Melissa Roberts & Jake Shuster | The math behind the moratorium
Guest Column | We want to create a culture shift around group spending and debt
October 16, 2012, 11:59 pm·
A cappella shows. Club sports competitions. Debate championships. Student-run publications. These are the activities that make Penn such a vibrant place and the Student Activities Council is the branch of student government that funds them.
Since any change in SAC’s policy reverberates through campus, we want to be as transparent as possible in explaining our recent decision to place a moratorium on new groups.
Few people think financial planning is sexy. Accountants are rarely the protagonists in steamy love stories. Crises, however, are scandalous and draw in readers. At the expense of writing a glamorous article, we’ve justified our moratorium based on simple math.
Each year, SAC receives its funding from the Undergraduate Assembly. Last year the UA was given a 3.9-percent increase in its budget by Penn’s trustees. The UA recognized that SAC is the only branch of government with a constituency that is constantly increasing as new groups are accepted and that our costs increase faster than other branches of student government. The UA worked to allocate a larger chunk of its funds to SAC by cutting other costs in student government and SAC began the 2012-2013 academic year with a 7.5-percent increase in funds.
Despite this seemingly large increase, the costs that SAC-funded groups are incurring are growing faster. When we reviewed SAC’s finances, we found that our performing arts facilities costs — one of our largest costs — were growing roughly 15 percent per year over the last five years.
Our travel costs are growing faster than the rate of inflation. To make matters worse, 49 out of 201 student groups were in debt at the start of this year, which created uncertainty in our financial plans.
From past experience, we know that without a moratorium, the number of SAC groups grows by 10 percent a year, which in turn means greater costs as these newly recognized groups ask for funding.
What do you think? If your budget typically increases at 4.8 percent (the average of SAC’s last 5 years), your costs increase at 10-15 percent and student groups continue to go into debt creating uncertainly — would you confidently extend a permanent promise to new groups? After this question was posed to the SAC general body, made up of representatives from each of the SAC-funded groups, it received an overwhelming, “no.”
SAC decided to implement a moratorium to avoid financial mismanagement. If SAC continues to take on new groups while costs increase at such an alarming rate, we won’t be able to sustain the groups we already have while balancing our budget.
Is this situation ideal? No, of course not. That is why we are working tirelessly to bring down the trajectory of cost increases and hold student groups responsible for their debt, so that we can eventually go back to recognizing new groups while remaining confident in our financial position.
So, here is what we are doing about it.
1. We are reworking our debt policy to ensure that groups will not go into debt in the future. Last year was the first time a debt plan has ever been implemented. While it was disappointing that so many groups went into debt, we have been working closely with groups to get debt repaid.
So far, roughly a third of the debt has been paid back. While repayment is good, we aim to prevent groups from accumulating debt in the first place. This was a trial run and we learned that we need harsher penalties to prevent groups from going into debt, which we will introduce and vote on at the October GBM.
In addition, SAC has implemented a debt alert system that notifies us automatically when groups go into debt, giving us and the Office of Student Affairs greater oversight of group finances.
2. We are partnering with the UA and the administration to address the cost concerns and attempting to get a more substantial budget for the 2013-2014 academic year. We want to slow the trajectory of cost increases so we have greater confidence in our finances. We’re also looking into cutting administrative costs to the lowest possible level.
3. Finally, we are working with the Office of Student Affairs to create a treasurer training program that will prevent similar situations from happening in the future. In addition to creating penalties, we want to create a culture shift around group spending and debt.
If you have any questions or concerns about this, we would love to hear your thoughts.
Melissa Roberts & Jake Shuster are College seniors. Roberts is the Student Activities Council Chair and Shuster is the Undergraduate Assembly Treasurer and a SAC executive member. They can be reached at firstname.lastname@example.org and email@example.com.