At $166.4 million, Campaign Andover hangs in the balance.
Amid troubled times, the most successful fund-raising drive in private school history nears the finish line. Will what we didn't know hurt us?

by Theresa Pease

They also knew that achieving their goal was not optional. The campaign priorities were designed not to annex frills, but to assure the school’s future security by creating long-term financial equilibrium.

What they didn’t know was that, after years of boom times, the securities markets were about to go on a roller coaster ride, taking the value of the academy’s endowment and the confidence of potential donors with them. They didn’t know the campaign goal would climb by $8.5 million to accommodate a vi-tally important new science center. They didn’t know that as the June 2002 campaign finish date came into view, the nation would be poised on the brink of recession. They didn’t know we would be reeling from an unprecedented terrorist assault that would literally blow Wall Street apart and precipitate the loss of hundreds of thousands of jobs. They didn’t know the United States would be at war.

FIRST THINGS FIRST:
THE GOOD NEWS

Against that backdrop, how are we doing?

Surprisingly well, Campaign Andover leaders agree. As of Sept. 26, the campaign had raised nearly $166.4 million in gifts and pledges. That sum is already well beyond the previous independent school campaign record of $131 million, achieved by New Jersey’s Lawrenceville School in 1997. The Andover tally represents over 83 percent of the campaign’s original goal of $200 million, and almost 80 percent of the expanded $208.5 million goal. What’s more, it reflects unprecedented commitments, including gifts of $10 million or more from each of three alumni: Richard Gelb ’41; Oscar Tang ’56, charter trustee and treasurer of the Board of Trustees; and David M. Underwood ’54, trustee president and chairman of Campaign Andover. Also included are $6 million from Charter Trustee Thomas C. Israel ’62; four gifts in the $2.5 million to $5 million range from Tom Nebel ’49, Donna Brace Ogilvie ’30 and trustees Edward E. Elson ’52 and Stanley S. Shuman ’52; 23 additional gifts of more than $1 million; and nearly 100 gifts between $100,000 and $1 million. Thousands more contributions of all sizes, sent in by alumni, parents, grandparents and friends of Andover, make up the rest of the campaign total. Since the campaign’s start, 64 percent of all alumni have made at least one gift, and records have been broken in annual giving, in reunion class giving, and in parent and grandparent

giving. Because of such generosity, Head of School Barbara Chase wrote in the enclosed Report of Giving, "Andover is a stronger school than it was five years ago."

A SOURCE OF PRIDE

Says Treasurer Tang, who is also a national vice chairman of the fund-raising effort, "I’m very proud of what Campaign Andover has achieved to date."

On the facilities side, a gift from David Underwood enabled Cochran Chapel to be magnificently renovated to increase its seating capacity. The old Abbot Academy campus is resplendent, with its buildings beautifully renewed largely through the generosity of Oscar Tang, and its wrought-iron gates have been rebuilt to perfection thanks to a grant from the Abbot Academy Association. With the help of Laurel and Tom Nebel ’49 and others, new faculty apartments have increased the adult presence in dormitories. New hockey and football facilities bearing the names of former PA hockey coach Ted Harrison ’38 and donor Stanford Phelps, brother of Barry Phelps ’49, are rising above the dust of a construction site off South Main Street. Closer to the heart of things, the Shuman Admission Center, named for benefactor Stan Shuman, welcomes prospective students, and ground work is under way for the construction of a new science center to be named for lead donor Dick Gelb.

Less visibly, millions of dollars have come in to bolster faculty support, student financial aid, campus preservation, outreach programs, technology and other innovations. Indeed, despite the erosion caused by dips in the securities markets, the school’s endowment has swelled from $321 million at the campaign’s start to about $470 million at the start of the current fiscal year.

SO WHAT’S THE PROBLEM?

On the other hand, the campaign is now running about $10 million to $15 million behind where it was projected to be by this date. Further, one gift each of $15 million and $25 million on the so-called "gift pyramid"–a pre-campaign planning chart that projected how Andover would get to its goal–have not yet materialized. To do the job they set out to do, Andover fund raisers will have to bring in a challenging

$42 million in gifts and pledges over the campaign’s remaining months.

So, suppose the campaign doesn’t quite reach the $208.5 million target. What’s a few million dollars among friends?

