.

AAA securities are investment grade, which means they are very low risk, said Michael Dewally, an assistant professor of finance.

Although Marquette has

invested conservatively and its funds are quite diversified, the school will not escape the crisis unscathed, Dewally said.

"There's no place to hide in the market," Dewally said. "All sectors have declined."

Bruce Bittles, chief investment strategist for Robert W. Baird & Co., said he does not know what the crisis' effect on Marquette will be, but the impact on universities in general will be substantial.

University endowment portfolios are likely to be adversely affected, Bittles said.

Bittles also said new construction at universities could be postponed because it will be more difficult to raise money.

"Donors' portfolios have suffered, and they may have to donate less or not at all," Bittles said.

Funding for the construction of Eckstein Hall and Zilber Hall and for the renovation of the former Marquette Apartments, 1628 W. Wisconsin Ave., has already been secured, Olsen said.

Earlier this semester, the university moved to the next stage of designing the Discovery Learning Complex, the proposed engineering building at 16th Street and Wisconsin Avenue. Olsen said construction will begin when the "standard cash and pledge guidelines" are achieved.

Michael Switzenbaum, executive associate dean and a professor in the College of Engineering, said approximately $63 million of the $100 million needed for construction of the building has been raised.

The report said the university is working with donors, focusing on raising money for scholarships and the law and engineering campaigns.

"Although we expect that some donors will defer donations due to the economy, we're confident that we will again see that generosity of spirit and commitment to the mission of our Catholic, Jesuit education," Olsen said.

Funding for future construction will depend on donations and available bridge financing through the credit markets, according to the report.

The economic meltdown could also prove detrimental to college enrollment, Bittles said. If the economy continues to slow down, some families will not be able to continue funding their children's college educations. College savings could also be impacted, negatively affecting incoming freshmen next academic year, he said.

Bittles warned of the significance of the situation.

"There's going to be some serious ramifications this time," Bittles said. "This is all real."