Luther College Chips

Luther utilizes reserve fund through deficit

Linh Do, Staff Writer

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Luther has a board-designated operating reserve, which saves and accumulates money over time. In years like the 2018-19 academic year where the college has been running a deficit, the reserve fund helps the college cover necessary expenses. Dipping into this reserve also means that some expenditures, like faculty raises, are not possible.

According to Vice President for Finance and Administration Eric Runestad, Luther utilized the reserve this past academic year. The total amount will be calculated once the official academic year is over in May.

According to Runestad, the reserve fund comes from different assets of the college and allows Luther to maintain a strong financial position.

“We want to be clear about the fact that we have [some] challenges but they are in the right proportion,” Runestad said. “We have ample reserves to help us balance student budget and future year budget.”

As the college experiences a deficit, faculty members will not receive a salary raise this year. This decision was made by the Board of Regents in October 2018, despite the faculty salary scale indicating that there should have been a raise.

“In a year where we have more expenses than revenue, if we should give a compensation increase, then the distance between expenses and revenue grows,” Runestad said. “That’s what makes the time like this hard because we need people to bring their best work [and] effort but from an operational or budget standpoint, awarding a salary increase this year would have made that deficit greater, and that’s the kind of challenge that we have to work our way through because we can’t afford to do that over and over.”

According to Associate Professor of History and member of the Faculty Interest Committee Victoria Christman, this salary freeze is due to low student enrollment in recent years.

“On a yearly basis, the college attempts to balance its budget by taking in as much money from tuition as it needs to pay for faculty salary, operations, debt payments, etc.,” Christman said. “In years in which we have low student enrollment, we take in less than we have to pay out, which is obviously a problem.”

Both Runestad and Christman agree that student enrollment has a large impact on faculty salaries. In years where Luther is running a deficit, a raise is less likely to happen because the college wants to save as much money as possible.

According to Runestad, to make decisions about future faculty raises, the college will need to consider different factors such as comparative faculty compensation data from other colleges, recent enrollment figures, consumer price index, and overall budgetary performance.

“In the meantime, we work on the basic financial principle [to increase our revenue and decrease our expenses],” Runestad said. “We build long-term models to help us understand what we see, what we think we see in the future. And if we see things that we want to change, [we will] work on strategies for increasing revenue or [holding] the line of expenses.”

According to Christman, if enrollment increases, faculty raises will likely resume.

“Obviously the faculty would rather have pay raises than not have them, but they understand the conundrum of a budget deficit,” Christman said. “Once we have the right balance of students to faculty and staff, we will have a balanced budget, and pay raises will be introduced again. We are all looking forward to that.”

Swopnil Shrestha (‘21) understands that the college is experiencing a complicated situation and wishes to have more information about it.

“I feel that it is very difficult to decipher what is happening in general with the salary freezes,” Shrestha said. “I have a general sense that it will be equitable and more constructive to the faculty, however, there is a definite lack of information for students. I believe that more information should be available officially about the college’s internal and especially financial processes to students for us to understand the college’s values and sense of direction.”

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