Whittier’s financing habits: “risky business”?

Lightmary Flores

Two Whittier College students conducted research for a Roosevelt Institute study of 19 colleges, stating the colleges lost a total of $2.7 billion dollars out of their yearly budgets by participating in “risky financial deals.” Among these 19 colleges, was Whittier College.

The Roosevelt Institute is a national student-run policy organization in which student representatives are selected to do research on the financial practices of higher education institutions. 

The research study, “The Financialization of U.S. Higher Education: What Swaps Cost Our Schools,” focuses on the costs of a type of interest rate, known as a swap loan, in the time after the 2008 financial crisis.

Whittier College, like many other institutions, participated in investment rate swaps, which are contracts among educational institutions and banks that will be paid back by the educational institution and are meant to help cover the cost of education. These loans are risky because colleges do not know how the stock market interest value will affect the overall cost. 

The report also found that the educational institutions that were studied all face significant termination fees. This is a characteristic of these loans that gives variable rates to colleges and leaves them to pay significant fixed costs back to the bank. 

According to this study, one of the reasons colleges borrow money using swap deals is to increase the value of education with borrowed money. This is to help pay not only for academic costs but to “try to compete with each other,” in order to nab rich, full-tuition-paying students by building fancier facilities, students centers, and luxurious housing.

According to the Roosevelt Institute report, Whittier College was ranked the least transparent school in the sample, as representatives of the College refused to give Roosevelt-affiliated Whittier College students access to annual financial reports prior to the 2014 to 2015 academic year for analysis. 

After multiple requests for in-person meetings with Vice President of Finance Jim Dunkelman, the audited financial statement for the 2015 to 2016 year was released for this study. “Other colleges have openly disclosed audited financial statements every year,” Hoversten said, and he was curious as to why Whittier did not do the same. 

“Informative studies like these are important because we see that educational institutions like Whittier College should not be investing with money they don’t have because it leads to more investment losses over time,” senior Political Science major and Roosevelt Institute researcher Maxwell Hoversten said. “People are just realizing the risks of these contracts in that there is no way out. To get out of these interest swaps, you have to buy your way out of them, which, for educational institutions, means more termination fees.” 

The Roosevelt Institute was brought to campus by senior and student researcher Maria Rodriguez. Rodriguez was exposed to the organization after interning for the Roosevelt Institute two years ago.

“I am hoping to bring local policy change here to Whittier,” Rodriguez said. “This program helps students engage in policy research and public policy projects regarding economic development, civic infrastructure, public health, and environment in their own communities.”

The organization is endowed by the The Franklin D. Roosevelt Presidential Library and Museum. The library provides training for student participants to help them understand swap bonds and what information to look for, including spending, revenue, swap loans, and termination fees found in audited financial statements. 

Hoversten took initiative in investigating Whittier College’s investment settlements. “What I found in the IRS 990 form for the year 2013 [was that Whittier College] had significant swap liabilities,” Hoversten said. “I also found a report titled: ‘The Series 2008 bonds issued to the City,’ which loaned the College part of this bond money to pay off another bond they received four years earlier.”

Currently, there has been student concern regarding the College’s spending on contracts and new developments, such as the new facilities contract with Flagship Facilities and the large investments into the Science and Learning Center. 

In response to these inquisitions by the students, the ASWC Senate invited Chief Financial Officer Jim Dunkelman to their weekly meeting. 

In the coming few weeks, Dunkelman will be publically presenting the College’s budget breakdown to the ASWC Senate. Students will be given the opportunity to ask questions and see the official numbers for the first time. The date will be announced soon by the ASWC Senate.