Pennsylvania's State System of Higher Education is preparing to offer Cheyney University, a financially troubled historically black institution, a $6.5 million line of credit, The Pittsburgh Post-Gazettereported. The university's finances have been in doubt for a number of reasons, including a 36 percent enrollment drop in recent years. The line of credit is believed to be sufficient to help the university manage through early 2016. The university system and Cheyney officials are also working on enrollment and financial plans to give the university more stability.
Two neighboring performing arts colleges -- the Berklee College of Music and the Boston Conservatory -- are exploring a merger, The Boston Globe reported. Berklee, with an endowment of $321 million and more than 4,000 students, is the larger of the institutions. But Boston Conservatory -- with a $15 million endowment and enrollment of 730 -- has some academic strengths not in the broader curriculum of Berklee.
The announcement of the closing of Marian Court College, with faculty disclaimers (“didn’t realize it was as dire as it was,” and the president’s dreaming (“hopeful the college would remain open”), should pull us back to the realities that have been set out very clearly for years -- by the Bain Report, by Clayton Christensen, by Thomas Frey, by Nathan Harden, by dozens of others:
Many, many colleges are working with a business model that simply cannot sustain them, and tinkering around the edges with defective enrollment management software, combined majors, a part-time (as yet unaccredited) M.B.A., or Saturday classes is almost a distraction from the main challenges of shrinking demographics, low-cost online instruction and skills validation, and the imminent tightening of government money that has been pouring into the mix.
The problem is compounded because so many college leaders can barely discern the symptoms of the malaise and are blind to their underlying, rampant and immutable causes. It is only natural that those who have trained to manage the status quo first and foremost long for its return. In no other industry -- with the possible exception of organized religion -- is so much wealth entrusted to people so unequipped to manage it.
The shock is not that the college closed -- it is that no one saw it coming.
But Marian Court was not unique. It was among the country’s vulnerable institutions, and there are hundreds of them: tuition dependent, with enrollments under 1,000, small or shrinking endowments, significant tuition discounts, high admission rates with low yields, and low retention rates.
St. Bridget’s also fits these metrics. It is a private, coeducational, not-for-profit liberal arts college in the Northeastern U.S.: a fictional composite based on real institutions like Marian Court -- some now closed and some that will close, although they don’t know it yet.
What all have in common is the lack of a full grasp of their true financial situations.
As at St. Bridget’s, at many institutions the administration and even the Board of Trustees will claim they did not have all the necessary data and did not recognize the looming threat to the college until it was too late.
And faculty -- who work with research and analysis every day in their professional lives -- may not have asked the right questions, or did not insist on honest and complete answers.
How many could not bear to put aside that tenure-track research on Theosophy or the ring-tail lemur to learn about boring subjects like deferred maintenance, debt overhang and bond interest rates? Surely some were living on hope: “next year our enrollment numbers will be up,” or “we’re in line for that federal grant that will help us attract veterans.”
Others may simply have been in denial. (How many women’s colleges have stated categorically, “We are not like Sweet Briar”?) But questions of financial health are of vital concern not only to presidents and chief financial officers, but to all whose lives are tied to the college. And any lack of focus is doubly distressing because there exist rough but impartial guides and stress tests that are open to all and can indicate, in general terms, a college’s level of strength or weakness.
But until all constituents consider the future of the campus to be their future, we will see more cases -- certainly dozens, probably hundreds -- like Marian Court (and St. Bridget’s). And more academic professionals will be reading untimely and distressing letters like this one:
From the President of St. Bridget’s College to the College Community
Regrettably, I have bad news about the financial situation of our college.
You all know of our difficulties. Reflecting the numbers from earlier years, last year we accepted 75 percent of all applicants, but only 35 percent of those accepted actually matriculated. And we lost 23 percent of those after their first year.In order to attract qualified students to St. Bridget’s, we had to offer discounts averaging 51 percent of tuition and fees.
In spite of our best measures, our enrollment has dropped by 38 percent over the past five years. Nevertheless, the structure of the college remained the same, and we added some administrative positions to stay within best practice and the law mandated from Washington.
When I took office eight months ago I discovered that the college’s finances were not as they had been painted.On the surface, it looked like we were breaking even: just covering our expenses with tuition-derived income.
But we were misleading ourselves.
During our past fiscal year, while the U.S. stock market rose by nearly 14 percent and the average college endowment earned 15.5 percent, the St. Bridget’s endowment showed an increase of only 2 percent.
In fact, we were spending all tuition revenues and nearly all the income generated by the endowment to keep the college operating. For the past three years, as enrollment dropped, we depended on earnings from our endowment in a strong stock market just to stay alive.
We don’t know if the past president understood this, nor do we know if the question was ever raised in a board meeting.
But now the stock market is weakening. As I’d like to think you all know, following five years of nearly free funds, the Federal Reserve has decided to tighten money supply and raise interest rates. The stock market is losing momentum; our endowment is generating a fraction of last year’s income; student loans will become more costly; and even fewer parents are comfortable borrowing $25,000 to $30,000 per year for a St. Bridget’s education.
