Multiple media reports appeared last week about the efforts by American cities, backed by their state governments, to lure the merchandizing giant Amazon’s second global headquarters to their regions. The company will entertain proposals until October 19.
Amazon set general parameters and has a history in Seattle that forecasts what mix of opportunities it might seek in this $5 billion expansion that may produce as many as 50,000 new jobs. The stakes are high for the North American cities — including Denver, Minneapolis/St. Paul, Dallas, Toronto, Pittsburgh, Austin, Atlanta, Washington, and Boston — that will likely make serious bids for Amazon.
Boston wins on points for the following reasons:
Boston recently attracted the global headquarters of General Electric into a strong, entrepreneurial, global-based economy.
Boston has a well-connected international airport.
Its winter weather is no worse than what hot and oppressive summers offer in Dallas,
Atlanta, Austin, and Washington.
The Greater Boston economy is healthy and diversified.
Boston operates one of the country’s largest public transit systems, now being upgraded after years of neglect.
It can offer or piece together large tracts of land to create a new Amazon campus near its thriving downtown.
Boston also has a strong sense of self that mirrors the social, psychological, and cultural mix that also makes Seattle so attractive to Amazon. In fact, Boston’s potential is enormous. It ranked third in A. T. Kearney’s Global Cities 2016 Outlook study. This study looked at both a city’s current performance — based on business activity, human capital, information exchange, cultural experience, and political engagement — and its projected success, based on how personal well-being, economics, innovation, and governance have changed over time.
Obviously, the City of Boston and the Commonwealth of Massachusetts have a role to play in the bid for Amazon’s headquarters. It’s complicated politically by the run-up to the 2018 elections and the ability and willingness of some bidders to buy Amazon’s commitment through cash and regulatory and tax incentives.
Massachusetts’ politicians should capitalize on a full range of existing programs and incentives but focus on improvements that would benefit its citizens – especially transit upgrades – to answer local questions about “what’s in it for me” rather than try to outbid others financially.
Amazon’s vision must be tied inexorably to a broader, more encompassing and inclusive vision for New England in the 21st century.
Boston’s Bid for Amazon Must Be Built on its Culture of Innovation
Where Boston truly pulls ahead of potential suitors is on the dynamics of its creative culture. Boston rose into the ranks of global cities because it reinvented itself over the past 40 years, while maintaining a historic commitment to wealth management, defense, insurance, and manufacturing, among other core industries. In the eyes of many, it has become the leading example of an “eds and meds” culture, anchored by global heavyweights like MIT and Harvard.
The foundation upon which Boston’s bid for Amazon must be built is higher education writ large.
New England’s colleges and universities have produced a culture of collaboration, creativity, and innovation that permeates its economy, particularly in biotech and medical research — a culture that matches the creative mix of cities like Austin.
What is different, however, is the depth and diversity of the collaborative culture that took root in New England. There is simply more of the historic ingredients available at a scale, maturity, investment capability, and management expertise than possible among other bidders. Visiting Kendall Square or the Seaport District, you sense it as you feel it.
Higher Ed Leadership Must Step Forward to Make Boston’s Case for Amazon
By challenging local leaders to imagine the possible, my hunch is that Amazon was not looking to extract the most ransom but more likely interested in seeing what creatively might emerge to judge its best fit. And this is where higher education leadership must step forward. Even the strengths associated with MIT and Harvard will not win the bid.
The core argument must be that Boston has produced the best model for nurturing the next creative generation in America. In doing so, Boston must also make the case as the logical choice to set Amazon’s future strategically within a global economy.
It begins with New England’s colleges and universities whose combined size, overall quality, skilled alumni and student bases, regional work ethic, and collaborative integration provide the resources that Amazon needs.
Almost 100 colleges and universities are within a two-hour drive of Boston to nurture this creative energy — a fact unmatched elsewhere in North America.
Beyond a skilled labor force that can be rapidly grown, higher education must offer concrete examples of collaboration that point to innovation and re-imagination. Massachusetts has come a long way from a manufacturing economy once based on shoes, textiles, and machine parts production, banking, insurance, defense, and electronics.
Boston became a biotech powerhouse over the past 20 years, for example, because its leadership – especially in higher education — could imagine the possible.
Higher education is the economic engine that built the booming Boston that we know today. In the end, sometimes money and tax breaks aren’t always enough. In its bid for Amazon, Boston must demonstrate why.
The first indications are in on how the academic year is likely to go. In the pomp and ceremony that surrounds the opening of the school year, deep concerns emerge behind-the-scenes in all but the best endowed institutions as the numbers come in. There are no alternative facts to hide what an institution will face. It’s the “is what it is” moment for America’s higher education.
Colleges and universities have known what the composition of their incoming classes will be since last May when a fairly complete freshman profile emerged. They completed summer renovations on facilities and monitored their multi-year building projects. And they have matched their staff, especially faculty, to the size and needs of the incoming and returning student bodies to keep their student/teacher ratios in line.
But the late summer presents more statistical evidence of what is likely to happen in the coming academic year. The most telling evidence is financial:
What was the summer melt — those who intend to enroll but don’t arrive — of students like?
Did the freshman class meet the enrollment projections?
Did the Office of Financial Aid meet or exceed its budget?
What will federal and state support look like, especially at public institutions?
Were capital projects delivered on time and on budget?
Financial Questions Dominate College Leadership Discussions
Since most colleges are so heavily tuition-dependent, these financial questions increasingly dominate senior leadership discussions each fall.
The cold facts are that colleges are capital-, technology-, and labor-intensive institutions. There is very little discretion available to them in an annual budget.
And the numbers will likely confirm soon that net tuition revenue is essentially flat for yet another year. Further, many of them, including some very good schools, did not meet their internal enrollment projections.
The financial model at tuition-dependent colleges and universities that support their people, programs, and facilities no longer works.
Clearly, higher education is going through a process in which it must reevaluate how to pay the bills. There are ways to put the financial pieces together differently, drive efficiencies and cost savings, and look to outside partnerships to reevaluate how to make the educational enterprise work without destroying the historical foundation upon which colleges and universities are built.
