Good morning, and welcome to the All-Alumni Convocation. This is the first year we’ve separated Commencement weekend from Reunion weekend, with the goal of focusing more time and attention on both our graduating seniors and our reunioners. Over three thousand Oles and their friends and families have returned to the Hill to renew their connection to the College and to take pleasure in one another’s company this weekend. I extend to all of you a heartfelt welcome.
In a few minutes we will receive the class gifts from our reunion classes, and that’s always a moving experience. When we make our gifts to the College we express our gratitude for the people and experiences that shaped us while we were students here, for the friendships that began at St. Olaf and have flourished in the years since, for the mission of the College, and for its influence in our lives. A gift to the College is also an expression of faith in the future, a proactive step to ensure that future by supporting the young men and women, Oles, who are going to shape it.
But before we do that, I’d like to offer some thoughts about the state of the College by way of reporting to you, our stakeholders, how we are living out our mission, what results we are achieving, and where we see the College headed.
The most important component of the College is our students; so let’s begin by talking about them. Last weekend we graduated 696 of them, equipped by their St. Olaf education with a base of knowledge, skills and competencies, and habits of mind and heart that will enable them to flourish in the vocations they will discern, the communities in which they will live, and in the families they will form. The most popular major was Biology followed by Mathematics, Economics, Music, English, and Chemistry. The class grade point was 3.37. Thirty-one percent of the Class graduated with honors, and 71 members graduated Phi Beta Kappa. Seventy-seven percent participated in at least one off-campus domestic or international program. Seventy-four percent of the class made their first gift to their alma mater by pledging to the Senior Campaign.
Of the 696 graduating seniors, 635 individuals have told us about their post-graduation plans. 178 will enroll in further education; 146 have accepted an employment offer; 51 will be working full-time in a volunteer or service program; 4 are entering military service; 51 have other long-term plans (e.g., Fulbright fellowships, Rotary scholarships); and 248 are “still working on it.” 110 of our graduating seniors reported a salary for full-time employment. Of those, roughly a third are making over $45,000, a third are making between $45,000 and $20,000, and a third are making $20,000 or less, most of them participating in programs such as Americorps and Lutheran Volunteer Corps.
More than half of our graduates have a path away from the College that leads to personal and professional fulfillment and to financial independence. That’s a very good thing. But a significant number have not yet found that path, and that is a bad thing and it’s not good enough for St. Olaf. We are going to get very good very quickly at assisting students to identify that path and to get on it. Many of you assisted this spring with the Ole Career Network by volunteering to mentor graduates in their job search, helping them network, opening doors for them in your professions, and so on. Thank you for that! Our initiative to grow that program and many others focused on helping graduates move on is called the Main Street Initiative. I encourage you to read about it on the website and I welcome your thoughts about it.
Having said good-bye to the Class of 2011, we’re turning our attention now to welcoming the Class of 2015 this fall. As you know, St. Olaf is a tuition-dependent institution. That means that we rely upon revenue from tuition and fees paid by our students and their families to fund most of our operation. The first, most obvious, and most critical question, therefore to ask about the welfare of the College is whether there is still a sufficient demand for the experience we offer and whether we can generate enough revenue to provide that experience. The answer to both questions is yes. The class of 2015 was admitted from the largest applicant pool in the college’s history — 4,173. We admitted 53 percent of those students, down from 57 percent last year. They come to us from 45 different states and from 24 different foreign countries. Fifty-three percent are from outside Minnesota. This is the most geographically diverse class we have ever enrolled.
Fifty-seven percent of the class is female and 43 percent male, which is a fairly consistent gender split for our college. Fifteen percent of the students are domestic students of color. This is the most diverse class by race and ethnicity that we have ever enrolled. These students bring impressive academic credentials. Their average high school GPA was 3.83. Twenty-two percent of the class presented a perfect 4.0 grade point average. The median high school class rank is the 92nd percentile with 10 percent of the class ranked 1st or 2nd in their high school class. The average ACT is a 29, and the average SAT is 1300.
