Last Chance at Rockford

How a small college fell deeply into debt -- and why a successful academic leader came out of retirement to try to save it.
June 30, 2006

In an era of billion-dollar endowments and campaigns, it's easy to forget that the economics of small colleges can work or collapse on a single decision.

Rockford College is a case in point. A small liberal arts college in a small city in Illinois, it has long had a reputation as a place that takes values seriously, encouraging students to think about social justice and to act accordingly -- like Jane Addams, the college's most famous graduate. But ever since 1984, when the college signed a lease on a campus in London, Rockford has had trouble balancing its books. The British campus was seen as a profit center, but it became a bottomless pit for spending.

For about a decade now, Rockford has had debt in the $10 million range, no endowment to speak of, and enrollment of around 700. With more than $1 million in bills due this summer -- before students will pay tuition for the fall and give the college some working cash -- Rockford could have hit a breaking point. With some help from the state and an interim president who is winning rave reviews, the college will get through the summer -- and some now think it is on the road to a real recovery.

Rockford's fate matters greatly, of course, to its students, faculty and alumni. But the situation in northern Illinois is also being watched by others who consider the outcome important not just for the college, but for its model of education. "There are a lot of little, unique institutions that are vital for their students and their communities, and that provide choices in higher education," says David W. Tretter, president of the Federation of Independent Illinois Colleges and Universities. But some of those that, like Rockford, have fewer than 800 students, struggle and find themselves "on the margins" financially, he said. The question for Tretter and others is how to avoid those margins -- and how to help colleges that find themselves there.

If Rockford's experience shows anything, it may suggest the importance of being realistic whenever someone says some new off-campus program will create a windfall.

Robert Evans, chair of economics and business and a professor at Rockford for 30 years, says he remembers all the promises that were made when the British campus was leased. It would give the college broader exposure. Other colleges would share the space (and the costs of repairs). Revenue would flow in. And by the way, faculty members would have a place to stay in London and reason to travel there.

Some did, Evans says, and not surprisingly, they became fans of the place. But it never took off and all the partnerships and fame never materialized. "It just became the black hole for expenditures," Evans says.

As Rockford tried to improve the run-down facilities in London, it spent more than $5 million on repairs -- not counting millions more in rental fees. Throughout the '80s, spending in London increased, with the college seeing much of its endowment vanish, selling off both land and art, and eliminating some programs -- all in the name of the foreign windfall that never fell. The college also started to take on debt -- $6 million at one point -- to keep things going.

"We consumed our seed corn. We weren't spending on the things that might have helped us grow," says Evans.

By the early 1990s, the college got on a path to get rid of the London obligations, but not the debt. That led to another decade of periodic layoffs, more sales of art and land, more stagnation in planning, and tight budgets -- year after year -- even as no progress was made on the debt.

Of the 30 years Evans has worked at the college, in at least 10, there were no raises at all for professors.

This spring, the college was preparing for a presidential search. Paul C. Pribbenow -- who generally won good points for keeping the place functioning, but less praise when it comes to crafting a long-term solution -- was leaving, to become president of Augsburg College. So not only were bills coming due, and lots of them, but it needed to attract a president.

In some sense, Rockford clearly needs a president pronto. But the board, after consulting with search firms and experts, came to the conclusion that it couldn't attract a good president until the college was on a little firmer ground, and so the trustees asked a search firm to identify candidates for a one- to two-year stint as interim president.

And that's why the Academic Search Consultation Service tracked down Richard Kneedler in Florida in February. Kneedler had no ties to Rockford and had done his time as a college leader, finishing up a 14-year stint as president of Franklin & Marshall College, in 2002. In all, he had worked as an administrator at Franklin & Marshall for more than 30 years.

Kneedler says he initially wasn't interested. He did some Googling and became intrigued by the college. He found  himself admiring its ethos, but thought the financial problems were too severe. When a phone call was set up with some board members, Kneedler says that he thought to himself that there was no way they would be honest about just what dire shape the college was in, and that his excuse for ending the conversation would be their minimizing Rockford's problems. To his surprise, they admitted just how poorly things were going -- and a few more phone calls and visits later, he was packing his bags and driving to Illinois.

Asked to describe what he's been doing in the month since he's been there full time, Kneedler is modest, talking about time spent listening to various constituent groups on the campus and in Illinois. Professors, however, say that he's given them confidence that things are going to turn around. Kneedler helped arrange a deal with the State of Illinois in which a grant of about $500,000 is due to arrive soon to keep the college functioning through the fall. Regular e-mails from Kneedler are keeping people informed of what's going on.

On a longer-term basis, Kneedler has started talks with several colleges in the region, and various government agencies, about different kinds of partnerships. Franklin & Marshall participates in numerous consortia with other colleges in Pennsylvania to obtain economies of scale in purchasing, as well as to share some staffing costs. Kneedler sees those efforts as a model, but he's also floating much more radical approaches as possible solutions for Rockford.

For example, he is exploring the possibility of Rockford following the model of the New College of Florida, which was an experimental private college that -- facing financial difficulties -- became a part of the University of South Florida (while maintaining a separate faculty and curriculum) and more recently became a freestanding public institution. Kneedler's willingness to talk about solutions that dramatic has attracted considerable attention at the college, and some mixed opinions, but he says that he is only trying to show the range of options, and that he would want a solution that would preserve Rockford's character.

"I don't think merger is the right approach as Rockford would lose its identity, but I think partnerships provide a lot of benefits," Kneedler says.

A big part of the problem is size. In recent years, many of the nation's wealthiest and most prestigious liberal arts colleges have been getting bigger -- growing from enrollments in the 1,200 range to the 1,500 range or larger yet.

Kneedler says it is clear that the economics of running a college at enrollment below 1,000 are "a real challenge." (Franklin & Marshall had between 1,700 and 2,000 students during his time there.) "When you are this small, it means that your operating costs -- your 145 beautiful acres, your lovely buildings, all of that, you are spreading these costs over a very small student base." One advantage of partnerships, he says, is that they could add enrollments, while also giving Rockford students exposure to programs the college can't start on its own.

Evans -- who is the faculty-elected representative on the Rockford board -- says that there has been enough communication coming from Kneedler that professors are willing to entertain even dramatic ideas for change. "So far, he's batting 1.000."

For Kneedler, the challenges at Rockford have become important enough that he's happy to be leading a college again. By the time he left Franklin & Marshall, its endowment had increased fourfold during his presidency, to $300 million. What's it like trying to help a college with a larger debt than endowment?

He says it's actually like the beginning of his administrative career, when he was helping senior administrators execute budget cuts and reposition the college. He says he is relying more on his early career than on the financial success of his presidency. "If I'd been at a perpetually rich institution, I wouldn't know what to do now," he says.


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