A few million dollars, Andover’s financial leaders agree, would mean the campaign had

not achieved its goal of creating financial equilibrium–and the opposite of equilibrium is imbalance, for which Roget provides "inade-quacy" as a synonym.

JUST THE BASICS

Inadequacy for what? At the campaign’s start, planners defined financial equilibrium as the ability of the academy to keep tuition increases moderate and preserve the value of the endowment for the benefit of future generations while at the same time reinforcing its key commitments. Those commitments include balancing the operating budget; investing appropriately in the renewal of the academy’s historic and beautiful campus; and safeguarding Andover’s educational leadership by continuing to attract and retain the best faculty and enroll the most capable students.

In other words, simply the basics, according to Chief Financial Officer Neil Cullen. "All the financial modeling we have done over the past few years," he says, "assumes that we are going to meet the goal. Short of eliminating programs to cut expenses, which is clearly something we do not want to do, we have few options. If we don’t make the goal, we will either have to increase tuition more dramatically than we planned or spend more endowment income than is fiscally prudent."

NICKEL AND DIMING IT

In educational circles, the standard is to keep average annual endowment spending at or below the level of average annual endowment return in order to maintain the value of endowment principal. This translates roughly into an acceptable spending range of 4-6 percent of the endowment’s average value over the previous 13 quarters. PA has adopted a specific goal of spending no more than 5 percent of the endowment annually by campaign’s end. Earn a nickel, spend a nickel. If you earn a nickel and spend a dime, you’re depleting the endowment.

In 2000-01, endowment spending was at 5.3 percent. For 2001-02, the academy anticipates endowment spending of more than 5.6 percent. Cullen attributes the backslide to declines in the financial markets and to the school’s growing expenses. Comments Tang, "Phillips Academy has not been spending its funds imprudently; rather, it has been investing appropriately in its people and its program and its campus. Such investments have been rewarded in a record-low admissions rate of 21 percent and a record-high admissions yield of 74 percent, signs of the institution’s tremendous health." Nevertheless, achieving the 5 percent spending goal remains crucial to ongoing equilibrium.

WHAT PRICE GOODNESS
AND KNOWLEDGE?

Some of the expense growth Cullen refers to reflects advances in ongoing costs like faculty salaries and student financial aid. Some, though, represents new initiatives thrust upon the school by circumstance. For example, he says, up until a decade ago, the budget contained no allowance for capital renewal of the school’s buildings and grounds, which were becoming deteriorated. Today, administrators regard the preservation of those assets as not merely a pragmatic necessity, but a sacred trust. What’s more, prior to 1992 the academy had no need to spend money on computers and associated infrastructure costs; Tang likes to describe technology as "a new mouth at the table." Cullen says the budget line items covering campus and technology renewal alone went from zero a decade ago to about $10 million annually today.

"People hear that we have a nearly $500 million endowment, and they think we’re rich. They forget to consider the size of the school and the magnitude of our expenses," he says, noting that, on a per-pupil basis, Andover ranks only fifth in endowment, trailing St. Paul’s School as well as Groton, Exeter and Deerfield academies.

Tang concurs with Cullen’s analysis, and he points out that weakening world financial markets represent a triple whammy for Andover. Not only do they erode the performance of the academy’s endowment and impact the willingness and ability of donors to participate, the treasurer says; they actually increase the school’s expenses by expanding families’ need for financial aid.

HUNTING THE HAIL-MARY
PHILANTHROPIST

What would it take to bring the Campaign Andover drama to a happy ending by June 2002?

"What we need for a successful conclusion to the campaign," projects Tang, "are large gifts from donors who may have been waiting until toward the campaign’s finish to make their biggest commitment. It is my belief that such donors are out there. It is also possible that some donors who made large gifts earlier in the campaign may be willing to step up again to close the gap. If so, it’s time for them to come forward."

Of course, theoretically the goal is achievable even without a Hail Mary pass. Mathematically, $42 million can mean two gifts of $21 million or 21 million gifts of $2. It can mean one gift of $10 million, five gifts of $6 million and 4,000 gifts of $500. Hey, if you’re thinking of gifts in the $4.66 million or $2.34 million range, it can be six of one and half a dozen of the other.

Math jokes aside, the important thing is to marshal the energies of all the academy’s fund raisers, volunteers and friends to get the job done through whatever size gifts can be raised.

Says Cullen, "Without a successful campaign and without a growing stock market, we simply do not have the resources to support our current level of spending."