institutionalfinance

Papers on New Approaches to Higher Ed Financing

The University of Virginia's Miller Center and the National Commission on Financing 21st Century Higher Education this week released four new white papers that describe higher education's fiscal challenges and provide initial solutions.

“The commission is working toward consensus on new policies that have the potential to help the nation meet educational attainment goals,” Juliet Garcia, a member of the commission and a senior adviser to the chancellor of the University of Texas, said in a written statement. “We are exploring how to increase graduation rates with existing resources, and looking for additional public and private financing options to make college affordable and attainable for all students.”

The series eventually will include 10 papers. The first four focus on the outlook for states' spending, transformations affecting higher education, lessons from other countries and best practices in state higher education finance.

Southern accreditor puts five colleges on probation

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The Southern Association of Colleges and Schools has put four small private colleges and one community college on notice, mostly due to financial problems.

U of Wyoming Prepares for Big Cuts

The University of Wyoming announced Friday that President Laurie Nichols plans to declare a financial crisis to speed the process of cuts that officials believe are necessary due to declines in state funding. Nichols plans to identify $19 million in cuts and $6 million in reallocations during the next fiscal year, and an additional $10 million in spending cuts in the following fiscal year.

Search Firm Contracts Aren't What Some Think, Researchers Find

Using a search firm to recruit a new president or provost can cost public colleges and universities the better part of $100,000 -- or more.

Research being presented Friday estimates fees called for under executive search firm contracts with public colleges and universities for the 2015-16 academic year averaged $78,769. Fees varied from a low of $25,000 to a high of $160,000. The estimate is before indirect or administrative fees. Factor in several other fees, and the average search firm contract was estimated as being worth $87,186.

That higher figure still does not quantify other hard-to-estimate costs like reimbursements, bonuses and faculty time, according to James Finkelstein, a public policy professor at George Mason University who is presenting the research on search firm contracts at the American Association of University Professors’ annual conference under the title of “Executive Search Firms and the Disempowerment of Faculty.” Finkelstein’s research used job postings seeking higher education leaders for the 2015-16 academic year, finding 82 out of 106 hunts for leaders used a search firm. Ultimately, researchers received 61 contracts to evaluate through public information requests.

Executive search firms are being used more frequently by universities, according to Finkelstein. But he thinks his research has implications beyond the number of searches or the dollar amounts involved. Outside search firms can directly affect which candidates are being recruited, whether candidates’ needs are being met and how the search process plays out. Finkelstein thinks they are an important topic under university governance.

“Is the use of a search firm, in particular in hiring a president, essentially a governing board outsourcing one of their most important responsibilities?” said Finkelstein, who on Thursday presented another batch of research examining the salaries and benefits public college and university presidents receive.

Under their contracts, search firms are not bound to provide all the services many might expect, Finkelstein said. Of the contracts reviewed, 51 percent included on-list reference check services and 46 percent included off-list reference checks. Some contracts included other due diligence services -- but many of those services came with an additional fee.

Degree checks were included in 23 percent of contracts but could be added for an additional fee in another 20 percent. Media checks were included in 20 percent of searches and could be added for a fee in 2 percent more. Credit reports were included in 12 percent of contracts and available for a fee in 20 percent, criminal record checks were included in 10 percent of contracts and available for a fee in 21 percent, and checks with departments of motor vehicles were included in 8 percent of contracts and available for an extra fee in 16 percent.

Total estimated fees -- including indirect or administrative fees but not other fees like travel reimbursements -- varied widely between two-year and four-year institutions. Fees averaged $53,536 at two-year institutions and $101,607 at four-year institutions. Differences weren’t as pronounced between presidential and provost searches, however. Lumping two-year and four-year institutions together, presidential searches came with fees estimated at an average of $88,194. Provost searches had an average estimate of $84,833.

Most contracts called for calculating fees based on a fixed-price model or a percentage model. The fixed-price model was used in 52 percent of searches, while a percentage of a leader’s base salary was used in calculations in 25 percent of searches. That percentage of base salary used to calculate fees varied from 30-33 percent -- and 22 percent of searches included bonuses in their calculations.

Finkelstein’s research also showed that a majority of contracts, 57 percent, were prepared by search firms, instead of the hiring colleges or universities.