We now find ourselves with an operating shortfall of nearly $4 million for this fiscal year. We also have bonds coming due in the amount of $1.5 million, and deferred maintenance on our physical plant that will cost upwards of $750,000. If we pay all this out of our endowment, we deplete that fund by more than one-third and severely limit its ability to generate income in the future.
Moreover, within our current structural model it will be impossible to find savings of $4 million beginning in the next fiscal year, in order to urgently balance the books. To accomplish savings of this magnitude will, at very least, require radical and immediate surgery. This would mean:
Eliminating some departments
Eliminating some programs
Cutting administrative staff
Reducing remaining faculty and staff salaries by at least 20 percent
Eliminating all college contributions to retirement and tuition plans
Selling some of the college buildings
Reducing student services
Taken together, these measures might put our accreditation in jeopardy. Our bond rating by Moody’s might drop even lower, and we would be forced to pay higher interest rates to borrow or to roll over current bonds.
It is with this reality in mind that the Board of Trustees meets this weekend to make major decisions that will impact the future of the college. I ask for your support and understanding in these difficult times.
Aden Hayes is executive director of the Foundation for Practical Education.
Columbia University's board voted Monday to divest its endowment from private prison companies, CNN reported. Columbia may be the first American college or university to adopt such a policy. Student and faculty groups have been urging the shift. Columbia has in the past invested in two such companies, although there have been reports that holdings in one company were sold prior to Monday's vote. A statement from the university to CNN said: “This action occurs within the larger, ongoing discussion of the issue of mass incarceration that concerns citizens from across the ideological spectrum. The decision follows… thoughtful analysis and deliberation by our faculty, students and alumni.”
Three women's colleges that accepted students transferring from Sweet Briar College plan to refund the deposits of any student who has changed her mind about transferring now that Sweet Briar will remain open for the 2015-16 academic year.
Hollins University, Agnes Scott College and Mary Baldwin College will each refund enrollment deposits for students returning to Sweet Briar, which on Saturday announced that it is abandoning a plan announced four months ago to close the women's college. At Hollins, 70 students transferring from Sweet Briar paid enrollment deposits for the fall.
"We are in the process of contacting all Sweet Briar students who have enrolled as transfers at Agnes Scott and are offering to refund their deposit if they choose to stay at Sweet Briar," Agnes Scott President Elizabeth Kiss said in a statement. "We remain committed to providing a warm Scottie welcome to all admitted transfer students from Sweet Briar who wish to join the Agnes Scott community."
I confess that, when it came to recreation centers, I was once a card-carrying member of the arched-eyebrow club. In my former position as budget director and later vice chancellor for finance for the Ohio Board of Regents, I had limited authority over campus issuance of new debt for construction. “Tut, tut, tut,” I used to think. “How could the trustees and administrators be so extravagant as to spend money on these luxurious student facilities? Why aren't running, cycling and walking on outdoor paths good enough? Why can't students do calisthenics in their dorm rooms?” (The tuts are added for dramatic effect. I never actually thought these words.)
Fortunately for the campuses and students in public institutions in Ohio, my opinion had little effect on these decisions. In terms of process, the institutions were, like Caesar's wife, above suspicion. The administrations would generally seek and receive approval from students, either through an actual referendum or through student government. Students would usually approve the projects and, most importantly, the new fees associated with them.
At the University of Cincinnati, students approved the immediate imposition of new fees for a recreation center they would never use -- due to the construction schedule -- arguing that previous generations of students had supported existing, older facilities, and that the current cohort of students were in debt for these past sacrifices and investments. The staff of the Board of Regents would review the financial viability of the project, making sure that operations and debt could be financed with the plan submitted by the campus.
I was on a road in Athens -- Ohio, not Damascus -- when I got knocked off of my proverbial ass, discovered the value of these centers and changed my opinion 180 degrees. I visited the Ping Center at Ohio University on a Saturday night. What I discovered amazed me. I found the 168,000-square-foot recreation center filled with hundreds of students, faculty and staff, exercising, competing in recreational and intramural sports, socializing, doing homework in the juice bar, and generally having productive shared experiences in a safe, comfortable and challenging environment.
At a time when binge drinking and obesity are two of the most serious health issues faced by college students, and faculty-student interactions are few and far between, I was impressed with the level and type of unstructured, positive activity I witnessed among students and faculty that night. I assume that recreation centers at other institutions serve similar purposes. In addition, at urban campuses, these centers serve as a magnet on weekends and off hours that bring people, life and income to areas that otherwise would be dark and dead. In a small way, they help keep the city alive.
For someone who is still proud of his education in the liberal arts, it took me a long time to come to appreciate the words of the Roman poet Juvenal: “Mens sana in corpore sano.”
You can look it up on your smartphone, while you're on your stationary bike, at your campus recreation center.
Richard Petrick is the retired vice chancellor for finance of the Ohio Board of Regents.
South Carolina State University's board on Wednesday declared financial exigency, potentially making it easier for the university to eliminate jobs of employees, including faculty members, the Associated Press reported. The university is $20 million in debt. The university received some good financial news Wednesday when a state board gave the university a five-year delay in repaying a $6 million loan. State leaders have repeatedly criticized the financial management of the historically black university. But its defenders have pointed to years of underfunding.