1. Macalester College Summary: Proposed 2009-10 Operating Budget April 2009

2. 2009-10 Operating Budget Key messages The college is financially sound External circumstances have dictated a rethinking of previous assumptions about revenue growth Anticipatory planning in the last couple of years has helped prepare for this The 2009-10 budget takes some significant steps towards realigning revenues and costs Absent some really good economic news, there will be more work needed to complete this realignment in 2010-2011

3. Background A most unusual year for budgeting The circumstances that make it unusual are still evolving Our budget process paid significant attention to future years We have focused on several important strategies : o Support the student experience o Keep tuition increase low o Defend student access to our programs with financial aid o Support our people o Make changes to resource allocations purposefully Financial markets and student enrollment and retention will be important guides Objective: Create an outstanding and sustainable student experience 2009-10 Operating Budget

4. Key assumptions—external: Global economic downturn will continue into 2010 Slump will affect economic activity everywhere Financial markets will remain depressed for some time High school graduation level is peaking Students and families will continue to see importance of B.A. Some may broaden their view of where to obtain that degree Many will still seek a degree from a high quality college The cost of a degree will continue to feel challenging to many families placing upward pressure on financial aid 2009-10 Operating Budget

5. Key assumptions—Macalester We are trending toward a student body target of about 1,800 [2009/10 projection is 1,829] o Raising that number modestly will likely be the subject of future discussions Financial aid discount levels will rise and remain high Endowment value =$475M on 2/28/09 o Down from $675M on 6/30/08 Fundraising will remain challenging 2009-10 Operating Budget

6. Revenue assumptions Student body size - 1,829 FTE o Budget built on 1,810, which is long-term goal Financial aid discount - 47.4% o $3.5M increase in aid; $2.0M in a normal year o Discount rate is still at least 8% above peer medians Net tuition per student - $20,127 o Financial aid grows faster than tuition in this budget o First drop in net tuition this decade Endowment draw – no change in formula o Effect of financial market decline comes in 2-4 years Annual Fund –$3.3M; 08-09 forecast = $3.1M Other revenue up slightly from budget, mainly due to summer use of campus 2009-10 Operating Budget

7. Expense assumptions Faculty salary pool o Only increases are for lower paid employees [$400] and promotions o No net new positions Staff salary pool o Increases mainly due to $400 increases and union contract o Small pool for promotions and required range adjustments o No new positions created in 2009-10 Student employment o Largest % increase besides benefits Wage increase, higher usage is expected Some additional positions in Admissions, Student Services, Academics 2009-10 Operating Budget

8. Expense assumptions (continued) Benefits o Very large increase mainly related to health care coverage (15.9% rate increase; +38 participants) Program budgets o Overall decrease of 5.5% vs. plan Advancement and Operations -7% Academic, Student Affairs, Admissions -5% Study away o Head count 235 [compared to 247 in 2008-09] Fall enrollment lowest in many years Capital o Ongoing capital consumption flat from 08-09 o No new borrowing during fiscal year 2009-10 Operating Budget

9. Risks and longer term issues Response of peer institutions – larger student bodies Longer, deeper domestic or global contraction Recovery of financial markets Availability of credit for families o Effect of credit on families Student/family perception of the variety of higher education choices Recovery of donor income statements and balance sheets 2009-10 Operating Budget

10. What’s different? Direct aspects of the student experience will feel similar to 2008-09 Some slowing in progress on campus repairs and maintenance backlog Reductions in program budgets, travel, frequency [e.g., Macalester Today is being reduced from four to three issues next year] What’s next? Summer 2009 review 2008-09 financial performance; consider scenarios based on more recent data Review longer term ideas for revenues and expenses Students, faculty, staff can look for ways to reduce costs o Ask why we do things o Ask why we do things in a particular way o Ask why we don’t do other things 2009-10 Operating Budget

11. Summary Macalester is managing through the economic crisis o Other institutions have had layoffs, capital projects stopped, additional borrowing to meet cash needs, selling assets, eliminating programs The downturn will continue to have a significant effect on our longer term planning We are mindful of possible challenges going forward o Student demand o Financial aid demand o Fundraising o Longer term effect on endowment spending We are also committed to building on our historic strengths to ensure a relevant, robust experience for our students going forward 2009/10 Operating Budget