institutionalfinance

Conference on PILOT agreements highlights lack of formal policy

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Formal rules surrounding agreements on payments in lieu of taxes are rare, so local politics determine who pays and how much.

Chester College will shut down

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Struggling arts institution couldn't raise enough money to deal with deficit and enrollment decline.

Texas Tops Money-Making Athletic Departments

The University of Texas at Austin's athletics department brought in upwards of $150 million in revenue in 2010-11, more than any other institution and nearly $19 million more than its closest competitor, Ohio State University. The latest annual update to USA Today’s mammoth database on revenue and expenses at institutions in Division I of the National Collegiate Athletic Association notes that just 22 athletic departments are operating in the black. Spending across the 227 public universities for which USA Today could gather data rose by $267 million from a year earlier. (Athletic success at Texas will have some payoff for the institution's academic side, which for the next five years will collect half the profits from its 24-hour cable channel, the Longhorn Network. Last year that amounted to $6 million.) Other top revenue-generating programs include the Universities of Alabama ($124.5 million), Florida ($123.5 million) and Michigan ($122.7 million), as well as Pennsylvania State University ($116.1 million), the Universities of Tennessee ($104.4 million) and Oklahoma ($104.3 million), Auburn University ($104 million) and the University of Wisconsin ($96.3 million).

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Hebrew College Will Keep Its Campus

Hebrew College has abandoned plans to sell its campus to pay off its debt, The Boston Globe reported. The college had planned to move into leased space. But 18 months after announcing plans to sell the campus, the college has managed to reduce its spending on administrative functions, and to attract enough new backing to stay put.

 

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Northeastern U. to Open Graduate Campus in Seattle

Northeastern University on Tuesday officially unveiled plans to open a Seattle graduate campus in September. The Boston-based university last year launched a graduate campus in Charlotte, N.C., and plans to start other campuses in Austin, Minneapolis and Silicon Valley. The Seattle branch will feature 16 degree programs, including cybersecurity and engineering, which will be geared to the city's technology sector. Tayloe Washburn, a local business leader, will be the campus's dean and executive officer.

Pitt Consolidates Administration of 2 Regional Campuses

The University of Pittsburgh is joining the ranks of public universities responding to budget constraints by restructuring how it administers its campuses. The university announced Monday that it would have two of its (five) regional campuses report to a single president, and centralize numerous administrative functions for the campuses. Under the arrangement, the president of Pitt's Bradford campus, Livingston Alexander, will oversee the university's Titusville campus as well, with Titusville's current provost becoming a campus dean (responsible for day-to-day oversight) and reporting to Alexander. The announcement did not estimate how much the realignment might save.

The University System of Georgia is proceeding with a plan to merge several sets of campuses, and the State University of New York System has pushed (with mixed success) to consolidate the leadership over pairs of its campuses as well.

Georgia Perimeter President, Facing Deficit, Steps Down

Anthony Tricoli has quit as president of Georgia Perimeter College, which is facing a $16 million budget shortfall, The Atlanta Journal-Constitution reported. The college is planning to suspend contracts, cut travel and delay hiring, among other steps to deal with the shortfall.

Retrenchment at Sweet Briar

Sweet Briar College, faced with financial difficulties caused by lower than desired enrollment levels, is shrinking its faculty, and eliminating two majors, The Lynchburg News & Advance reported. The college has 605 students, but has room on campus for 750-800. Sweet Briar plans to cut the equivalent of 11 full-time faculty positions (though some of the cuts will be of part-timers), bringing the faculty size down to the equivalent of 85 full-time positions. The majors that will be eliminated are German and engineering management. Sweet Briar has been struggling with attracting more students since 2009.

Boosting higher ed performance without more state support won't work (essay)

The Committee for Economic Development’s (CED) new report, “Boosting Postsecondary Education Performance,” was not written in the spirit of Warren Buffett. Nor of Paul Volcker. More’s the pity. For if the report’s authors had acknowledged that trying to substantially boost performance without boosting investment is an unrealistic business plan, they would have seized the opportunity to change the national conversation to stimulate genuine growth and affordable, quality higher education.