There are backers and detractors of universities using executive search firms. Some have argued that spending on university searches is an investment that pays off, with the right university presidents able to boost donations and improve standings.

Paine College Accreditation to Be Revoked

Paine College faces a recommendation that it lose accreditation for not meeting financial standards, a loss that would make the small private historically black college in Augusta, Ga. ineligible for federal funding at a time when it has already struggled.

The college will appeal the recommendation, it said Thursday evening, according to WTVM. Paine announced its plan to appeal after the Southern Association of Colleges and Schools Commission on Colleges said earlier Thursday that the college had not satisfied deficiencies in three areas, according to The Augusta Chronicle. Those areas are financial resources and stability, financial stability, and control of sponsored research/external funds. Paine has been on probation since 2014.

A loss of accreditation and ensuing ineligibility for federal funds would be a major blow to Paine, which lists its head count at 534 students. More than 95 percent of its students receive financial aid. It has also suffered financial losses in recent years, with The Augusta Chronicle reporting a loss of $2.9 million in assets through the end of 2014 and its draw on a line of credit increasing to $5.4 million. Late in 2015, Paine was unable to make payroll for employees. Early in that year it suspended its football program as it sought to shore up its financials.

President Samuel Sullivan has in recent months pushed to raise funds. But early this week he wrote that the college needed to raise $1 million by June 30 in order to meet immediate financial needs.

Paine will maintain its accreditation and federal funding through the appeal process, it said.

“We are confident that with our submission of additional evidence regarding the strategy to improve financial conditions at the college, our appeal will be successful,” Sullivan said in a statement. “Now, more than ever, is the time for the public to give to Paine College to ensure that the college is financially solvent. As we move forward, we will make adjustments in the college’s budget to reflect the institution’s needs while reducing expenditures.”

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Public university presidents seeing big gains in bonuses, other perks

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New study on compensation for leaders of state colleges and universities finds costs for bonuses and other expensive benefits are growing.

UC Merced Picks Company For $1.14 Billion Expansion

The University of California, Merced, is moving forward on a $1.14 billion campus expansion plan designed to use a public-private partnership to allow the newest campus in the University of California System to grow by 3,300 students.

UC Merced on Wednesday named international investor and infrastructure developer the Plenary Group as the lead developer on a project to increase the size of its campus by 2020. The plan calls for new facilities to be built within a 219-acre site currently supporting the existing campus. Under the public-private partnership, private companies will design and build new facilities, then operate them over a 39-year contract. Funding will include private financing from the developer, money from UC Merced and up to $600 million in revenue bonds issued by the University of California Board of Regents.

The UC Board of Regents approved the project's budget, commercial terms and other major elements in November. It will be reviewing conceptual designs and external financing this summer. Government and other public organizations are increasingly turning to public-private partnerships as ways to finance construction and infrastructure. UC officials hailed Wednesday's announcement as a possible model for the future.

“UC Merced, the youngest campus in our system, is poised to become a model for our other campuses as we look for the most efficient ways to construct, operate and maintain facilities that enable us to pursue our teaching, research and public service missions,” UC President Janet Napolitano said in a statement.

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Grace University Cuts All Salaries by 10%

Grace University, a small Christian institution in Nebraska, is responding to a deficit by cutting all salaries by 10 percent, The Omaha World-Herald. The university is also raising tuition by 7 percent, cutting some student scholarships and eliminating its baseball and softball teams.

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Erskine to explore splitting off seminary

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Erskine, after years of debates over religious issues and academic freedom, may sever a liberal arts institution and a theological one.

U.S. Hearing Explores Impact of Overtime Rule on Colleges

A U.S. House of Representatives panel held a highly partisan hearing Thursday about the impact that the Obama administration's proposed new rules governing overtime pay would have on colleges and other nonprofit organizations. A senior administrator at the University of Kansas was the main higher education witness, arguing that the changes would have a significantly negative financial impact on the institution and other colleges and universities, to the tune of roughly $3 million a year at Kansas.

Another witness, Jared Bernstein of the Center on Budget and Policy Priorities, played down the proportion of higher education employees who would be affected -- and noted that the University of Kansas could cover its new costs with about half of the nearly $5 million in compensation the university pays to its men's basketball coach, Bill Self.

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