Student Residential “Palaces” Symbolize Excesses of College Spending
One example is the Taj Mahal residence hall. These are often spectacular facilities with amenities that exceed anything that most students – even those sharing apartment rents – will be able to afford after graduation. The “build it and they will come” theory of facilities design and enhancements has serious drawbacks. Its presence draws attention to the inadequacy of the current financial model.
These residence halls symbolize the excesses of American higher education, especially the failure of a college to live within the means that would dampen tuition sticker price increases.
The facts are that it is unlikely that higher education institutions need to put so much cash into development of these student residential palaces. If they do, private developers should bear the cost of their construction, assuming that they can maintain quality and create efficiencies that a college is unable to do using in-house expertise to moderate the cost.
In fact, in many cases colleges should be moving out of the student “hotel” business, using a progressive redesign of their student life program to achieve broader institutional strategic objectives that go beyond these luxurious student residences.
Colleges must also find a way to diminish the need both to treat fully depreciated student housing as a cash cow to shore up their general programming and re-capture much of their upper division students for whom they may not currently provide housing.
Focus on What Students Truly Need in Residence Hall
There are larger questions drawn from these trends. When is more just more?And, what do students actually need?
Let’s assume that students need a residence that has decent square footage and is well-maintained. They should be clean, have adequate electrical capacity for their growing number of technology-related products, quiet HVAC for heating and air conditioning, and private or semi-private bathrooms, depending on the configuration of the facility.
That’s enough. They do not need in-house pools, exercise facilities, cafes, or in-suitelaundry facilities. That’s too much.
Technology, Connectivity Top List of Student Needs
In fact, if a college or university thinks strategically about what tops the list of students needs, they are likely to hear that it is technology – and specifically, connectivity.
The ability to connect to the outside world is the great leveler for colleges and universities that break down the geographic, social, and cultural barriers that all institutions face in different ways.
This is an area of continuing concern on college campuses.It is a particularly serious problem on rural campus where social and cultural options are more limited. Technology is a large, recurring expense for most colleges, especially since demands shift and technology changes with amazing speed.
Solution Will Require Partnerships
The solution will require new and imaginative partnerships among colleges, business and industry and their providers. It may be that fewer dollars – or perhaps more private partnership dollars – can be put into non-core, non-academic facilities like residence halls to pay for other expenses like technology.
Whatever the solution, colleges must think strategically by looking to the consumer demands of their students and less to the mindless “rock wall” amenities of their competitors.
Almost 21 million people attend some variation of a college or university in the United States. For some, the purpose is obvious – to improve their skills, increase their wages, and enhance their marketability in the workforce. But for many – especially those in the traditional 18-22 year cohort – the reasons may not be as clear.
For many of these young students, the goal was to get into college. Most residential liberal arts campuses provide an often bewildering set of opportunities to explore, try out new things, and form or challenge personal assumptions.
Colleges create the opportunity for students to imagine a future — one of the best justifications for the value of a college degree.
In American society, college is the best and sometimes last opportunity for a student to grow within a carefully prescribed set of protected parameters. It can be an idyllic moment when friendships form and core beliefs take hold, free from many of the pressures that will beset new graduates after they enter the job market.
College is also a perfect moment for a student to postpone the future, especially for those who may not have figured their future path. It’s further complicated by the nature of the workforce into which they will enter. College graduates seldom transition into a first job that they will hold until retirement. There’s little chance for a seamless pathway to emerge, no matter how much introspection and reflection occurs in the quiet moments of college life. The global job market changes too rapidly.
In fact, it’s better to prepare generally – acquiring skills that liberal arts training provides – including the ability to speak well, write, apply quantitative methods, use technology, and work in a collaborative setting – than to assume that more narrow training will open the first doors to productive employment. But this reality does not mean that students can hide their head in their books, extracurricular activities, and friendships.
Post-Graduation Outcomes are Where Rubber Meets the Road for Colleges
This is where the rubber meets the road. Colleges do a wonderful job at inputs, likely because inputs prepare students for a successful classroom experience. They are also improving their assessment capabilities, often because of pressure from discipline-based and regional accrediting associations. But they are weakest at outputs – the kind that prepare students to enter the workplace successfully.
Many colleges tout their graduation placement records. They eloquently promote the percentage of their students who find employment and take advanced degree training within six months after graduation.
Graduate placement stats are a good indication of success but imperfect at best. Colleges with professional degree programs like business, engineering, and nursing will logically have higher placement rates because the market aggressively seeks those graduates. Other strong “pre” professional schools that prepare students for advanced degrees in law, medicine, dentistry, and graduate programs like health sciences and public policy may also expect higher levels of placement.
There are two problems with using graduate placement as measurement of success.
The first is that a college or university normally gears its career center toward programs that support employable majors. While there are exceptions, it’s hard to find a college career center that supports humanities majors as strongly as it assists the engineering and business students. Second, the students are not motivated – especially self-motivated – to use college resources wisely or prepare for life after college.
Students Must Take Responsibility for Future Before Graduation
And that may be the next lesson for colleges to learn. Students – soon to be alumni and graduates – must take some responsibility for their own futures. While colleges can provide better tools for graduates in all majors to succeed in their employment searches, the student must also be encouraged to use the four years wisely. It’s imperative in a global market that students prepare for what’s coming.
It begins by encouraging colleges and universities to be more intentional about their student life programs:
What does an institution hope to teach in the thousand teachable moments that occur outside the classroom?
Does it offer a residential life program beyond the classroom and laboratory experience that introduces students to communal living and then encourages progressive choices in a controlled experience to prepare them for independent living?
Students Must Be Thoughtful Advocates for Their Own Futures
Further, should students also be as intentional about their college extracurricular experiences as they are presumably about their academic careers? Some students will have the luxury to seek unpaid internships, externships, and summer employment that prepare them for work after graduation. Others need to work when they are not in school to pay their tuition and living expenses, beyond grants and loans.
Whatever the situation, students can develop an individually tailored strategy that introduces them to the workforce, even if it means only on a volunteer basis.
