By Brett Masters '04

Deerfield's endowments have declined by nearly $50 million since August, 2000, reports the school's Business Manager Michael Sheridan. This decline has occurred in the wake of two years of sagging markets and a lackluster economy that have hurt individual investors and institutions across the board.

Though Deerfield remains financially stable-it finished the 2002 fiscal year with a surplus-it is beginning to feel a pinch. As a result of the decline, the school has cut its operating budget by 2% for the 2003 fiscal year which began in August. Thirty-eight percent of the budget is paid for with endowment income. Last year, Deerfield's operating expenses totaled approximately $30 million.

"We've already begun making cutbacks," Mr. Sheridan said. "And we'll have to make some economies in the future, but it's unlikely they'll be damaging. I doubt very much that students will notice any difference."

Administrators hope to limit the effects of these budget restraints by spreading them across many departments and extracurricular organizations, marginalizing the impact. Budget holders were told in September that they will receive less funding this year. News of the cutbacks at Deerfield comes at a time when many educational institutions are finding themselves strapped for cash. This fall, during what is usually the most important of the fundraising period, Andover, Exeter, Milton and Choate all reported a decline in existing endowments.

In September, Harvard University announced that its endowments had dropped by 4.5% from 2001 levels, the second consecutive year of decline. And reports released earlier this month by Yale and Columbia were similarly bearish, showing a decline in endowment gifts. The Yale Daily News, reporting the drop, cited a climate of financial conservatism stemming from a faltering economy and the recent string of corporate scandals as causing people to hold on to their money.

"There has been no demonstrable effect on gifts to Deerfield, but we don't really know what to expect. Certainly when the market's hot people are inclined to give more; when it's not they're not," said Mr. Sheridan.

Last year, Deerfield received $4,001,072 in gifts from alumni. These were given in addition to fundraising moneys earmarked for special initiatives, like the construction of a new science, math, and technology center.

The uncertain economic climate of recent years has not affected the academy until now owing to the method by which Deerfield and most other schools calculate annual endowment draws. The method applies a five-percent, three-year rolling average to endowment market values.

That means that the amount of money the school can draw from its endowment annually will fluctuate each year based upon the average gain or loss of endowment investments during the three preceding years.

Given the 18%, $50 million decline of the last three fiscal years, Deerfield can expect to have less access to endowment funds until the market, and endowment values, rebound.

This leaves many parents and students with the obvious concern: What does this mean for tuition?

The basic annual tuition (excluding fees) for a boarder at Deerfield is currently $28,000. This is a five percent higher than what parents paid last year ($26,500) a change consistent with past years' increases.

Mr. Sheridan said the cost will probably continue to rise, but notes that Deerfield's tuition is less than that charged by other schools. He also noted that inflation-adjusted tuition at Deerfield has not changed substantially in recent years, and isn't likely too in the future.

"Let me put it this way," Mr. Sheridan said, "when I was a student here... and that was a few years ago... tuition ran about what it cost to buy a good, midsized car. That's still true."