Funding the Competition

Campuses in the the University of Arkansas System balk at the idea of paying the startup costs of an online institution that is missing its own fund-raising target and may one day compete for their students.
October 22, 2014
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The University of Arkansas System in March approved the creation of a fully online institution that would spring from the system’s pool of talent and resources. Seven months later, some of the other institutions in the system are balking at the idea of footing the bill for what may become a direct competitor.

eVersity is part of a statewide effort to increase the number of Arkansans with college degrees. Following its anticipated launch in October 2015, the online institution will market itself to adult learners who at one point started college and completed a handful of credits but left before they could earn a degree.

One year away from its intended launch, eVersity is halfway to its fund-raising goal of $10 million. That figure includes $1 million from the system and $2 million from Governor Mike Beebe, which will jump to $3 million if eVersity can secure $1 million in private funds.

At a board meeting last Friday, trustees agreed the remaining $5 million will be covered by a loan -- and not, as some had hoped, by private funds -- but the system has yet to decide where the money will come from.

Over the course of three hours, the board eventually debated three options. eVersity could take out a loan, tack the $5 million onto a bond issued from one of the other institutions in the system, or borrow from the campuses’ reserves -- effectively skimming a couple of percent from each institution's funds. The system, not the campuses, controls those reserves.

While the Arkansas board tabled the decision, several administrators and faculty members in the system now say they see the third option, which has proven divisive, as inevitable. Particularly at the Fayetteville and Little Rock campuses, which already have their own online education offerings, the idea of paying to fund eVersity's startup costs -- or indeed seeing their funds invested in another institution’s priorities -- is facing backlash.

“We don’t know -- if it were to come to pass -- how much would be loaned from [the Little Rock campus] to the system, but I certainly think everybody in academia right now is running a bit lean on extra funds,” said Andrew Wright, associate professor of systems engineering. “We would like to use all our resources to further our campus’s mission. Any diversion of resources means that we’re not going to do something that we otherwise would.”

The debate shows the difficulties large institutions run into when they attempt to launch major online initiatives. While some, like the University of Florida, have received support from the state legislature, others, such as the University of California and California State University, have had to reassess their plans.

eVersity’s backers, vice president for academic affairs Michael Moore and system president Donald R. Bobbitt among them, have long said the institution’s startup funds would come from a number of sources, including the system. The resolution that laid the foundation for the institution also specifies that the funds “shall be constituted from system resources and other sources.”

So far, Moore said, fund-raising from those other sources, namely private sources, is “coming along slowly.”

“One would always hope you would just roll in money, I’m sure,” Moore said. “What we’re experiencing on the foundation side -- which is not surprising -- is that many foundations ... are more willing to fund going to scale than they are willing to fund startup, so they’ve encouraged us to come back at a point in the near future when we have some early results.”

Moore said he was not concerned by those setbacks, and suggested eVersity may only need about $7 million total for its launch. 

“No one is doubting the mission and purpose of eVersity,” he said. “The question is the source of the money. As far as I’m concerned, full steam ahead.”

Some of those present at Friday's meeting expressed concerns that loaning even a little from the reserves could put more pressure on already financially struggling institutions.

“In my 10 years as a trustee, I don’t believe the system has ever used this approach to borrow among the institutions,” said Jane Rogers, secretary of the Board of Trustees. “Our campuses as they stand right now do not have adequate reserves, and that is a little frightening on its own.”

The Little Rock campus, for example, may be the most vulnerable to a successful eVersity. It enrolls the most adult learners out of the institutions in the system, and has in the last few years been forced to respond to shrinking enrollments with budget cuts. This year, as the enrollment of the flagship campus in Fayetteville grew by 2.3 percent, Little Rock saw another year of decline: 5.6 percent.

“To ask to borrow money from them for this endeavor -- there’s no other way to say it than it just doesn’t seem right,” said Rogers, adding that she preferred eVersity take out a loan.

Board chairman Jim von Gremp could not be reached for comment Tuesday.

In practical terms, a smaller reserve means campuses could be less prepared to deal with unexpected expenses like a leaky roof, but “it certainly would not make us financially unstable,” said Joel E. Anderson, chancellor of the University of Arkansas at Little Rock.

More importantly, he said, “eVersity will in significant ways be a competitor to this institution.”

For example, in his presentation to the board on Friday, Moore outlined a “curriculum vision” for a criminal justice program that ranged from a certificate of proficiency all the way up to a doctoral degree. Such a vision may clash with Little Rock, which already offers an online bachelor’s degree program in criminal justice.

“What’s different and certainly gives a number of faculty heartburn on campus is that eVersity will be a new in-state competitor and a sister UA institution that will be targeting a demographic that we serve,” Anderson said. “This will be a competitor that will have a shared brand, be part of the UA System and will be offering these programs at a lower price.”

Moore acknowledged that there may be some overlap between the different institutions in the system, but said eVersity is being built to compete in a different market.

“Very few of our campuses have anything that approaches a robust online offering,” Moore said. “The real competition for us are the out-of-state providers that are coming in here -- for-profits that we’re trying to reach up to.”

The eVersity team has stressed a commitment to frugality. They have pledged that once off the ground, eVersity will neither seek nor accept taxpayer funds. Moore also devoted one-third of his hour-and-a-half slideshow presentation to showing off the team’s humble lodgings in an old cabin, decorated with office furniture from a state surplus store and lighted with chicken coop lights.

“We’re very cognizant that every dollar we spend is passed down to the student,” Moore said. “We’re doing everything we can to bend that tuition curve south instead of north. That was to me the real important story -- not so much about the source of the funding.”

The presentation then moved to a stark white slide, empty except for a faint eVersity logo and the words “INTER INSTITUTIONAL LOAN REQUEST.”

The board is expected to settle on a source for the loan in the coming weeks.


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