Board of Trustees approves budget based on long-term financial issues

In the preliminary tuition and salary budget for the 2014-2015 school year that the Board of Trustees approved Dec. 2, the Business Office considered, in the absence of “noteworthy” concerns, long-term factors like financial aid and the healthcare budget, Chief Financial Officer Rob Levin said.

Levin said it’s preferable for the number of students on financial aid to remain consistent in each grade, but the tuition for all independent schools has grown faster than both inflation and income. This means that the pool of students who apply to Harvard-Westlake without financial aid is shrinking, so more of the students who end up attending the school will need financial aid.

Although this is a long-term factor, Levin said for the past couple of years the school has accepted a couple more students each year on financial aid than usual.

The class of 2014 has a greater number of students on aid than usual, so its graduation “takes pressure off” the 2014-15 budget, Levin said.

However, he said this is counterbalanced by the unexpected number of “emergencies” recently — students whose changing financial situation requires them to obtain financial aid.

“We thought that pace was cooling,” Levin said, after the steep rise of yearly emergencies caused by the recession, but it has risen again, from the low 20s to the low 30s.

In 2008, when the recession hit, the number per year of emergencies grew from eight to 40 students in the 2008-2009 school year.

These events impacted the budget and have driven the percent of students on financial aid from the steady 17 percent the Business Office targets to 18 percent —  maybe 18.5 percent by the year’s end, Levin said.

“We try not to budget based on lumpiness,” Levin said. “We try and smooth things out. We look at the bumpiness in financial aid, we look at the bumpiness in enrollment — the wobble, if you will.”

With Harvard-Westlake’s self-funded healthcare system, Levin said the budget has been cheaper than expected for the past few years, especially since the yearly compound growth rate has been just one percent, a number Levin called “unsustainable.”

After budgeting healthcare at $2.7 million or below since 2001, the Business Office reached a “day of reckoning” last year, hitting $2.8 million.

This year, based on the preliminary tuition and salary budget, the healthcare budget may hit $3.3 million, bumping up the compound growth rate to 3.5 to 4 percent, Levin said.

The preliminary tuition and salary budget also does not break even, Levin said.

“It’s got a small six-figure deficit,” Levin said. “Again, that’s in the context of a $70 million budget [in total for the school].”

“There are no consequences right now, because what are the consequences of a weather forecast?” he added.

More often than not, the preliminary budget doesn’t break even, so this is not out of the ordinary, Levin said.

“Early in the game, we have to be a little pessimistic,” he said.

The only budget in the last 29 years that did not end up running a surplus was from 2008-0209, when the recession hit.

All surpluses go towards the school’s reserves of about $15-20 million, which are used either for planned renewal and replacement of tools like faculty laptops and projectors, or “any sort of surprise,” like an earthquake, Levin said.

The Board of Trustees will release the tuition for the 2014-2015 school year in February.

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