Raiding its nest egg
Ellen McCulloch-Lovell served as president of Marlboro from 2004 to 2015.
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Raiding its nest egg

Marlboro College’s broken financial picture is common for small and tiny colleges in the United States, where dozens of public and private colleges have closed or merged since 2016 — and that doesn’t take into account the unique challenges of keeping a tiny school solvent

MARLBORO — A full financial accounting of what happened to bring Marlboro to this inflection point will await a deeper analysis than is possible in the midst of things.

But the broad brushstrokes are visible.

The challenge of Marlboro College's viability extends back to its founding, and mirrors the same sort of challenges for small colleges across the nation, many of which have folded or have merged with other schools over the past decades.

The wonder may not be that Marlboro is almost inevitably closing its doors, but that it lasted so long as an independent college.

The college has faced two difficult challenges: its tiny student population, which has limited tuition income, and its young age, compared to schools that have been hoarding their respective nest eggs for centuries. And as a double whammy, a small and new school has a correspondingly small base of alumni who can be asked to support the college.

Marlboro “seems to attract students who wish to think for themselves,” The Boston Globe wrote in 1988. “And there have never been many of those.”

On top of those challenges, Marlboro's closure is part of a national trend that is hitting small private liberal arts colleges.

Marlboro is one of 89 nonprofit colleges and universities that since 2016 have closed or merged, or are in the process of closing and merging, according to the online newsletter Education Dive.

In the past few years, three colleges in southern Vermont have closed, including Green Mountain College, St. Joseph's, and Southern Vermont College. In 2018, the School for International Training ended its last residential program in Brattleboro after a long history in the town. Two state colleges, Johnson and Lyndon, were consolidated into a new educational entity, Northern Vermont University.

Even so, for many members of the college community, it has been hard to believe that a college with about $30 million in endowment would have to close its campus and be absorbed into Emerson College.

The hope that former Marlboro Vice President Will Wootton [see interview] and those who support his efforts might uncover a different path, one that will let the college survive on Potash Hill, is based on a sense that the college's finances and core ethos are solid enough that the institution can still stand on its own, given a restructuring to match the current enrollment of about 150 students and an infusion of donations to support a relaunch.

It is also based on a sense that Marlboro had always found a way to survive until now, and that maybe it is too soon to give up on the college. The fact that the college had so often survived close calls with financial insolvency in the past has only added to the skepticism about the inevitability of the Emerson plan.

In a 2001 article for Marlboro's alumni journal Potash Hill, Dan Toomey, a 1979 alumnus and associate professor of English at Landmark College in Putney, suggested that many of the students in the college's original student body came with practical skills that were put to immediate use at the college. In Marlboro's early years, it was good to be handy.

Some early members of Marlboro's faculty are legendary for having worked for free during lean years in the 1950s. Tales of the college's escapes from closing extend back to that era.

In a 1992 story about “experimental colleges” like Marlboro, Hampshire, and Goddard making a comeback, the Globe described Marlboro's faculty as “grossly underpaid by national standards.”

In the years before 1982, the operating deficit was sometimes smaller, and for brief periods in every decade since the college was founded, there were some years of plenty. Even so, the college almost closed twice in the period of Rod Gander's presidency, which lasted from 1981 to 1996.

The donation of a $200,000 Stradivarius violin helped the college make ends meet at one point in its early years, a tale documented in a 1986 New England Monthly feature that followed Rod Gander in his quest to raise $800,000 for Marlboro.

In a magazine review published in The Berkshire Eagle, Eric Peterson wrote, “The reader is allowed to sit in on uncomfortable meetings in which President Gander literally begs for money and attends an auction at Sotheby's, where the college attempts, and fails, to sell the violin.”

“It isn't particularly pleasant to picture our college presidents with tin cups in their hands,” Peterson concludes, “but that is today's reality.”

A review of the board minutes between 1980 and 1996 shows that, for many of those years, the college rolled over short-term debt and sometimes consolidated short-term debt into long-term debt. Significant donors did not come on the scene until the second half of the 1990s.

The college's first full-time president, Thomas Ragle, who served from 1958 to 1980, published a memoir of Marlboro's early history in 1999. In its pages he describes in eloquent prose the remarkable process of developing the educational philosophy of the college, and a substantial part of the book is also about the challenges to make ends meet during that period.

The culture of sacrifice at Marlboro had diminished by the late 1990s and early 2000s. To the world, the college seemed to be in the best shape that it had ever been, with relatively strong enrollment and new building projects in Brattleboro and on Potash Hill.

The college received good publicity and began to cultivate wealthy benefactors during the 1990s and 2000s.

Those benefactors helped the young college build its endowment. Money given to a college's endowment is designed to be invested for the long term. Generally, nonprofits use only interest from an endowment to fund day-to-day operations, taking care not to touch the principal. In theory, a healthy endowment could compensate for the revenue that would never come from such a tiny student body.