The class also brings with it characteristics that reflect our heritage, and that is something we continue to value. Over 30 percent are legacy students, which means that they were preceded at St. Olaf by another member of their family — a parent or grandparent, an aunt or uncle, or a sibling. Among those who report a church affiliation over 40 percent proudly proclaim their identity as Lutheran; this also is consistent with previous years.
When all the dust settles, the Class of 2015 will comprise about 760 students. By design it will be about 80 students smaller than last year’s class, largely for two reasons. First, we are on track to experience record retention of first to second year students for next fall. St. Olaf’s first to second year retention rate has hovered in the low 90 percents in recent years, which is high. At present it looks as though that number may rise to 96 percent next fall, which will result in thirty to forty more returning students than we had anticipated. Second, the size of our entering class has exceeded our target for the last three years. So, our campus was already full, and our retention increased, so it only made sense to reduce the size of the entering class in order to keep overall enrollment at a manageable level. “Manageable” here means being able to house our students on campus, to accommodate them in the cafeteria, to preserve small class size, and generally to ensure that students receive the personal attention that is a hallmark of the College.
Even though the first year class is smaller than last year, we will exceed our net revenue target for the coming year. That means we will be able to generate enough revenue from our operations to fund the operating budget that enables us to provide our students the experience that they both expect and deserve.
Let’s turn to that budget. When you step back and consider the cost of the College’s operations as a whole, there are only two numbers that really matter: the cost of compensation for the people — faculty and staff of the College — who provide the St. Olaf experience, and the financial aid that enables students from a broad range of economic backgrounds to attend St. Olaf. Compensation for the fiscal year that began June 1 will cost $65 million or 54 percent of our $120 million operating budget. We will spend $55 million on financial aid.
I want to spend a minute on financial aid to make sure that everyone understands the role it plays in populating the College with students and in the economics of higher education. St. Olaf has, for many years, hewed to the policy that we meet the demonstrated financial need of every student we enroll. If you enroll at St. Olaf, and your family completes the FAFSA, the federal form that is universally used to determine the amount a family should contribute to their student’s college education, we know two things: how much St. Olaf costs, and how much of that amount your family can reasonably be expected to pay. The difference between those two numbers is the amount of your financial aid package at the College. It will be composed of grant, loan, and student work, and the amount and proportion of each may vary from student to student depending upon the family’s circumstances, but the aid equals your need.
Many colleges do not have this same policy. They engage in what is called “gapping.” That is, they determine your need but they offer an aid package that is less than your need. There is a gap that it is up to you to fill any way you can. They are betting that you want to attend their college so badly that you will find a way, somehow, to close that gap.
St. Olaf has chosen not to go that way. We meet students’ demonstrated need, and that is very expensive. As I just told you, it will cost $55 million this year. How does financial aid “cost” a college? The cost to the college comes in the form of a price discount. In other words, most financial aid takes the form of the college simply not collecting that amount of tuition from a student. The result is a drop in overall tuition revenue and, thus, less money with which to support the program of the college. At its extreme, the practice of tuition discounting could result in a situation where you enroll a full class of students but because you have discounted the price so heavily to enable them to attend you cant actually run the college. That’s why the key number to focus on is not actually the number of students you enroll but rather the net tuition revenue you generate.
Of the $120 million in our operating budget for this fiscal year $86 million or 71 percent will be funded by net revenue from the comprehensive fee. Earnings from our endowment, which we value at the end of May at $343 million, will fund 10 percent of the budget; revenue from the bookstore, government grants, and so forth will fund about 15 percent; and the remainder, about four percent, will be funded by gifts to the College.
You know and I know that there is a national discourse about the cost of higher education in America. Families are looking at the cost and wondering how, as much as they believe in the value of a college degree, they can pay for it. Because we are a private, intensely residential college with very high quality programming that is expensive to provide, St. Olaf is priced at the upper end of the college cost continuum. Our policy of meeting the demonstrated financial need of every student we enroll mitigates the cost for families, but there is no doubt that whatever your level of need, and hence whatever your financial aid package, the amount you pay as a family strains your resources.
