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Dartmouth Can’t Afford Solid-Platinum Benefits for Its Employees

Dart Benes Brochure2.jpgI chose to use the adjective solid-platinum to describe Dartmouth’s employee benefits plan because I couldn’t come up with an original modifier that referred to diamonds. But that is where we are. For every dollar of salaries and wages that the College paid out in fiscal 2008, another 43¢ of cost was incurred in benefits expenses (up from 39¢ in 2005).

Put another way: the bite taken out of the budget by benefits is rising: during 2005-2008, while salaries and wages rose 23%, the cost of benefits rose even faster, by 31.7%. In contrast, the CPI was up only 10% during that time.

The College’s 43% figure is virtually the same astounding level of benefits spending that hobbles French companies, but in France corporations have no choice in the matter; the payment of charges sociales is mandated by the state. But Dartmouth has no such excuse, other than the absurd largesse of past administrations that sought to buy popular support, even at the cost of declining educational quality for students.

However, the silver lining in this dark cloud is that the College’s benefits plan can be adjusted without laying off even a single employee. Please take note, President Kim. As the Boston Globe once headlined an editorial that spawned a wonderful vignette: All Must Share the Burden. With some resolute leadership, the College’s benefits package could be pruned, co-pays increased, contributions trimmed, and deductibles hiked — and immense amounts of money saved. For example, last year UNH’s fringe benefits amounted to 32.7% of the total payment of salaries and wages. If Dartmouth had paid out the same percentage in fiscal 2008, we would have reduced our budget by close to $30 million, and thereby plugged more than half of the shortfall that President Kim said on Friday we are facing due to the drop in value of the endowment. Here’s an example of a place to start cutting:

Dart Benes Brochure3.jpg

Now please don’t get me wrong. I am sure that many people and families have enjoyed wonderful counseling sessions on the College’s dime, and they felt much better about themselves afterwards (so no impassioned letters, please); but the College cannot afford this. Not when students can’t get into the classes that they want, and the institution as a whole is bleeding red ink. Choices must be made, folks, and this could be the first among them.

How about adopting the following goal? Dartmouth College should have the very best benefits program among large, private employers in New Hampshire, but no better than the next best big company. We cannot afford to continue the wasteful indulgence that ate up almost $129 million in 2008.

Addendum: It seems that not all of the Ivies employ the same accounting conventions in this area: Columbia, Penn and Princeton do not separately break out salaries/wages and benefits in their 2008 annual reports. However, the other schools in the Ancient Eight do, and the figures give one pause when one looks at the percentage of benefits paid out relative to salaries and wages: Harvard (27.9%), Yale (27.5%), Cornell (24.9%), Brown (26.5%). As we noted above, the comparable figure for Dartmouth was 43%.

Trustee Homework Assignment: For the next Board of Trustees meeting in early November, please bring information about the level of benefits spending for the U.S.-based operations of your own company. I’ll bet that nobody in the room has a company that splashes money around on fringe benefits like our alma mater.

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