It was a period when the college might have taken account of its relative prosperity and made plans for foreseeable challenges in its future.

Those years marked the “echo boom” of college students who were the offspring of baby boomers, born roughly between 1983 and 2001.

But that population reached its peak in 2007, and leaner years would come. The college now educates about half the number of students it did at its high point in the early 2000s.

News reports had often reported that the college was doing well. Still, for anyone paying attention to the balance sheets over the years, it was clear that Marlboro was at best a tenuous business proposition, and, even at its most stable, it never thrived.

Over the past two decades, money from wealthy donors and drawing down its endowment bought Marlboro time, and the college raised money to build new buildings during the period when enrollment was on an upswing.

An analysis of the nonprofit's public IRS returns for the years 2000 to 2018 indicates that the college was rarely able to cover its operating expenses with operating revenues from student tuition, endowment income, and annual giving, apart from major gifts directed toward operations that ordinarily would go to endowment.

Its survival in the years since has depended on millions of dollars in donations.

But the college often had to rely on major donations - not just to open new buildings, but to cover routine operating expenses. From year to year, some of Marlboro's deficit would be covered by annual donations. For three years, a substantial annual donation bailed out the college, but that support has ended.

Even so, the college operated in the red almost every year since 2010, and for most years before that.

In recent years, the college has had to draw heavily on the principal of its $30 million endowment in order to cover its costs. In the most current year, the college anticipates converting about 18 percent of these investments to raise $6 million.

The New England Commission of Higher Education (NECHE), the regional accreditation agency for colleges and universities in New England, has taken note of this unsustainable financial strategy.

In a Dec. 16, 2019 letter, NECHE notified Marlboro College that of its continued Notice of Concern. According to the organization's evaluation manual, that status “should be recommended when the team determines that the institution is in danger of being found not to meet one or more of the Commission's standards if current circumstances or trends continue.”

If NECHE puts the college on probation or withdraws its accreditation, that measure in itself would constitute a death sentence for Marlboro - no one will pay money to send a child to a school that is losing or has lost its accreditation. Students would lose access to federal financial aid. According to the manual, that status is kept confidential as a school takes steps to remedy that situation.

Perhaps the starkest figure is that tuition revenues decreased by more than half over three years, from $3.6 million in 2016–2017 to $1.98 million in 2018–2019.

The December letter from NECHE referenced the college's discount rate for tuition was at 67 percent this year, meaning that for every tuition dollar on paper, students only paid 33 cents. This was an improvement over the previous year's 81-percent discount rate. NECHE also made clear that the pattern was unsustainable. (Marlboro's most recent audit, made available at the same time, reflects a 66-percent discount rate in 2017–2018 and a 71-percent discount rate for 2018-2019.)

In its decision to approve Marlboro's plan to close the college and merge with Emerson, NECHE made clear that it was relying on the financial information the college had provided, most of which the college released to the public in December.

On the basis of those figures, NECHE suggested that the only alternative it saw to the merger with Emerson would be a “three-year teach-out” of currently enrolled students on the Marlboro campus.

In that scenario, Marlboro would continue to liquidate its endowment, which - though unsustainable in the long run - would last long enough for the school to suspend admissions, continue educating its current student body until they all are graduated, and then end the school's operations.

Wootton and his supporters say that if they are permitted deeper access to Marlboro's internal financial accounting, they might be able to offer an alternative scenario - one that would require retrenchment, but keep the college alive on its hillside campus.

They also speculate that NECHE would consider new information and alternative financial scenarios if these gained support within Marlboro's community.

A scenario of this sort has played out at Hampshire College, where an uproar about the way that its trustees had represented the college's circumstances and its plans to close or merge Hampshire with another higher-education institution resulted in alumni and community backlash and, soon after, a halt to the closure plans, a mass resignation of trustees, and the selection of a new president.

Hampshire's alternative educational structure mirrors Marlboro's in certain ways, but the college was founded more recently and always has had a higher enrollment. Its student body numbered 1,191 in 2018.

Located within the five-college area of central Massachusetts, which includes Amherst College and the University of Massachusetts at Amherst, it does not suffer from the kind of rural isolation that has hampered Marlboro's enrollment efforts.

Whether Hampshire will survive is still unclear. For some, it provides a model of the sort of upsurge of support that might also keep Marlboro's campus open in Vermont. Still, those watching the Marlboro situation have not yet seen the groundswell of support that at least for now has staved off a similar merger plan for Hampshire.

Spending money from the future

Marlboro College is far from alone in its difficulties. The reality is that any private institution of higher education relies on a mix of endowment income, annual donations, tuition revenues, and other program income, all balanced against what it costs to operate a campus and provide educational programs and services.

