Paul B. Lasiter


Message from the
Chief Financial Officer

Late last week a higher-education industry research report crossed my desk with the headline, “Weakened Tuition Revenue Plagues U.S. Higher Education.” That certainly wasn’t a pleasant headline for the chief financial officer of Pepperdine University to read, and it evoked a visceral, emotional response.

We don’t use the term plague too often in this modern age. But even with all of the terrible imagery the word plague brings to mind, I also realized that this particular “plague” is probably welcome news to the vast majority of future college students. Why? The plagues of increased competitive pressures, reduced numbers of incoming college students, and increased scrutiny on the value of a college degree are all making it harder for many universities to raise their costs. As a result, in the next few years, it will likely be comparatively easier for students, and harder for universities, to afford the real costs of a college education. In such an environment, continued support from our donors and friends, particularly for student scholarships, will be increasingly important in maintaining and improving the financial health of the University.

Throughout the University, per-student net tuition revenues have increased at an average annual rate of only 2.99 percent during the past five years. As I wrote last year, this low rate of increase has occurred by design. We strive to keep the University’s tuition growth rate as low as possible in order to maintain or improve student affordability. While the gross rate of college tuition increases has been a frequent news headline, the even greater increases in institutional financial aid are markedly less known by the public. At Pepperdine, total student financial aid costs have increased at an average annual rate of 7.8 percent over the past five years. Student aid is the fastest growing expense category at the University, a fact that is likely to continue. During fiscal 2013 we distributed a record $89 million (or about $14,700 per full-time-equivalent student) of University-funded student aid, the vast majority of which is need-based. As a result of our significant investment in student aid, the average annual net tuition cost for an undergraduate education at Seaver College has grown at an average annual rate of only 1.27 percent during the past five years.

In order to increase their rate of net tuition revenue growth, many universities have simply increased their student enrollment base. Here at Pepperdine we have chosen to employ the fiscal discipline necessary to free ourselves from the typical dependency on ever-increasing student enrollment to meet basic operational needs. With sound fiscal management, the University has been able to generate both strong operating and cash-flow margins, while at the same time reducing full-time-equivalent student enrollments from the peak level of 6,363 in fiscal 2004. For fiscal 2013, the University’s full-time-equivalent student base of 6,068 was virtually unchanged from five years ago at 6,055 during fiscal 2008. We don’t measure success by the increasing size of our student enrollment, but through the ways we enrich and encourage every student who enters our care. Our low student-to-faculty ratio and small class sizes are a comparatively expensive way to teach, but we believe that is the best way for our faculty to engage students and help transform their lives.

The University’s endowment funds ended fiscal 2013 at $716 million, nearly matching the all-time high achieved in 2007. Since increasing the level of operating support we receive from the endowment is critical to the future success of the University, we decided to transfer over $51 million of accumulated University reserves into quasi-endowment funds. These funds have been internally committed to long-term investments that will generate increased endowment support to operations for years to come. Even in the wake of the extreme volatility our endowment has experienced over the past five years, the operating support the endowment has provided to University operations has increased every year since 2007 from $26 million to over $33 million in fiscal 2013.

Of all of the plague images that came to my mind, none was more paramount than the sufferings of Egypt’s people under a proud and unmerciful pharaoh. That series of plagues led ultimately to the fulfillment of a promise God had made years before. I am confident that God will likewise fulfill the promises he has made to us as well. Our faith remains in Him.


Paul B. Lasiter's Signature
Paul B. Lasiter, CPA
Vice President and Chief Financial Officer