For students of limited means, having to work can differentiate them from their more fortunate peers as individuals better equipped to be successful after graduation.
Whatever the circumstances, students must learn to use the resources available to them. They cannot put off their future nor be overwhelmed by the challenges it takes to make a healthy career happen. It begins with a thoughtful self-examination and ends with the recognition that they may ultimately be their own best advocates.
Mr. Busteed argued that America’s colleges and universities have traditionally followed the lead of America’s most elite institutions, an approach he argues has produced an “arms race of extensive new facilities, substantial growth in administrative staff, and the expansion of postgraduate degrees and programs.”
Citing the Wall Street Journal, Mr. Busteed reports that these trends caused 30 years of unprecedented growth in tuition rising “more than 400 % since the early 1980s and far outpac(ing) the cost increases of all other goods and services during the same time frame.” Busteed concludes, rightly so, that the pace is unsustainable.
For Mr. Busteed, the solution is for elite institutions to lead in non-elite ways. This does not mean simply ratcheting up financial aid since more aid is not the same as reducing costs. Instead, he asserts: “the real conversation should be about how to reduce the actual cost of college – and that is the difficult conversation higher education leaders don’t want to have.”
His solution is for elite colleges and universities to both talk the talk and walk the walk. Specifically, they should offer “associate degrees, certifications, non-accredited boot camps, employer- or industry-specific workforce programs, and even build…active partnerships with their local K-12 school districts.” He wonders “whether elites will have the foresight and the will to lead us in that direction.”
Change Often Moves at Snail’s Pace Especially at Elite Colleges and Universities
First, Mr. Busteed is right to infer that America’s colleges and universities are often places of cultural inertia. On most college campuses, process overrides other considerations. Shared governance among trustees, staff, and faculty often produces thoughtful change.
But change can move at a snail’s pace, especially at the handful of well-heeled elite colleges and universities relatively unconstrained by financial, political, or cultural pressures.
It’s a kind of “rule by committee” at times in which winning the debate can be as important as settling on the policy direction. The process can look more like the production of sausage even if the end result is appealing.
Less Wealthy Colleges & Universities Often Most Innovative
Second, change is hard. But the advocates for change face unique and idiosyncratic differences on every campus. Rather than argue that less wealthy colleges follow the elites, it may be just the opposite.
Under-endowed colleges and universities are the most willing to make change. Simply put, they have no choice.
These institutions are tuition-dependent and their survival requires some mix of planning, gambling, and luck. American higher education is not a monolithic pecking order in which the less fortunate emulate the wealthy. Those days ended in the last century when financial aid discounting disrupted archaic financial planning models to produce the current financial crisis in higher education.
Third, American higher education is highly decentralized. Expanding graduate and professional degree programs means very different things at a major research university compared to a rural, four-year liberal arts college. Further, colleges identify what they do and what programs they offer by their mission and purpose. Each category – indeed, every college and university – has a different purpose. Not all of them train America’s workforce in the same way or contribute to local and regional economic development in lock step.
Active Community Partnerships are Part of Most Colleges and Universities
Fourth, it is wrong to assert that colleges and universities are failing to build active community partnerships. In fact, most of America’s colleges and universities are eager and integrated community participants, deeply involved in basic education locally, and active in promoting regional, social, cultural, and economic initiatives.
Where would West Philadelphia be, for example, without the decades-long work of the University of Pennsylvania and Drexel University in their local community? There are hundreds of these examples across America.
That’s not to say that America’s colleges and universities must not evolve to match their programs to develop the workforce and assist in economic development based on the pressing needs their regions face.
In fact, the mission and purpose of any institution must always reflect the society that surrounds it. Yet these institutions must also help set the agenda for where society will head.
Colleges & Universities Must Plan Individually and Act Collectively
It’s not enough to follow the trends sanctioned by the actions of elite institutions. It’s critical to have the courage to lead locally based on what challenges face them at home. To do so, America’s colleges and universities must plan individually and act collectively.
Higher education is not a monolithic industry with a defined and inflexible pecking order but a collection of decentralized colleges and universities – large and small – that reflect the genius, strengths, and pitfalls of 400 years of history.
America’s colleges must find new ways — and new words — to describe their importance and differentiate more sharply their contributions to society. But the pronouncements and policies of a handful of elite colleges and universities is only one place among many from which the majority of higher education’s institutions can find and refine their future.
At the annual meeting of the National Association of College and University Business Officers (NACUBO) in Minneapolis last week, there was a good deal of attention paid to how higher education should address the steady decline in support for America’s colleges and universities among consumers (that is, students and families) and key external stakeholders.
Those of us who care deeply about the future of higher education commend NACUBO for working to get in front of this steady erosion in support.
Sharpening the Case for the Value of Higher Education
It’s clear, however, that we have a great deal of work to do to sharpen the argument and make it more relevant to the audiences with whom we wish to engage.
That may be the most important take-away from NACUBO’s discussions: The value proposition for American higher education must reflect the concerns of those who we are trying to convince. It must also resonate with them.
That’s not to say that we should abandon the older arguments. Historically, the most appealing case made by higher education about its value was that America’s colleges and universities produced an educated citizenry broadly prepared to contribute to global society.
Founded and nurtured by the liberal arts tradition, higher education offered more than narrow technical training. Given the rising nationalism and growing tribalism in American culture, this is a critical argument to make.
In fact, it may be the most important argument to make – a foundation upon which a broader case can be built. But laying the foundation is no longer sufficient, although it is essential that the argument on the broader social good of higher education be strengthened and supported.
It makes no sense either to politicize the criticisms of the argument or to cater exclusively to consumer whims, anecdotes, and polling about why higher education matters.
There will always be a subset of arguments about whether or not higher education has been captured by the left. For those who think in political terms, it’s what matters, and sometimes it appears, it’s the only thing that matters.
Economics, Not Politics, Shape Perceptions of Higher Education
There is some merit to these arguments, but many of us do not believe that the broad middle group of educators is narrowly ideological either by discipline or practice. It’s generally healthy to have these political debates, but it will likely be economics rather than politics that shape American perceptions of higher education in the future.
