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Business Officer Magazine

Seeking Financial Harmony

Senior business officers embark on a quest to answer the classic conundrum: how to balance budget priorities.

By Matt Hamill

As business officers related their struggles with defining what they hope to accomplish with their own financial aid dollars, the need for clearer institutional goals, strategies to accomplish them, and effective campus collaboration became apparent. Among the questions posed by and to participants:

  • What are the characteristics of your desired student population?
  • What are the financial barriers to bringing that population to your campus?
  • What aid policies should you follow to accomplish your objectives?
  • What is the role of merit aid in achieving your desired student population?
  • What level of institutional aid is required to meet campus goals?
  • What are my competitors doing, and what will the market bear?
  • How can I maximize my net tuition revenue?
  • What other investment priorities exist, and what tradeoffs (if any) might be involved in providing that level of aid?

No cookie-cutter approach exists—institutions navigate these waters based on their goals and objectives, history, the marketplace they work in, and myriad other factors.

Encouraging Campus Debate

Roundtable participants related proven strategies to best communicate information to support key decisions that determine the price and costs of providing a college education. Virtually all of the techniques included two core elements: engaging the faculty effectively and finding the right terminology to facilitate the debate.

A small group exercise illustrated the importance of these techniques. Participants were assigned the role of chief business officer, faculty member, or trustee and were then instructed to debate this scenario. The institution has a projected deficit and can close the budget gap in one of three ways: 1) the institution can close an academic program that has been suffering from serious enrollment declines in recent years; 2) the campus can impose an organizationwide salary freeze; or 3) the campus can outsource its office services program and eliminate 20 staff positions.

Perhaps not surprisingly, none of the small groups reached consensus on a single strategy. But the role-playing that ensued demonstrated the importance of engaging the right people and providing them with meaningful information. Strategies described included

  • designing and providing regular budget communication with the faculty senate;
  • engaging the faculty as members of the institution’s budget committees;
  • developing regional collaborative efforts between chief financial and academic officers; and
  • bringing in outside experts to train business office staff on communication tactics.

Predicting Outcomes

Throughout the two-day event, an underlying theme was the difficulty of developing a predictive model to guide institutional policy and strategy discussions on tuition and aid issues. Campuses reported various efforts to avoid the surprises and unanticipated consequences that can arise whenever policies and strategies are refined or adjusted. One model developed at Furman University tracks student decisions in prior years to help officials understand and more accurately predict the likely financial outcomes of their tuition setting and institutional aid policy decisions.

Gather ’Round the Table

The annual Senior Business Officers Roundtable brings together a small group of business officers and other higher education leaders to analyze a current issue. Sandy Baum, professor of economics at Skidmore College and senior policy analyst at the College Board, facilitated this year’s event. The 2004 program was organized by Chris Harrington, vice president for finance at Quincy College, and sponsored by Fiduciary Trust Company.

EACUBO is in the process of planning the 2005 roundtable. If you are interested in participating, visit and look for contact information as it becomes available.

Consider National Numbers

Event facilitator Sandy Baum, professor of economics at Skidmore College and senior policy analyst at the College Board, shared various data with participants, drawing in part on her work as coauthor of the College Board’s Trends in Student Aid publication. According to her research, institutional grant aid totaled slightly more than $20 billion in the 2002-03 academic year, representing 19 percent of total student aid and almost half of all grant aid received by college students. Over the past decade, institutional aid has risen, in constant dollars, faster than both state and federal grant aid programs.

One national trend noted was the rapid increase in the amount of institutional aid awarded to students from the highest income quartile. From 1992-93 to 1999-2000, the percentage of high-income students receiving institutional aid grew almost 46 percent at independent, nonprofit institutions (from 35 percent to 51 percent of full-time undergraduate students) and 50 percent at public institutions (from 12 percent to 18 percent of full-time undergraduates). Over the same period, these high-income students saw greater growth in their average aid awards. Among independent institutions, the average award to high-income students increased from $5,500 to $6,800, a 23.6 percent increase (compared to students from the lowest income quartile, whose average award increased from $5,500 to $6,200, a 12.7 percent increase). At public institutions, the average award to high-income students increased from $2,400 to $3,200, a 33.3 percent increase (compared to low-income students, whose average award increased from $1,900 to $2,300, a 21.1 percent increase).

Is merit aid increasing faster than need-based aid? Some data indicate that the share of state grant programs that were awarded based on need had declined from 90 percent to 77 percent in the past decade. However, participants noted the challenge of drawing clear lines between need- and merit-based aid; some students with financial need receive merit aid, for example. One thing that was clear from the conversation: Institutions are regularly reviewing and refining their strategies and policies to bring a targeted student population to campus by reducing the financial burden and rewarding academic achievement.

Author Bio Matt Hamill is senior vice president, advocacy and issue analysis, at NACUBO.