institutionalfinance

Business officers focus on overlap of financial and academic decisions

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As institutions struggle to “do more with less,” business officers' annual meeting focuses increasingly on evaluation of which programs -- including academic departments -- are making and costing money and reallocating from one to the other.

Predicting the decade ahead in financial aid

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A panel of aid directors and experts predicts a bleak future for federal student assistance in the next decade.

Bain Tool Aims to Gauge Colleges' Financial Sustainability

Bain & Co. on Monday published a report and a database that the consulting company says show that a third of colleges in the country are on an unsustainable financial path. The report by the company, which has been increasing its profile in higher education by advising college and university administrations on where and how to restructure their budgets, argues that institutional debt is too handily outpacing revenues and educational expenditures.

 

 

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Colby Trustee Chair Under Fire for Barclays Connection

Protesters gathered on Saturday at Colby College and called for the resignation of Bob Diamond, chair of the college's board of trustees -- and until recently, chief executive officer of the British bank Barclays, which is embroiled in a interest-rate fixing scandal. Diamond resigned from his position at Barclays on July 3, a week after the bank was fined $450 million for attempting to fix the interest rate at which London banks lend to each other (abbreviated Libor) to profit on trading and also to make its borrowing costs look better during the financial crisis.

Protesters also wanted the college to say that millions of dollars in donations to the college came from alleged illegal profits he accrued while at Barclays. According to the Kennebec Journal, Diamond, a 1973 Colby graduate, donated about $14 million in recent years.

Michael Kiser, vice president for communications at the college, said the protesters were allowed to meet in front of the campus's Diamond Building, which was built after Diamond gave $6 million toward the construction of a social sciences and interdisciplinary studies building in 2003. He said the protest was not indicative of the larger Colby community's response to the scandal, adding that some alumni have contacted the college with questions, but not complaints.

Kiser said the protests don't reflect the college's stance, either: "We don't see any change in Bob's relationship to the college," Kiser said. "He's a stalwart alum."

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Deep Financial Problems for Memphis Art College

The Memphis College of Art, a private, nonprofit institution, is experiencing severe financial problems, The Commercial Appeal reported. The college's board has declared financial exigency, laid off four faculty members and announced plans to sell much of its art collection. Officials believe that the cuts have turned things around, and say that the budget is now balanced. But the budget for 2012-13 is down 28 percent from the budget for 2011-12.

 

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Protests Over Layoffs at Coppin State

Faculty members and students this week held a protest at Coppin State University, objecting to what they say are 25 layoffs or non-renewals of staff members this year, The Baltimore Sun reported. Leaders of the protest said that they never were told why layoffs were needed, and are concerned about the elimination of positions at a time that President Reginald Avery has been adding slots to his cabinet. Avery and other university officials declined to comment on the protests.

Young donors need to be reached online and with tangible explanations of impact

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"Millennial" donors need to be reached through online and smartphone-accessible campaigns that provide tangible explanations of what impact their donations will have.

UC-Riverside Trying Again to Open a Medical School

After setbacks last year stopped its plan to open a new medical school in its tracks, the University of California at Riverside is trying again, fresh with non-state funds that it hopes will overcome an accreditor's concerns, the Los Angeles Times reported.

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A business-friendly argument for more government support for higher ed (essay)

Academics have historically balked when confronted with suggestions that the education system is a business and should be treated as such. They speculate that placing a monetary value on an entity with a deep, intellectual purpose diminishes the overall significance of learning. They claim that you cannot quantify the positive benefits of a degree.

But this is not the case. Education, particularly higher education, is a business, and one of the few left in this country that guarantees a positive return. To call education a business isn’t to undermine its importance to our country and citizens — it provides the proof that our higher education systems should be a top priority, if not the top priority, for government spending.

Quite simply, the future of our economy depends on well-educated workers. More than 59 percent of jobs today require some postsecondary education, yet these degrees are becoming increasingly difficult to attain. We must evaluate higher education based on the return institutions generate for the country both in terms of absolute dollars and competitiveness.