It’s also wrong to build entirely new justifications based narrowly on consumer whims. But this is where additional work must be done. Colleges are tuition-driven by nature and design. The 94 institutions with endowments of $1 billion or higher control nearly 75% of the $529 billion reported by all institutions.
The financial and demographic issues facing most colleges and universities are challenging:
From 2010-2016, the average comprehensive fee (tuition, fees, room and board) rose 43% for private colleges and 68% for public colleges.
Financial aid discounts now exceed on average 50 cents of every tuition dollar received.
Significantly, recent surveys show that 46% of graduates from U.S. four-year institutions have enrolled in community college at some point.
In an era of steady or declining demographics, consumers are voting with their feet. In a new survey, one in eight colleges have had merger, closing, or acquisition discussions internally over the past year.
Despite these challenges, the sky is not falling as some doomsday prognosticators predict. For the moment, American higher education has lost the public relations battle with the outcry over high sticker prices and a one-sided read of employment after graduation statistics.
But the foundation of preparing students for a global society in which students must graduate with a pragmatic understanding of how they can contribute is a good beginning defense of the value of a higher education degree.
On to this foundation must be grafted other justifications, however, that build from previous arguments on value. If the rigors of the 21st century demand creativity and imagination, it will be an evolving curriculum within higher education that will provide the entrepreneurial encouragement and training.
It’s already happening in ways large and small throughout American higher education. It’s why our colleges and universities are the basis for imitation and the envy of the world.
Those who advocate for America’s colleges and universities must find words – sometimes different words — that are neither defensive not outlandish to explain their value. It’s a public relations battle that higher education cannot lose.
In many respects, what a college or university business officer (CBO) thinks about the health of higher education says more about the vitality and sustainability of America’s colleges and universities than the opinions of any other group surveyed. The reasoning is simple: The business officers know where the money comes from and where it goes on a college campus.
Stated starkly, most CBO’s recognize that American higher education is in the midst of a financial crisis that is different and arguably more persistent than the higher education challenges caused by the Great Recession.
Let me be clear. It’s not that the sky is falling. And it’s not that America’s colleges cannot find ways to adapt to changing impacts that detrimentally affect their bottom line. Many would say that they have administrative, programmatic, and institution-wide strategic tools that can help weather the coming storm.
But there is a sense that these options are narrowing, that traditional approaches like belt-tightening may not work fully to offset revenue declines, and that the operating models developed in the last century may not translate to adapting to the pressures building on colleges in 2017.
Inside Higher Ed (IHE) surveyed 409 chief business officers from public, private and for-profit institutions. They weighted their results statistically to produce findings that represented the view of their colleagues nationally.
Higher Ed Budget Officers Less Optimistic About Financial Health
IHE’s Doug Lederman and Rick Seltzer suggested that the sunnier opinions shaping findings of earlier survey years had darkened somewhat. They reported:
“The emerging picture is decidedly less optimistic than that of previous years. This year, 71 percent of chief business officers agreed with the statement that media reports saying higher education is in the midst of a financial crisis are accurate.” This represents an increase from 63 percent in 2016 and 56 percent in 2015.
What’s even more amazing is that only 56 percent of those surveyed agreed or strongly agreed that their institutions will be financially stable over the next five years, declining to 48 percent if the timeline extends 10 years.
Tuition, Fees Are Not Strong Sources of Future Revenue
So, how will spending needs be met in future years? Most chief business officers argue that new revenue will not be found either from comprehensive fee increases, including tuition, or from increases in net tuition revenue.
Lederman and Seltzer reported: “Just over 7 in 10 – 71 percent – agreed that their institutions would seek to increase overall enrollment. Nearly a quarter, 23 percent, said they would try to lower the tuition discount rate, a move that would have the effect of increasing net tuition revenue.”
Is Reallocation of Budget Funds “New” Spending?
The alternative strategy is to reallocate money from within the annual operating and capital budgets. Consistent now over three years, almost two-thirds of the respondents indicated that reallocation was the best source of new spending.
Lederman and Seltzer point out, however, that these findings differ dramatically from the past: “The portion of chief business officers agreeing their institutions will try to increase overall enrollment dropped by 16 percentage points from 2016. The portion saying that they will try to lower the tuition discount rate fell 13 percentage points.”
Arguably, reallocating money and redirecting it to other spending priorities is an efficient use of existing revenue, providing an opportunity to create new efficiencies, new investment strategies, needed program review, and potential economies of scale. It also answers questions about whether higher education institutions take their stewardship responsibilities seriously. And it is sensitive to political and consumer demands.
There are some problems, however, with this approach. College operating budgets carry significant fixed costs, especially in areas such as labor, facilities, and technology. They disproportionately employ white-collar workers who command higher salaries. Indeed, the compensation piece of the operating budget may approach up to 80 percent of this budget at some institutions.
After fixed costs, one of the overlooked facts about higher education is that there is very little discretionary money left. Indeed, many colleges squeezed much of the obvious discretion to handle shortfalls in the Great Recession. There isn’t much easy money left on the table.
Reallocation of Compensation Budget Pits Administration Against Faculty, Staff
Reallocation therefore implies some effort to address revenue shifting from fixed costs. The largest source might be compensation, setting administrators and trustees against faculty and staff. It’s worrisome, especially since the options on where to allocate revenue from have narrowed so dramatically.
There may be alternatives, especially if American colleges are willing to reimagine how they handle enrollment, the performance of underutilized assets like real estate, and their willingness to engage in broad partnerships that extend beyond the college gates. Need, rather than long-term planning, will likely motivate the higher education institutions that move first. But they could quickly become a model for others to follow.
It will be interesting to see if the most at-risk schools become the most nimble, leading higher education in a direction that others who have the luxury of time must ultimately follow.
Ms. Fernandez noted that Merrimack is among a handful of small private colleges that have avoided drastic financial steps, despite changing demographics and the consumer revolt against high sticker prices. She argues that Merrimack’s success is exceptional, especially in the highly competitive admissions market in the Northeast. In fact, Merrimack’s enrollment has increased by more than 60 percent from 2300 students in 2011 to 3,780 students last year. The college expects its second largest first-year enrollment in September.