Nevertheless, the CED has performed an important service in three regards. First, the report focuses on “broad access institutions,” which means “less-selective, less-expensive regional public and private colleges [and universities], community and technical colleges, and for-profit colleges.”

Too often, policy makers feature flagship publics, as if our future depends only on them. Research universities are important, particularly in graduate and professional education, creating new knowledge, and in the generally overlooked but essential role of preparing professors, the academy’s producers of value. But too much public policy privileges the already advantaged (compared to access institutions) flagships. Even the Obama administration, which has focused on community colleges, has overlooked four-year access institutions. Yet our success hinges on them.

Unfortunately, the CED report continues some policy makers’ misconstruction of for-profit universities as efficient. It is a false efficiency. As a sector, these institutions are VERY expensive to students and to the government. They have high tuition and they live largely off massive infusions of federal student aid. Disproportionate numbers of their students default on their loans at the government’s, not the corporations’ expense. That is a Wall Street bust model: high fees to average consumers, high defaults on loans for which the government and taxpayers pick up the tab.

A second contribution of the report is in emphasizing the importance of a system focus in state policy making, moving “beyond a one-institution-at-a-time approach to state policy.” Part of that focus is grounded in understanding, in contrast to too many state policy makers, that higher education is a valuable asset, pivotal to our future, not merely a cost to be minimized. With some important exceptions, most states have failed to develop policies that provide an integrated strategy for fostering affordable access to a quality higher education and ensuring a rational division of labor among institutions (a conclusion shared by Laura Perna and Joni Finney’s state policy project). The report could have extended that integration to include K-12 education, and it could have spoken more to articulation/transfer. In calling on business leaders, it could have focused on medium/small business leaders. But at least it got the systemic focus and higher education’s value as a public good right. 

A third contribution, though it likely will be lost in the rush to performance measures and “dashboards,” is the report’s recognition that “There are no proven models of state success in addressing these issues; and for that matter, one size does not fit all.” If state policymakers latch on to that phrase, internalizing the recommendation that “the strategic plan should provide wide latitude for institutional innovation through initiative and implementation,” this will be a major benefit. 

More likely, state policy makers will interpret the report to embrace a simplistic outcome measures-gone-wild approach that leads postsecondary education further down the path of the narrow numbers-blinded, short-term productivity/profit-margin-minded thinking that plagues some sectors of the corporate economy. That approach characterized Wall Street as it sought innovations (e.g., derivatives, subprime mortgages) to boost “productivity.” 

That sort of net-tuition-revenue-maximizing thinking is moving many colleges and universities away from the lower income students who are the country’s growth demographic, in pursuit of students able to pay more, with less financial aid. The CED critiqued this mentality in business, in its report, “Built to Last: Focusing Corporations on Long-Term Performance.” But it offers no cautionary note for higher education.

The new CED report misses a major opportunity to seize the historical moment. The country desperately needs enlightened business, academic, and government leaders to acknowledge that doing considerably more with no more resources is an emperor that has no clothes.

Instead, the report offers “new normal,” magical thinking as realism: “Realistically, however, given the severe budget pressures facing the states, the prospects of significantly greater public funding of postsecondary education in the short to medium term are poor.” It recommends that: “It is critical, therefore, that postsecondary institutions strive to boost their performance through productivity gains and innovation without relying heavily on new money to underwrite improvements.”

