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OPM — Other People’s Money

The endowment is only part of the story in understanding the College’s fiscal health. To fill out the picture, let’s look at the administration’s borrowing. Of course, debt has its place in financial management — why wait for money to come in when an important project can be built right now. But the temptation to use debt to cover budgetary holes that stem from over-staffing, the over-compensation of employees, and excessive spending, is strong, too. Look at the evolution of debt at the College over the past 26 years: the amount owing on bonds and mortgages today is almost an order of magnitude over what it was in 1990, a period of time during which inflation was 84%.

Dartmouth Debt Growth Comp.jpg

Of course, there comes a point when the party stops. The College lost its prestigious Triple A bond rating in 2009, a move which resulted in an increase in the interest rates payable on Dartmouth’s bonds.

But the administration’s taste for the easy-money party is far from over. This past April the College issued another $250 million of debt, in part to finance the house system.

Another way to look at the issue is to note that while the endowment has increased by approximately two billion dollars since 2000, during that time our debt has climbed by a billion dollars, too, eating up half of the endowment’s gains.

Needless to say, there is another way to finance new projects: cut waste from the budget. Any good business is always finding ways to increase productivity, even as it grows. The College should start doing so now.

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