I should offer a disclaimer that I am a Merrimack graduate and have served both as a trustee and the chair of the Board. But that having been said, what happened at Merrimack is illustrative of the broader changes that must occur across higher education.
Focus on Tech and Health Science Programs
Ms. Fernandez rightly attributes much of the enrollment growth to the College’s determination to aggressively support programs in health science, business, and engineering to reflect the steady growth of these sectors as foundational pillars in the Boston “eds and meds” high and biotech economy.
Fernandez argues that this represents a move away from the humanities toward more practical education that serves the workforce needs of the Boston region.
Sophisticated Financial Aid Model Targets Right Students
Ms. Fernandez also reports that Merrimack has worked extraordinarily hard to develop a sophisticated financial aid model, targeting the right students rather than simply the best scoring ones:
“The effort has become so sophisticated that the College uses an outside consultant and computer algorithms to dole out financial aid, ensuring that students who visit often and want to come to the school get more money, instead of simply offering the biggest scholarships to students with the best grades who are weighing several options.”
The Globe article suggests that the redefinition of the college’s product – in this case, attention to academic program differentiation – enabled Merrimack to emerge from the pack of other good schools working to define their future.
Strategic Allocation of Resources to Boost Enrollment Growth
But the hidden story behind the obvious lessons that Merrimack provides on enrollment growth is that its leadership of trustees, faculty, and administrative staff determined what resources they had to use, where investments made the best sense, and how to tie issues such as enrollment growth to strategy.
It’s much more complicated than what even the most significant financial aid modeling could provide.
The transformation begins with leadership. When Merrimack College sought a new president in 2010, its Board consciously made a determination to seek the right person for that moment in the College’s history, choosing a senior Northeastern University official, Dr. Christopher Hopey, as its new leader. What attracted the search committee to Mr. Hopey was the range and complexity of his experience, a successful track record in growing programs at Northeastern, and a clearly articulated vision of where a tuition-dependent college should head in its service market.
The new president also understood the need to build on Merrimack’s sense of self, appreciated the limits of the cards that were dealt to him, and could execute, assess, and modify the combination of people, programs, and facilities that Merrimack must have to become a sustainable college.
The Board of Trustees also looked hard at itself, determined to keep its noses in but fingers out of the tent. First, the board established what it needed to know and then looked at what it did not know.
The college’s new administration found a rare combination of external in-residence expertise, new hires, and consultants who built from the Augustinian traditions that shaped Merrimack’s traditions, pushing aside the inertia that defines so many college campuses.
Merrimack moved quickly to support its newly differentiated programs. But what’s missing from the Globe article is that while Merrimack ramped up professional programs tied to the regional economy, it remained true to the core tenets of the liberal arts. Students still graduated with an ability to speak, write, apply quantitative methods, use technology, and work in a collaborative setting.
This combination of the liberal arts tradition washing over its professional programs is Merrimack’s equivalent of the “secret sauce” that separates the College from its peers.
Ultimately, the lesson from Merrimack College is similar to that learned from other colleges and universities that took off as they differentiated themselves. Examples include Elon University, SUNY Geneseo, and Cal Poly San Louis Obispo although the circumstances are different on each campus.
The cold fact is that there is no simple strategy to build sustainable growth on a college campus. The solution instead begins with an understanding of who the institution is and how the pieces fit together.
While on the Merrimack campus not too long ago, I ran into the women’s basketball coach – also a former colleague from an institution where we had both worked. Without prompting, she spoke passionately about how she loved working at Merrimack because she felt the momentum that the changes had made possible each day.
That’s the best success metric for any college in the end. The right kind of change builds momentum. You know it when you feel it.
As colleges lay out their strategies to become more sustainable over the long term, there are uncertainties that can dramatically affect their abilities to do so.
Some are programmatic, based upon unpredictable market conditions. Others rely on personnel decisions that shape an institution’s ability to be both flexible and creative. A few involve the maintenance, development, and disposition of facilities that determine the level of debt repayment or depend on endowment returns or fundraising success.
Technology Can Be the Great Leveler – or Not
Imbedded within these nagging uncertainties is the impact that technology will have on an institution. If college administrators guess correctly, technology can be the great leveler that neutralizes disparities in wealth and disadvantages in location.
Technology is also a major recurring expense that can undermine a college’s commitment to other institutional priorities.
Let’s explore one area that demonstrates the complexity of the technology issue – the evolution of the college library.
For decades, most college students, myself included, went to the library because that’s where we found the books that professors demanded we read or research. Freshmen orientation often included the college librarian’s explanation on how to use the card catalogue. We learned how to find books, cite them, and avoid plagiarism. It was, in general, a neat and tidy exercise.
To facilitate library use, colleges dedicated a portion of their annual budget to book and subscription purchases. There were some regular complaints about the rising cost of subscriptions, offset at a few colleges and universities by dedicated library endowments to make these purchases possible. As we moved closer to the 21st century, technology made inroads as the computerization of card catalogues and the first digital subscriptions to academic journals made their appearance.
One of the Three Centers of Campus Life
By then, three centers of campus life had emerged. The first was the library, which remained the beating heart of academic life, even if the parameters governing libraries shifted.
The second was the athletic complex – derisively referred to by some as the “jockplex” – where NCAA or NIAA sports co-existed with health and wellness programs for the campus community as a whole.
The last area was the campus dining center, a kind of communal living room with food.
Of these three centers of campus life, none has undergone a more striking transformation than the library.
The transformation began in part with what seemed to be the radical decision to open a café within the library, often a Starbucks or other chain at larger campuses.
The café transformed the library from its historic perception as a stuffy depository of seldom read books to a welcoming reception area for coffee-addicted learners.
Library as Nexus of Intellectual and Social Discourse
Administrators further reconfigured libraries to provide collaborative working spaces, quiet zones, and common areas that aimed to restore the centrally-located library as the “go to” place for intellectual discourse and debate.
