Auxiliary Services: Where's the Bottom Line?
- By Amy Milshtein
- June 1st, 2002
Which statement is true? A: Auxiliary services profits represent an important part of a school’s budget. B: Auxiliary services must break even or die. C: Auxiliary services’ decisions are based more on student needs and less on the bottom line. Trick question -- the answer is D: All of the above. So why is one school’s “bread and butter” less vital to another? It’s a question of public vs. private.
Public schools depend on their auxiliary services for a constant revenue stream. “We can’t run our operation to break even,” ex-plains Paul Storey, executive director of the Cal Poly Foundation in Pomona, Calif. “After covering our expenses, we have to contribute additional support to the university.”
For example, the Cal Poly Foundation includes running the bookstore, a cafeteria, two franchise restaurants, a conference center, a lodge and “over 21” student apartment housing. The profits these businesses bring in help Cal Poly meet its financial goals -- like funding the construction of a new building. “We were one of the many sources of funds that made construction possible,” says Storey. “We are just as valuable to the school as donors and tuitions.”
In the California State school system, auxiliaries run as a separate, independent corporation. By separating the auxiliaries out, the goals are very clear. “The universities provide education, we provide goods and services,” says Storey. Milk the cash cow too much, however, and it will run dry. “Everything must be in balance,” says Storey. “Prices must be fair and reasonable, or students will choose the pizza place down the street.”
Auxiliary services on the private school side, however, are a whole different animal. As an employee of the well-endowed Pomona College, Neil Gerard, associate dean of students and director of Smith Campus Center and student programs, admits that decisions are based more on student needs and less on the need to generate dollars. “I worked on the public side for a while, and this is dramatically different,” he says. “We still have to make good business decisions, mind you, but they are not focused as tightly on the bottom line.”
Pomona College, located in Southern California, is the oldest of the five Claremont Colleges, which operate as a consortium. As such, they share physical plant costs and a central library, but the campuses operate independently. At Pomona, auxiliary services benefit from the school’s long history and large endowment.
“Our student store and fountain stay open long hours and don’t price items at a full mark-up because they just have to break even,” explains Gerard. “If we had to make a profit, the hours would be shorter and the prices higher.”
Gerard makes another point with the school’s branch of Bank of America. “When I was at the public school, the rent we charged Bank of America was critical to making our profit goals,” he says. Bank of America didn’t mind paying, however, because the school has thousands of students. As Pomona is a much smaller institution, Gerard had to entice Bank of America to the campus with the promise of free rent.
The student union building provides another example. “Public schools often have to rent out space in the union building during the school year,” says Gerard. “While it generates funds, it closes off parts of the building to the students. We only rent out space to conferences during the summer. This way we don’t compete with ourselves.”
And it’s the same story throughout the school. From parking spaces to the washers and dryers, everything is priced to break even. Even “gamer” students get a break. “We have a pinball arcade where every machine is priced at a quarter,” says Gerard. Anyone who has tried his or her hand at Ms. Pac Man lately knows that that price has gone the way of parachute pants and Reagonomics.
However, it’s not all “sweetness and light” at every private institution, according to Gerard. “Many private schools have been forced to merge, while others have just outright gone belly up,” he says. “Some private schools simply have to look to their auxiliaries to do more.”
As an example, he points just down the road to Pitzer College, the newest of the Claremont Colleges. With a campus population of just less than 1,000 students, it is about the same size as the four other Claremont Colleges, but not as well endowed. “Our auxiliaries follow a simple rule, ‘break even or die,’” reports Chris Freeberg, associate dean of students, director of the Grove House and Gold Student Center for Pitzer College.
For instance, Freeberg is presently mourning the loss of the grill/snack bar in the student center. “Even though we weren’t charged for utilities and employed work/study students, the grill just couldn’t sustain itself,” he says.
Students still have the Grove House, Pitzer’s other on-campus restaurant, along with a student center that includes a swimming pool, big screen TV, art gallery and fitness center. “It’s all free to Pitzer students,” says Freeberg. “But we do charge other Claremont Colleges students to use the fitness room.”
Freeberg is reflective about the balancing act that his position demands, “It is nice not to have the extreme pressure of continually meeting a bottom line, yet you are painfully aware of the bottom line because it is never too far away.”
Those in a similar position can take heart in Gerard’s comment. “It’s my personal philosophy that people in higher education work harder when the dollars are short.”