In this presentation, the speaker examines Hastings College’s recent financial recovery, highlighting a 43% increase in operating revenue since 2016—placing the college in the 75th percentile among U.S. institutions—while keeping expense growth to only 8‑9%, well below the 22% average. Net tuition revenue accounts for just 33% of total unrestricted operating revenue, with auxiliary enterprises contributing 26% and endowment/investment income 15%. Despite these gains, the college’s endowment has grown only 22% since 2016, well under the national median, due to poor investment returns (average 7% vs. 11% median) and a heavy allocation to underperforming alternative assets. Contributions and appropriations appear healthy, indicating the return shortfall is the primary issue. The speaker recommends that the board’s finance committee scrutinize the endowment investment strategy and consider reallocating away from low‑performing alternatives to improve long‑term financial sustainability.
Chapters
Until that's fixed. Hastings College in Nebraska. So I think this may be one of the cases, Gary, where I really want to focus in and learn about what they did, because this is quite remarkable. They went from being just as bad as Northland, actually worse, and have now— you see this steady increase in net income margin, and now they've had 2 years in a row where it's positive, and that's post-COVID relief. Right. Uh, you know, it's possible I'm missing something here. There could be something artificial, but that doesn't seem likely with two consecutive years and just given the trend here. Um, and then take a look at the graph below. This was a massive endowment draw, but frankly, the— these are low, right? Since then, 2022, '23, and '24, all normal, low, low end of normal endowment draws. So that's not what's pumping this up. Uh, let's take a look and see if we can learn more about how they've dug out of this hole. Uh, do operating revenue and expenses on the two graphs. If I can type. Uh, there it is. Uh, I want to do change since 2016. So we get this scaled right. So you're going to see this. That's a huge growth in revenue, 43%. So that's going to probably be the story, but let's take a look at expenses as well. Okay. Well, two sides of the story here. So a couple of things just to be really quick and make this as easy as possible. Revenue's up 43% since 2016. Excellent. And that's about the 75th percentile. So they've done better than 75% of all schools in the country since then. And notice they've really done a good job of keeping their expenses low as well. Expenses only grew by 8%. 9%, and most schools grew by 22%. All right, and in fact, 22% would have been cool with them as well, right? Um, although they had to dig out of a big deficit, so it probably wouldn't have been cool. Uh, they just barely got out of their deficit with an 8% growth in expenses and 43% growth in revenue, right? This is awesome. This is exactly what we want to see happen. Um, we see way too many of the schools that are struggling just you know, expenses go up faster than other schools. It's completely ridiculous, in my opinion. Yeah. Um, yeah. And I've, so I'll just say I've heard that from the Drew case too. They're, oh, we tried to cut costs. And, you know, I'll just say you didn't try hard enough, right? Because clearly when your expenses are growing faster than your peer set or other schools, you have a problem, right? You just, you're not. Doing a serious, making a serious effort at cutting costs. This is what a serious effort at cutting costs and keeping costs low looks like. See how it stays lower than the growth in the peer set and the median school? That is excellent. And, but if you're growing faster, don't tell me that you've been doing everything you can to cut costs. Okay. All right. So the, let's see what their net tuition revenue is. I'm curious about this. Net tuition revenue. Interesting. Okay, so I just made a post about this on LinkedIn. The problem with focusing just on net tuition revenue is that it's, it could be less than half of the school's revenue, right? And so I think people need to have a better understanding of where all the revenue comes from. And this, in this school's case, they're probably have a big endowment. Let me just take a look. I have, have this in here now. I have shares, revenue shares. So let's take a look at net tuition revenue share of total revenue. I wasn't lying, I've got a lot of stuff in here. It's actually getting a little bit, um, so here it is. Net tuition revenue as a percent of total unrestricted operating revenue. And see this school, this school, yeah, net tuition revenue is really important, but it's only 33% of their revenue. Okay, so it's not the end of the world if their net tuition revenue is flat, especially if they're doing a good job managing their endowment and getting their revenues growing in other areas. Let's take a look at aux. Yeah, um, there you go. I mean, yeah, so they're 26% of their revenues from auxiliary enterprise. That's, uh, like housing, food service, bookstore, stuff like that. Athletic— that does put them, man, at some risk if enrollment goes down because yeah, it'll affect enrollment. Yep. I'd imagine that their investment in endowment income is quite high. Yeah. So they get another 15%, you know, just from their endowments and investment income. And let's just see how their endowment is doing. So this school is lucky to have that. And the great thing about being, having a bigger endowment is that endowments are generally growing. Quite fast. So yeah, it, it may not be the end of the world. Although this is what I wanted to flag. This is really interesting. Their endowment is not growing normally. You see that, Gary? It's only up 22% since 2016. Let's dig into that for a moment because that's unfortunate. If it would have grown normally, they would probably have massive surplus with their current spending rate right now because they're below the 25th percentile right there. Yeah, they're below. This is one of the worst growth rates in the country here for the endowment. So there's a couple of reasons. One is this big draw right here, uh, certainly set them back, put them down here, but they've since still been flat. Um, so there's a few things that'll affect your endowment growth. One is the appropriations. One's the contributions. Let's take a look at contributions. So I have contributions to the endowment as a fraction of your total expenses here. And contributions look excellent, so that's clearly not the case. All right, so appropriations look normal, contributions look normal. What's happening then? The returns must be poor, and that is indeed the case. It may not look so obvious to you, but this is— these are poor returns here, many years of poor returns. We've got a 7% versus a median of 11. We have that one looks normal. This one is basically break even when the median school's got a +2.5. This one is 20 when the median school is 26. That one looks okay. I don't have this data point, but I did check it beforehand. It's below the median again. And then this one's just straight awful, 7.7% versus 11.2. So this school has a problem with their investment returns not being normal. They're low and they need to try to fix it as fast as possible. Unfortunately, they've already sort of been hurt by this significantly. But I would immediately, if you worked on the board finance committee, you need to look really closely at this investment portfolio and try to change it. I double-checked in their audit and you can dig in there. It looks like they have a lot of alternative investment kind of funds, which appear to be not performing very well compared to what other schools are using. So that's