In some cases, the strategy worked. In others, the library became a social hearth space more suited to be seen in rather than to study and learn. But technology was the impetus behind the redesign of libraries across American higher education.
Students studied differently than had earlier generations of library users. Professors adapted pedagogy to account for technological innovation. Somewhere in the midst of these dramatic changes, a new concept of the learning commons emerged.
The Emergence of the “Learning Commons”
A learning commons is not a bad thing and demonstrates that even time-bound institutions like libraries can evolve in a way that better suits how students learn. It reflects core perceptions of the liberal arts, which include that students must understand how to work collaboratively and use technology effectively.
But the accompanying administrative changes had confusing implications for college budgets.
At most institutions, libraries remained places to frequent because that’s where the books are. But for new generations of learners heavily influenced by technology and long since acclimated to different learning styles, the college library became a place to access technology. This raises an interesting question for college strategists.
Is the library budget about books or technology?
The answer is clearly both. In an important way, technology is a great equalizer because colleges can implement technological changes without incurring the competitive and often prohibitive costs for books and subscriptions borne by earlier generations. The implications are enormous for the future of the library in a college learning environment.
We should welcome the emergence of the learning commons. At the same time, we should also recognize that the learning commons of the 21st century grew from the college libraries of earlier generations.
The learning commons have emerged as the next iteration of facilities that shape academic life, but the concept of the library remains at their historic core. There is room for books and technology.
It may be that basic cost efficiencies will define subsequent development. Consortia purchasing and sharing practices may end costly duplicative purchases as library books are warehoused elsewhere and made available on request or disseminated via the Internet. Technology will continue to shape the availability and distribution of journals, newspapers, and related material.
Nevertheless, libraries remain the depositories of our oral and written traditions. They house and protect our collective memory. Whatever the delivery mechanism, cost efficiencies created, and budgetary restrictions imposed, the best-designed learning commons must rechristen libraries as academic hearths that blend books and technology more seamlessly together.
As enrollment continues to soften at four-year residential colleges, college administrators must increasingly justify the philosophies behind and the costs associated with them.
It’s a sad commentary when colleges must defend what was once perceived to be the best justification for students to attend them.
The older argument fell along these lines:
Attendance at a four-year residential college offers students the luxury to explore their interests, grow in maturity, and broaden their horizons.
Residential colleges impose expectations on students. They must learn to live together. They must utilize the dozens of student-organized clubs and activities that can shape their extracurricular experiences to become well educated, committed, and productive citizens.
In short, the residential college supports the academic interests to provide a comprehensive education for their students.
Indeed, many residential colleges do just that. They have a clear focus, mission statement, and governing and operational philosophy. They offer a wide variety of programming and link their residential experience to in-class philosophy and practice.
But as the market softens, there are growing problems with how residential colleges will develop against a backdrop of the mounting pressures on them.
The first pressure is internal. While many colleges have a respectable sense of self, for countless others the student life programs that shape the residential college experience are often a mishmash “cookie cutter” hodgepodge drawn from peer and aspirant experiences that are not explicitly linked to their college’s strategic direction or even a precise program fit.
A review of most residential college literature, for example, seldom produces a clear statement of mission or how students translate their first efforts at interdependence to independence.
What is the seamless path that prepares them to move psychologically, socially, and culturally into the workforce after graduation?
Second, colleges must be judged ultimately by the buy-in their programs receive, especially from students, staff, and faculty. At many colleges, student life programs operate quite separately from the academic programs they should support.
Further, student life professionals lack the level of respect that the faculty enjoys. They are decidedly junior players in the campus pecking order. Senior administrators often see them less as developmental agents and more as some combination of truant officer and baby sitter.
These problems extend to student life professionals’ relationship with the students. In this regard, campus culture can play a large role in how residential life develops.
More progressive campuses involve students in residential life, including in critical areas like discipline. Progressive campuses often have honor codes and student disciplinary boards. But these processes require that campus administrators share power with students. This act can translate into a teachable moment for students on the best-run campuses. And it can also foster the trust and transparency that make good residential life programs better.
Third, the cost of residential life plays directly into the impact it has on campus. A good residential life program is expensive. Colleges that do not take a hard look at their programs also run the risk of adding programs to ensure comprehensiveness while seldom rejecting what no longer works. The result is that many colleges run a much larger offering of programs than is needed. Students should be able to start new programs, especially when the costs of the proposed program is prioritized and matched to the available resources. But in the end a residential life program is a rationing tool.
As such, residential life administrators can support any program that they choose but not all of the programs that students want. This is where strategy comes into play.
There must be a clear sense of direction, an ability to execute and assess, and a strong connection to the academic programs to determine whether the teachable moment provided by residence life staff meets the academic standards espoused by the college. There must be synergy between student life and the academic programs in a residential setting.
The best educational strategies balance people, programs, and facilities. A residential life program is also an open invitation to intersect the needs of the college with those of the community. In a fully integrated strategy, the social, cultural, wellness, human rights, and philanthropic initiatives supported by residential life programs are grounded in the neighborhood, town, and region. They share common purpose and direction. They avoid duplicating facilities.
In an era of diminishing resources, a robust residential life program is essential to a college’s identity. But if its purpose is unclear, its detractors will take advantage to open residence life to debilitating cutbacks.
The solution begins with a deeper commitment to the four-year residential college. It starts with a reaffirmation of why the residential learning experience defines them and who and what they teach. Their renewed commitment must establish metrics that shape each of the four years in a student’s life, linking the programs to critical outcomes like retention and graduation rates.
A residential college is an expensive way to educate students. Yet for many students, it is the transformative experience of their lives. Its advocates must shepherd its programs into responsible and cost-effective alignment to demonstrate to families as consumers — without apology and with considerable pride — that “you get what you pay for.”
Athletics contribute enormously to college life. They provide a unifying force across the campus community in which the college’s principal stakeholders – faculty, students, staff, alumni, parents, donors, and the community – can rally with pride in support of the institution.
Athletics are often the public face of a college. At the largest institutions, this can sometimes create special risk – think Baylor and Penn State – but for the most part a robust college athletics programs delivers far more than it risks.
