A new report from Calvin College’s Financial Review Task Force says the school’s $69.4 million budget gap is the result of construction costs that exceeded expectations by about $31 million.
Calvin’s long-term, $115-million debt exceeds the money in the school’s plant fund, which is designed to pay off the debt, by $69.4 million. An infographic illustrating the problem from the Chimes, Calvin’s student newspaper, appears below this post.
According to a statement from Calvin College president Michael Le Roy, debt of $115 million is “within an appropriate range for colleges of our size and type.”
However, he said the problem is that Calvin has not budgeted for its debt service payment.
According to Le Roy:
Most schools with Calvin College’s financial profile and good credit carry debt service payments of between 5% and 7.3% of their operating budgets. Calvin College’s debt service payments are at about 6.1% now and will grow to 9.2% by 2017 if our revenue holds constant. The problem is that we have not built more than .9% of the debt service payment into our operating budget.
But the other problem is that school’s original plan to pay off its debt with “gifts and investment returns” fell through. According to the Chimes, “Calvin exceeded funding on several building projects and spent $30.8 million more than it raised through fundraising. About half of that $30.8 million came from the construction of the multi-million Spoelhof Fieldhouse Complex completed in 2009.”
The $30.8 million construction spending constitutes approximately half of the school’s overall $69.4 million budget gap. By overspending on construction, the school failed to appropriate budget interest earned versus interest owed, leading to the shortfall.
CT previously reported Calvin’s financial troubles, which prompted the resignation of the school’s vice president of finance last year.
