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Panelists talk university endowments, investments

Janus Forum speakers discuss ways to yield positive returns in tough financial times

“It is a challenging time” for university finances, said Beppie Huidekoper, executive vice president for finance and administration, expressing a sentiment that became an overarching theme of the Janus Forum’s Tuesday discussion “We The Corporation: The Ethics of Managing a Billion Dollar University Budget.” 

The talk featured presentations by Huidekoper and Dan McCollum, managing director of the Investment Office, followed by a panel that also included Lynn Pasquerella PhD’85, president of Mount Holyoke College, and John Baugher, associate professor of sociology at the University of Southern Maine.

Huidekoper’s and McCollum’s presentations served as primers on the University’s financing operations, with Huidekoper educating the audience on the budget as a whole, and McCollum addressing the endowment.

“We’ve maxed out on a lot of our sources of revenue,” Huidekoper said. Compared to the 10 years of former President Ruth Simmons’ tenure, which spanned the 2002 through 2012 fiscal years, the University has needed to work harder to bring in sufficient funding, she added.

Budgets for both this and next fiscal year are running deficits, she said, adding that though the University has reserve funds, the administration will “have to be judicious” in utilizing them.

McCollum echoed Huidekoper’s message of employing careful and calculated financial management in his presentation. Investors at Brown work to ensure the best returns with the lowest risks, McCollum said. The endowment is invested mostly in stocks, equity-like credit and hedge funds, with the broad strategy of consistent, long-term growth, he said. Last year, endowment funds accounted for 16 percent of the operating budget.

Financial stress brought about by decreased sources of revenue is further complicated by many of the University’s more holistic goals, such as those outlined in President Christina Paxson’s strategic plan.

The University’s many objectives — including maintaing a high-quality faculty, increasing financial aid, bettering the student experience and complying with laws and regulations — are “all conflicting in some ways,” Huidekoper said. The University is now trying to increase revenue by raising tuition and boosting the size of the student body.

Administrators noted that the “integrity” of the groups chosen for investing is another factor in university financial management. “Let’s just say we didn’t get involved with Bernie Madoff. I think there was an opportunity to do so,” Huidekoper said during the panel, which turned away from the fundamentals of budgeting at Brown toward the event’s larger theme of the ethics of higher education financial management.

When a student asked about the budgetary consequences of divesting from major coal companies, McCollum said doing so would lead to “a certain risk that we would lose access” to some of the best-performing financial managers in the industry. If strings were attached to financial managers’ investing strategies, they might change or restrict their services to the University, he added.

Fielding a question about the ethics of divesting from certain industries, Baugher said, “I’d rather pay a little higher so that my children could have a sustainable planet.”

The same student asked if Baugher would be willing to lose his job in order ensure those types of ethical investments, to which he responded yes.

Baugher continued to emphasize institutional integrity as he recounted an experience receiving a letter of retrenchment from USM. The letter stated that his position was discontinued only for “financial reasons,” he said.

Baugher condemned USM’s financial restructuring, which involved layoffs of faculty members and reshuffling of academic departments, as a series of “regressive reforms” and a “full-frontal assault on academic freedom.”

Drawing from these experiences, Baugher now underscores “transparency, shared governance and academic freedom” as crucial metrics for higher education finance, he said.

Pasquerella called for a shifted focus in budgetary decisions, saying many university administrators regard higher education not as a “public good, but as a private commodity.” Instead of embracing this view, Mount Holyoke has tried to maintain a “commitment to access,” she said.

About 80 percent of students attending Mount Holyoke receive financial aid, she said, adding that the institution has frozen tuition and continued involvement in Massachusetts’ Five College Consortium to balance its budget. Students can take classes at neighboring institutions, helping to reduce costs for each college in the partnership.

Baugher also highlighted access to higher education, saying that the nation has to work toward “getting beyond this idea of me and my people.”

“We might take that value of access and think bigger than just Brown,” he said.

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