For a few elite colleges and universities, places like Harvard and Yale, Williams and Hamilton, endowments that began long ago are large enough to support most of their operational expenses. Harvard has the largest endowment in the country at $35 billion.

“Harvard is obligated to preserve the purchasing power of the endowment by spending only a small fraction of its value each year,” the university wrote in its 2018 financial report, noting that it spends approximately 5 percent of the endowment's value annually. “Spending significantly more than that over time, for whatever reason, would privilege the present over the future in a manner inconsistent with an endowment's fundamental purpose of maintaining intergenerational equity.”

For most small colleges, enrollment income is the lifeblood. Balancing enrollment income against operating costs is the core financial challenge.

In order to attract students, small colleges must execute a skillful mix of brand and product design, marketing and public relations, and tuition discounting in the form of scholarships and other aid.

The competition for students in the present moment, when the total number of college-age students has shrunk significantly from its peak around 2007, has resulted in an aggressive enrollment war that has been well-documented in the popular press and copiously covered in publications for the higher-education industry.

In this competitive world, the same student might be admitted at two selective colleges, with one offering a small scholarship and loan support and the other presenting a presidential scholarship amounting to almost half of the tuition cost.

Small colleges buy students through discounting. In its most recent years, Marlboro has had to dig deep into its pockets to attract an entering class. In some ways the college was in danger of simply disappearing for lack of students unless it made the college nearly free, no matter what the sticker price was after the costs of tuition were charged on the expense side of the ledger.

Another factor in this rough competition among colleges: students and families have higher expectations for physical resources - buildings, labs, technologies, and student-life amenities, further encouraging spending. Many colleges have suffered from carrying heavy debt-service payments in order to cover new facilities.

The current campus on Potash Hill might seem astonishing to some of the pioneers who started the college in farm buildings, but in the world of higher education, in the present moment, Marlboro has difficulty competing against other small colleges with larger enrollments and endowments.

It is unclear from the financial information that Marboro released what impact expansion has had on its bottom line over time.

The Marlboro College Graduate Center in Brattleboro that then-President Paul LeBlanc unveiled during his tenure between 1997 and 2004 has been seen as a white elephant by some members of the Marlboro community.

LeBlanc had been hired by Marlboro because of his experience in higher education and the new technologies that were emerging in the 1990s. His vision of creating a downtown Brattleboro building to house the Graduate Center was part of his effort to diversify the college's resource stream.

At the peak of the dot.com boom, shortly before the 2001 crash, the graduate program offered master's degrees in the educational and enterprise uses of the internet and associated technologies.

Whether that was the right move is something many people in the Marlboro community have questioned, because the building became a financial burden. The graduate program never provided significant ancillary income, even as it produced important value in terms of the skills and experience its graduates gained.

The downtown campus was sold in 2018 for $3 million, with the proceeds going to cover Marlboro's operating costs.

Radical changes inevitable

Marlboro's well-being in terms of the support it has received from donors since the late 1990s may seem enviable to other colleges of similar size. To have a $30 million endowment, a built-out campus, and very little debt is a circumstance that many colleges would love to have, one obvious reason that Marlboro's offer was attractive to Emerson College.

As a result, much of the conversation about how the college might be saved has centered on how many assets the college will transfer in exchange for the return.

The reality is that in the most recent year the college's operating costs were as much as five times larger than actual tuition revenues, which were less than $2 million last year. The personnel budget alone for the college totalled more than $6 million.

It is these sort of figures that Wootton has proposed reviewing in a structured context with a tight deadline. Although his memo was framed as a challenge, it is also an offer to take a second look in case someone missed something.

In a conversation with The Commons, Wootton discussed how his request to lay the books open would require more fine-grained information than the spreadsheets provided. Although the data that Marlboro provided and publishes on its website is clear and provides an accurate picture of the college's financial state, it does not offer the kind of detail required to do strategic financial planning at the operational level.

For example, it does not include actual personnel salaries by person, costs per student at an individual level, or what costs might be involved in creating a framework for retention and marketing efforts for a restructured Marlboro program.

Still, the actual operational spreadsheet of the college is simple: tuition revenues amount to about $2 million at best, and costs are several times that much.

Any scenario for survival in Marlboro would have to include radical retrenchment, with the college shedding millions in costs as it also relies on donors to help bridge the gap and support efforts to grow enrollment.

In a certain way, the change required would be as drastic as the change involved in moving the current faculty and students to Emerson. It might require pedagogical changes as significant as the ones that Marlboro will experience in its new incarnation as Emerson's “Marlboro Institute for Liberal Arts and Interdisciplinary Studies.”

Whether the merger goes through as planned, as seems likely, or some other option is defined, radical changes are inevitable.

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