RICHMOND, IN — Earlham College officials are asking a judge to allow the use of restricted Eli Lilly gifts over the years to offset an operating deficit.
In a court petition last month, attorneys wrote that “extraordinary circumstances include the impact of changing institutional leadership on enrollment management and marketing, the impact of COVID-19, and the April 2023 industrial fire in Richmond, Indiana, all contributing to continued declines in enrollments already exacerbated by enrollment declines precipitated by national demographic trends and low college-going rates among high school students in Indiana and the Midwest.”
The private liberal arts college was founded by Quakers, also called Friends, in 1847 and currently has about 600 enrolled students, the court document said.
Pharmaceutical company president Eli Lilly made gifts to the college in 1969 and 1973 and left money in his will. Some of the funds — with a June 30, 2025, market value of about $93 million, according to the document — carried some restrictions.
Lilly had a special interest in supporting religious-based, liberal arts colleges in Indiana, according to Wikipedia, and he supported at least 10 of Indiana’s private colleges, including Earlham.
Indiana law allows an institution to petition a court to modify a restriction “due to unanticipated circumstances,” among other reasons, the document said. The state’s attorney general is also a party to the process.
“Earlham seeks approval to take a special and limited appropriation of up to $40 million above the 5% spending rule … to be spent over the next four years to offset extraordinary circumstances,” the petition said. “The college has identified that it will suffer a $15 million operating deficit during the 2025-26 academic year and up to $40 million cumulative cash flow deficits through academic year 2029-30, which exceeds the amount which Earlham can withdraw above its spending rule as a prudent appropriation” under existing state law.
The trustees adopted a resolution in May directing an operating budget deficit of a “zero or better” cash flow deficit by fiscal year 2030.
About 49% of operating expenses are for employee salaries and benefits, the petition said, and faculty contracts call for severances and notices of up to 15 months for reduction of faculty personnel. “Additionally, should Earlham choose to discontinue under-enrolled programs, it is obligated to teach out students already committed to certain majors.”
The 2025-2026 cost to attend Earlham before financial aid is $71,638, but the college notes about 60% of students receive significant financial aid.
The college, with a new president, “has developed a plan … moving forward which will allow it to return to prudent appropriations in future academic years,” the court document said.
No hearings have been scheduled in the case.
This article originally appeared on Richmond Palladium-Item: Earlham officials seek court approval to tap into Lilly gifts to counter operating deficit
Reporting by Virginia Black, Richmond Palladium-Item / Richmond Palladium-Item
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