Public higher education depends on state and federal budget allocations. We have a choice as to how we distribute these public funds. By continually prioritizing Social Security, health care, and defense spending over education, the government is indirectly hindering an increase of college graduates that our economy so desperately needs. By 2018, 63 percent of jobs will require a college degree, but we are likely to fall 3 million graduates short of what the market demands, according to a recent study.

Today, the federal government spends approximately $30 billion annually subsidizing enrollment in higher education institutions, with most of the money spent on financial aid, and roughly 8 percent going to grants to institutions. According to a Cato Institute Study, the federal government also provides approximately $30 billion to U.S. universities to fund research projects. While these are certainly hefty investments, combined it means the government only contributes 14 percent of the total dollars — $420 billion — that flow into higher education institutions.

Higher education is the best investment we can make for our country’s future. But are we doing enough to support educational institutions and students? Higher education provides annuity-like returns for 40 years — the working years of most graduates. Over the course of an average lifetime, a holder of a four-year-equivalent degree (the weighted average of associate’s, bachelor’s, master’s, professional, and doctorate degrees) gives the government $471,000 in income, payroll, property, and sales tax revenue. You certainly can quantify the value of a degree: that’s more than twice what it would collect in lifetime taxes from a high school graduate lacking a college degree, according to a University of Maine study.

In California, for instance, every dollar the state invests in higher education leads to a $3 net return on investment. The University of California System (UC) contributes more than $14 billion in California economic activity and more than $4 billion in tax revenues each year, not to mention the impact from UC-related spinoffs. Further, the California State System (CSU) ensures businesses get the trained workforce they require — CSUs graduate 45 percent of the state’s computer and electrical engineers. Despite this, the UC and CSU schools have seen a 28 percent decline in state support between fiscal years 2007-2008 and 2011-2012, according to a study done by the Stanford Institute for Economic Policy Research.

Higher education graduates help fuel innovation that creates new jobs. Research universities contribute new technologies — from Internet search algorithms to genetic coding — and file thousands of patents annually. The American Recovery and Reinvestment Act (ARRA) of February 2009 provided some funds for higher education (mainly to prevent states from reallocating education dollars for other purposes). However, these funds are miniscule — less than a percent — in comparison to the total funding for research universities, according to the Washington Higher Education Coordinating Board.

If the government should plateau on its investment in higher education, we’ve raised the risk level of our current investment. When endowments are down and state governments cut funding to state universities, tuition rates rise and the likelihood of students not graduating increases. According to the American Institutes for Research, students who started bachelor degree programs in the fall of 2002 but failed to graduate in six years cost the students approximately $3.8 billion in lost income in 2010 alone.

A recent Inside Higher Ed blog post discusses an interesting approach to lowering tuition costs while increasing the numbers of students able to enroll in universities and earn degrees, using a simple supply and demand model. Approaching the problem from an economic standpoint does not undermine the importance of receiving an education; it highlights its very necessity, and makes it more accessible.

As taxpayers, we need to be asking about our tax dollars’ return on investment. From 1987 to 2006, we doubled federal support for Medicaid in state budgets — increasing these funds from 10.2 percent to 21.5 percent — but decreased federal expenditures for higher education from 12.3 percent of state budgets to 10.4 percent, according to a University of California study.

We need to have a conversation about education similar to the national debate we had about the automotive and financial industries. We should not view education expenditures as discretionary dollars that we can increase and decrease at will, but rather as the most dependable, profitable, and ultimately, important investment our government can make.

Mehdi Maghsoodnia (@mmaghsoodnia) is CEO of Rafter, which provides software tools for cloud-based distribution of course materials. Rafter is also the parent company of textbook rental service Bookrenter.com.

Giving to Penn State Is Second-Highest Ever, but Future Donations Down

Pennsylvania State University fund-raisers took in $208 million in the 2011-12 academic year, the second-most in institutional history, despite spending much of the year wracked in intense controversy related to child sexual abuse charges against a longtime football coach, the Centre Daily Times reported. But pledges and other measures of long-term giving were down, the newspaper reported.

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