Too Often College Sports are Separate and Unequal
Too often athletics can be its own fiefdom. There are times when trustees and donors step across a bright red line in the sand to put athletic interests above the academic program. The faculty are often divided over their benefit, seeing athletics as a competing interest for student time and attention. If college governance works, many of the problems emerging from athletics can demonstrate how a college that typically operates with the complexity of a small city works out the pressures of competing interests amicably.
The role of athletics can take on a very different meaning, depending upon the campus. At the largest NCAA Division I schools, the stakeholders treat sports as the defining factor that shapes their loyalty to the university. They see student athletes as budding national sports figures, at least in their premier sports programs. In many cases, these students stand apart from the rest of the student body and are often treated accordingly.
In Division II and III, student athletes are more like the general student body, but they also play a critical role albeit one with less frenzy and hoopla. One of the best-kept secrets at smaller Division III schools, for example, is that athletic programs can not only improve diversity but also directly affect the gender balance of an incoming class. Maintaining a large football roster, for instance, can offset the skewing toward women who matriculate in greater numbers than men at small liberal arts colleges.
Higher education leadership must make a decision on where administratively to house sports. Their decision is colored by how they see the contribution of athletics to student life.
College Athletics Must Be Aligned With Student Life
However athletics fit into the organizational chart, sports programs must ultimately be seen as the most valuable asset – linking the college’s stakeholders together – in the student life arsenal. But it is critical to break up the athletic fiefdom, even at the risk of trustee and donor angst, to align sports with student life.
The biggest problem is that athletic programs can’t meet their “all in” expenses. Most estimates suggest that only one in eight athletic programs support themselves. This issue will become increasingly important as the pressure to look for internal savings grows as the economic model that shapes a college’s operating budgets moves toward collapse.
How can colleges justify high tuition sticker prices, rising tuition discounts, and decreasing net tuition revenue while continuing to bankroll a wide variety of costly sports programs?
Dispelling the Myth that Athletics Can Bankroll a College
One answer may be to rethink how colleges finance athletics. The sports program costs a lot, especially if scholarships are provided and the college makes heavy investments in people, programs, and facilities to recruit and compete. The costs also increase with NCAA reporting and compliance requirements. Finally, the college, especially at the Division I level, must run almost two programs simultaneously – a competitive program for Division I athletes and a general recreational, health and wellness program for the general student body. The costs in duplicated facilities can be enormous.
Colleges Must Get a Handle on How to Finance Athletics Programs
The bottom line is that we must work to get a handle on how to pay for the costs of college athletics. It is pointless to fight an open battle to reduce the number of college sports, since each finds a committed constituency. But there can be expectations placed on how a college or university runs its sports program and pays its bills.
First, not all sports are equal. It is possible to run a tiered competitive program that allocates resources based upon the importance and level of investment required for each sport while still meeting Title IX guidelines.
Athlete Recruitment Must Be Integrated into Enrollment & Financial Aid Strategies
Second, athletic recruitment must not be a stand-alone operation but fully integrated into enrollment and financial aid strategies. If done correctly, the recruiting and student financial aid packaging can neutralize the overall cost of sports on a campus.
Athletic Facilities Should Be Considered Investments in Community
Third, colleges and universities must see their facilities as community investments. In some cases among sports in lower ranked tiers, it is possible to utilize existing community facilities in their regions. In other cases, these facilities can be designed as public-private partnerships. Whatever the solution, they must not tie up a college’s debt capacity unless this investment makes sense as part of a larger comprehensive solution. Indeed, the development of new athletics facilities is an important opportunity to attract micro-targeted donor interest in a college.
In the end, colleges and universities searching for efficiencies must look at athletics. It must be accomplished with an eye to strengthening a sustainable sports program. But done correctly, it may also be the best way to preserve the role of athletics in student life.
The range and scope of academic programs in higher education has become increasingly complex. New programs emerge almost daily to adjust to consumer demands and workforce needs. Applicants can easily become confused as they attempt to judge quality, complexity, cost, and a return on investment.
The result is often a mishmash of academic offerings developed upon a foundation that no longer seems to be built upon bedrock principles.
What is the purpose of a new program offering?
Is it a response to workforce demands?
Does the program emerge from a particular academic strength for which the college or university is noted?
Do the outputs – notably an education path that leads to a productive life – match the potential of the program?
These questions mask a transition that now faces American higher education. Consumer demands and expectations shift depending upon factors that go well beyond the academic program. One of the most notable shifts since the Great Recession has been the consumer attention paid to why students choose majors in employable fields. The best example is the effort to develop public policy to promote education in STEM fields.
By itself, choosing a STEM field is an admirable decision. America needs more scientists, mathematicians, and engineers. The jobs often pay well, and STEM graduates contribute enormously to the common wealth.
But the country also needs social workers, poets, and museum curators. For America to prosper, its policy makers must not pick winners and losers, narrowly choosing economic benefit and workforce development in key fields over breadth and the social good in American society.
America is only great when it is as complex as the problems that it faces and the potential that it promises to those who seek a college degree.
This is where American colleges and universities receive a failing grade. It is ludicrous and shortsighted to expect that colleges should adopt a mindset that effectively says, “build it and they will come.” (Apologies to “Field of Dreams.”) To do so would presume that American families understand what colleges do, how they educate, and why they exist.
For many families, a college education is simply a pathway to a good job. In the last century, this argument was sufficient and filled seats when demographics and government policy worked in favor of college admission practices.
College Admissions Now a Marriage of Academics and Business
These days are gone. College admissions has become a marriage of academics and business, introduced by the admissions office through marketing and communications strategies and tactics. Critics will complain that education is a business. They believe that this business mindset is the root cause of many of higher education’s problems.
But others will point out that those families who pay steep tuition prices – tuition discounts disguised as scholarships notwithstanding – have every right to understand more about what they are buying.
