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University official cut costs but increased its financial aid

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Steven G. McAllister
Washington and Lee University

It’s easy to forget that institutions of higher education have to meet a bottom line, too, just like any other enterprise.

Colleges and universities were not immune to the many challenges posed by the recent economic downturn.

Steve McAllister, Washington and Lee University’s vice president for finance and treasurer, met those challenges head-on by leading the Lexington school, which was founded in 1749, through an important belt-tightening program.

“Like most colleges and universities, we faced that economic downturn in 2007-08, and that required some significant recalibration of our business model,” says Kenneth P. Ruscio, Washington and Lee’s president, who plans to step down next year and return to teaching after a sabbatical.  “Steve had to really take the lead role in guiding the university through that recalibration. When you lose a fair amount of expected resources in a very short amount of time, you have to quickly make adjustments, and he was able to do that.”

Years before the recession, McAllister had overseen the creation of a reserve fund that would be crucial to the university’s ability to endure the economic turmoil. When the school’s endowment took a sizeable hit from a sharp decline in the stock market, the university was able to borrow from the reserve fund to subsidize revenue.

“It gave us time to go through and be more thoughtful about how and where to make [budget] reductions,” explains McAllister, who oversees a $126 million annual budget. “The university community recognized the challenges and worked to identify areas in the budget that they could reduce without having a negative impact on academics.”

Unlike some other institutions of higher learning, “we were able to keep all of our faculty through the process,” McAllister says. “Through it all, we never cut positions.”

In fact, the university has been able to increase salaries while also boosting financial aid to students. The university has 852 full-time employees, including 301 undergraduate and law school faculty, and 1,855 undergraduate students.

During the recession, McAllister also oversaw a five-year energy conservation program that’s reduced the university’s energy usage by more than 30 percent. The university spent $5 million to increase the efficiency of its heating and cooling systems and made substantial changes in how buildings are powered and climate controlled when not in use. The money spent to make upgrades has since been recouped in lower utility bills.

McAllister’s many responsibilities include management of the university’s endowment that now stands at nearly $1.5 billion, thanks to a recently concluded $542.5 million fundraising campaign. Revenue from philanthropy now exceeds revenue from tuition in the annual operating budget.

The university has been able to eliminate loans from its financial aid packages, helping students avoid graduating with college debt. In fact, no student from a family with income of less than $75,000 has to pay tuition to attend Washington and Lee.

“Through his dedication, hard work, financial expertise and unwavering support of institutional goals, Steve has helped solidify Washington and Lee University’s position as one of the strongest and most efficiently managed institutions of its size in the field of higher education,” Ruscio says. “He represents the best of management in the world of higher education and the nonprofit sector.”

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