There are three long-term solutions to this problem. The first, obviously, is to control costs. During each of the last two years we have reduced the non-compensation portion of our operating budget at St. Olaf by relentlessly seeking ways to do more with less. But the plain truth of the matter is that since over 54 percent of our operating budget is spent on compensation, we will never be able significantly to reduce our costs by focusing only on the non-compensation areas of the budget. Significant cost reduction will only come about through collaboration with other institutions to reduce duplication of programs and services, new ways to deliver our program, reconfiguration of our program, or other innovations. Recognizing that the cost of college can’t continue to climb in the next ten years the way it has in the last ten, we are thoughtfully exploring these options.
The second solution is to grow revenue. For us, that means seeking alternate revenue streams, because we are already asking students and their families to provide the majority of our revenue. The College operates a small telephone company that provides us with some revenue; we have entered into an agreement with the Mayo Clinic to lease some College-owned land north of campus for a radiation oncology clinic that they will open later this month; and we are seeking, again thoughtfully, other opportunities to use assets that we have to generate new revenue.
The third solution is to grow the endowment. At $343 million as of May 31, our endowment is at the highest it’s ever been at year-end. But it’s still too small. Indeed, given how the stock market behaved this week, it is already lower than it was on March 31. As I reported earlier, the endowment funds roughly 10 percent of the operating budget. Every new dollar of support from the endowment is a dollar we don’t have to collect from students and their families in order to run the College, so growing the endowment to fund faculty and staff positions and to support student financial aid, our two largest expense items, is absolutely our top priority going forward. I’m pleased to tell you that the overall goal for our Advancement team was to raise $22 million new dollars for the College this year and that they have blown past that goal, raising over $24 million. An additional goal was to add 60 new members to the Manitou Heights Society, our planned giving society, and that goal was met as well. Oles understand the importance of supporting the College, and they are stepping forward to do that.
At its May meeting the Board of Regents adopted a strategic plan to guide the College in the next five years. It’s on the website, and I encourage you to read it in its entirety. The plan identifies three Main Things to focus on. Quoting the Plan, here is the first one: “The excellence of St. Olaf’s academic program, as measured by the academic ability of students it enrolls, the quality of the learning environment it offers them, the accomplishments in teaching and research of its faculty, and the post-graduation outcomes experienced by its graduates, is the necessary precondition to all of its other activities.”
Quoting the Plan again, here is the second one: “The program of the College is built around its residential community that provides students opportunities to learn from each other, to examine and to affirm their values and faith commitments, to develop leadership skills, and to learn to live with others.”
Finally, again quoting the Plan, here is the third: “The College’s aspirations for excellence are absolute, and those aspirations carry a price. However, the cost of higher education in America generally, including the cost of St. Olaf, represents a threat to the ability of students and their families, no matter how willing, to invest in the experience. This challenge must be met head-on.”
These are the areas I plan to focus time and attention on in the coming years. They are core to our identity as a College and essential to the long-term health of the institution. At the end of the day, this all comes back to our students and the experience we offer them. St. Olaf is distinctive in its tradition of combining the highest levels of academic excellence with a fully thought-out and thoroughgoing commitment to its identity as a college of the church in the Lutheran tradition. We continue to offer daily chapel and Sunday worship. Two Lutheran campus pastors minister to the needs of our community and encourage and support students in their faith development. We continue to require each student to take a course in the Christian Bible and a course in Christian theology in addition to an ethics course. And we continue to encourage and support among our students inquiry into what their ultimate commitments will be and how they will live those commitments out in their lives.
Oles leave the campus prepared to be leaders in their workplaces and in their communities. We expect them to both do well and do good, and we prepare them for that result. You are the living proof that we deliver on that aspiration. When this year’s graduating class returns for their 50th reunion — in 2061 — they will look back as you are doing today, whatever your reunion year, on lives well-lived and the experience at St. Olaf that helped prepare you for that life.
David R. Anderson ‘74