As a large, long-term, stable institution, the College has reaped benefits, and it has tried to remain steady throughout the recent dizzying ups and downs of the stock market.
College Vice President and Treasurer Win Johnson listed the growth of endowment investment returns and improved fundraising success -- donation dollars have more than doubled in the past 10 years -- as two aspects of College finances that have experienced the greatest gain.
But a strong economy does present the College, along with plenty of other employers, with a downside -- a disadvantage that accounts for the increase in last year's tuition costs.
"We've had some negative impacts as well," Johnson said.
A low national unemployment rate has made it more difficult to recruit workers for the College, as well as to house new employees. And, according to Johnson, employee compensation, which includes salary and benefits, has risen at a rate faster than the one measured by the Consumer Price Index, which approximates general inflation in the United States.
Approximately 60 percent of the College's budget goes toward compensation of employees.
This accounts for the fact that last year's 3.5 percent increase in tuition costs, though the smallest in 33 years, has reflected growth higher than general inflation.
"We've been criticized for that. I don't think the CPI is a particularly good measure of our cost structure," Johnson said.
Nevertheless, the strong economy has helped the College make great financial gains -- gains that it hopes will help if the economy changes for the worse.
Student tuition is the largest source of revenue for the College, followed by money earned by the endowment, which is a large pool of funds donated for the purpose of providing long-term financial support though investment returns. Currently, the endowment is about 2 billion dollars.
According to Jonathan King, the College's director of investments, 70 percent of the endowment is invested in a diversified portfolio of equities, both domestic and international, as well as in more risky venture capital.
Of the rest, five percent is invested in real estate and 25 percent in bonds.
"We've had outstanding returns on the equities," King said, giving a rough estimate of 15 percent annual return.
Johnson said his office increases the amount of endowment funds used to support the budget by five percent every year, and will maintain that figure whichever direction the market heads.
Endowment spending has not matched the high level of endowment performance in an effort to smooth out the effects of bumpy, unpredictable growth over time.
"We don't believe the recent returns are sustainable in the long run," King said.
However, a theme that both King and Johnson have emphasized, is that, should the period of strong market growth end, the College would see almost no immediate impact.
"We've tried to protect ourselves as best we can," King said, describing the endowment portfolio as being highly diversified and spanning many investment types. "We're long term investors."
In discussing the stock market crash on Friday, in which the Dow Jones and Nasdaq indices lost 600 and 350 points, respectively, Johnson admitted "we lost a lot of money."
However, he made assurances that his office's spending policy is based on a three-year assessment of endowment value, and dips in the market of the nature exhibited last week have no substantial effect on the operation of the College.
According to Johnson, only a long-term period of slow endowment growth would have an impact in the distribution of endowment spending.
Stanley Colla, vice president of development and alumni relations, reiterated the notion that market setbacks have a limited effect on the amount of alumni giving toward the endowment.
"We've had several temporary downturns, but they have usually been countered by a resurgence in the stock market and economy in general," Colla said. "Those temporary setbacks have almost no impact on our giving."
According to Colla, the economy has a larger effect on the size of alumni gifts, than on the number of alumni donors. Another major factor is the positive correlation between the giving of a class during planned reunion years.
The number of gifts in recent years has remained consistent with those of past years, although the amount given has risen dramatically.
In 1999, total private support for the College amounted to 106,893,429 dollars, compared to 47,455,149 dollars in the 1989 fiscal year.
"[This] is both a demonstration of their support for Dartmouth, as well as their comfort with giving away their own resources," Colla said.
He attributed this more than doubling of alumni giving to the strong economy and the "Will to Excel" campaign which ended in 1996.
Some donors choose to give appreciated stock instead of making cash donations. These usually include the larger gifts, for which this type of donation provides a tax benefit.
"I continue to be optimistic that our economy is strong and that our alumni will be supportive of the College," Colla added.