New normal thinking is provided despite noting that “public colleges and universities in some states are turning away large numbers of applicants because they cannot provide enough classrooms and instructors to handle them.” The number (about 400,000) in community colleges alone is staggering (see report of Center for the Future of Higher Education). It is provided despite the acknowledged value created by higher education that would justify increased investment. And it is provided despite the fact that the historical higher education transformations it identifies (e.g., land grant colleges, and post-WWII G.I. bill and building community colleges and four-year access colleges) required significant public investment

Although state support is at historic lows, the report suggests the U.S. already spends enough on postsecondary education, citing high average expenditures as a percentage of GDP compared to OECD countries. Yet this average ignores the steeply stratified U.S. pattern, with access universities getting the short end of the stick). The issue is inequity and “growing imbalance,” not inefficiency. The CED report could have called for redistributing appropriations on the margins to favor access institutions. It could have called on states to maintain their level of investment, rather than continuing to hack away at postsecondary budgets in an austerity strategy that undercuts our future. And it could have called on businesses to invest in the limited/nonexistent endowments of access institutions, instead of further feathering the endowment nests of the elites.

Such new-normal advice is ironic coming from a group including corporate leaders from the financial sector and companies serving it. Three-plus years ago, the nation boosted, or stimulated, Wall Street with a bailout that had no strings. Yet the CED’s CEOs’ formula to boost performance on College Street entails no infusion of monies while tightly attaching strings to colleges, though, unlike Wall Street (or Detroit), they have increased their productivity amid, in relative terms, declining state appropriations, downsized full-time faculty, and high demand from students/customers.

Increased productivity trends are particularly evident in broad access institutions. They have re-engineered their production of education: hiring increased proportions of part-time, contingent faculty; extensively using on-line distance education; experiencing record student demand and enrolling most of the national increase in student population, thereby significantly increasing student/faculty ratios. All with less public investment. Access institutions are already doing a lot more with a lot less.

What would Buffett say to the boost-performance-with-less-investment advice? Or Volcker? The time is ripe for an enlightened set of business leaders to take up the mantles of these elder business statesmen. Both have put on the agenda the need for more revenues. Buffett proposes that additional monies should come from the wealthiest Americans paying their fair share of taxes. Volcker has also supported new taxes, but also proposed the “Volcker rule,” restructuring and regulating the financial sector.  

The CED could have proposed two sets of measures. One would increase the tax rate on the wealthy and close tax loopholes benefiting the largest corporations.  The U.S. individual income tax rate for the wealthy is historically low, lower than for middle and working class Americans. Collected corporate taxes (versus the formal tax rate) are also low. Indeed, reports have highlighted the “Dirty Thirty” Fortune 500 companies that pay no taxes (or get refunds), contributing to federal and state budget deficits. The CED could have called for closing tax loopholes that enable companies to pay little or nothing despite increased profits. That might have been hard given that “Dirty Thirty” companies such as G.E., Wells Fargo, Fed Ex, Honeywell, American Electric Power, and Tenet Health Care, are on its board and committees. But it would have been fair.

A second set of measures would restructure the financial sector and higher education’s priorities. In the former, a financial transactions tax could serve as a disincentive to the proprietary trading activities that led to the collapse. Some revenues could be directed to schools and access institutions. In higher education, just as the Volcker rule separates proprietary trading from the traditional functions of banks to protect the core and the customers, colleges and universities should refocus monies on their core, academic functions, to the benefit of students, reversing 30 years of reduced shares of expenditures going to non-educational programs and personnel.

In not proposing such “disruptive innovations,” the CED report guarantees that the system will continue to operate on a C.O.D. basis -- collecting on the delivery of education, from students. That will further shift the burden to middle- and lower-income families, rather than requiring the wealthy and large corporations to bear their fair share of investing to boost access to affordable, quality higher education, for the public good.

Gary Rhoades is professor of higher education at the University of Arizona’s Center for the Study of Higher Education. He also directs a virtual think tank, the Center for the Future of Higher Education.

Rutgers Charges Students Nearly $1,000 Each for Football

Rutgers University charges its students nearly $1,000 each a year -- more than the charges at any other university -- to finance football, Bloomberg reported. The total comes from an analysis by the news service based on student fees and direct university funding for the football program. Officials at Rutgers have said for years that investments in athletics would pay for themselves in the end, but many faculty and student groups have charged that the university spends too much on athletics.

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