College Marketing Fails to Differentiate Academic Programs from Competitors
What is most lacking on this issue is clarity – or expressed differently – a coherent and compelling academic marketing strategy. The problem begins with how colleges market their academic programs. While there are innumerable exceptions that display creativity and focus to lay out quality indicators and outcomes expectations imaginatively, most are described by worthless four-color brochures that fail to differentiate how their program differs from those of peer and aspirant institutions.
Academic Programs Without Direct Career Outcomes Often Given Short Shrift
It’s a shame because there are many outstanding academic programs that receive scant attention after the deals struck among the promotional efforts of marketing, communications, admissions, financial aid, and academic leadership. It’s easy to promote management, nursing, or engineering because these academic disciplines are linked to employment outcomes that are easily understood by consumers.
If a college or university offers a comprehensive field of academic programs, however, it is equally critical to think imaginatively about how students in fields like English, history, and sociology will be shaped by the unique quality of the academic program that they will consider.
Faculty are Keepers of the Higher Education Flame
The answer to “why us” in a particular field begins by emphasizing the quality and creativity of the faculty. The faculty are the keepers of the flame, outlasting students, administrators, and trustees in tenure. This means that faculty must be chosen well and resourced sufficiently.
But the defense of any academic program to a broader constituency must go well beyond dollars to explain what contributions an academic program makes to learning, how it fits into a broader curriculum, and why its presence is important among the academic disciplines offered.
We can predict that as the business of higher education and academics continue to be intertwined, there will be growing calls to defend the size of upper division classes, the amount of money appropriated, and the number of majors graduated in a particular discipline.
Before we get there as a society, however, it is critical to build a case for the academic programs that a college supports by explaining what’s unique and special about them. It may turn out that differentiation communicated through better marketing aligns best with a college’s mission and consumer interest.
A hotly debated topic making the rounds in higher education now is whether American colleges and universities – public and private – face a round of mergers and acquisitions over the next several years.
There are a number of reasons that the discussion of this topic had gained momentum.
Tuition discount rates are creating revenue squeeze for colleges
First, many colleges, especially small private colleges, are seeing their tuition discounts — now at 50% on average for every tuition dollar received — rise while their net tuition revenue remains flat or continues to fall. In fact, there are some colleges where the tuition discount now approaches 70 percent.
Financial health of many schools is questionable
Second, federal composite credit scores, which reflect the overall relative financial health of institutions along a scale from -1 to 3, have shown a good number of institutions to be in questionable financial health. A score greater than or equal to 1.5 indicates the institution is considered financially responsible. Colleges with scores of less than 1.5 but greater than or equal to 1.0 are considered financially responsible, but require additional oversight. These schools are subject to cash monitoring and other participation requirements.
The Chronicle of Higher Education reports that 177 degree-granting private colleges failed the U.S. Education Department’s financial-responsibility test, which seeks to quantify the financial health of proprietary and nonprofit institutions, for the 2014-15 academic year. That’s 18 more than failed the year before.
Further, of the 177 failing institutions, 112 (63%) are nonprofit and the rest are for-profit. For the previous year, 58 percent of the 159 failing institutions were nonprofit.
Third, Moody’s has revised its outlook for U.S. four-year higher education to stable from negative, reflecting the expectation that the sector’s business environment will neither erode significantly nor improve materially in the next 12-18 months. Until this latest ratings change, higher education had received a negative rating since January 2013.
Moody’s rating suggests that higher education is at best treading water and not in a robust recovery from the impact of the Great Recession.
Fourth, there is growing anecdotal evidence of a struggle over financial health. Nearly four of ten private colleges reported that they still had available seats in their upcoming admissions class last year. On the public side, some states are considering closing or merging small and underperforming (often rural) campuses. The number of students entering community colleges is also dropping. Years of underfunding public sector institutions have produced problems like the collapsing infrastructure and structural deficit issues at respected institutions like UMass Boston.
In addition, much of the public discourse over projected closures like Sweet Briar College, failed merger attempts, and persistent rumors of financial distress continue to feed the higher education gossip circuit.
The cumulative effect is to pit trustees, staff, faculty, students, and alumni against one another as the blame game over failed efforts at transparency and worse indications of poor stewardship shake higher education’s foundations.
Free tuition at public schools could be detrimental to private institutions
The newest wrinkle addresses the likely impact that variations in the free public tuition proposals might have in the 35 states where such proposals have arisen. In New York, for example, a number of private college and university presidents with whom I have spoken recently wondered what will happen when the state uses the program to encourage New York State families to vote with their feet for four-year public colleges. The impact on the state’s private and community colleges could be detrimental, lasting and severe.
There’s little question that American higher education is now going through a period of chaos and uncertainty that is upsetting the otherwise glacial pace by which higher education has historically evolved.
But history also tells us that there have been at least two other periods characterized by the same level of disruption. In each case, higher education grew and adapted but did not suffer from an agonizing collapse. It is possible to imagine the possibility and to see the potential amidst the chaos, even if some of it is self-inflicted.
Disruption in higher education may spark creative, positive change
And perhaps this is ultimately the point. Higher education will need to change the way that it operates. Leadership at all levels must modernize and re-think financial models, operating principles, and governing structures. It is likely that American colleges and universities will not be able to rely on traditional state and federal partnerships in the way that they have in the past.
It is essential that institutions begin to imagine broad cooperative efforts that cut across rigid but now outmoded divisions as “public” and “private,” research and teaching, and two-, four-, and graduate-level institutions. Education must be a seamless, lifelong pathway.
The most important change will be to build an aggressive, unapologetic defense of what higher education represents, why what it does is important, and how its colleges and universities contribute in unique ways to American society.
Disruption makes anything possible. Now is the best time to think about how to manage this disruption rather than simply react to what’s coming.
On June 1, President Trump announced that he was taking the United States out of the Paris Climate Accord, making the U.S., Syria, and Nicaragua (which felt the deal was not sufficiently ambitious), the only nations not to support the agreement.
The Paris Agreement sets a series of goals and is voluntary by design. Its value principally is that the agreement got everyone to the table to work on a pressing global issue that crossed national boundaries and directly impacted the quality of life on the planet.
Predictably, there has been a sharp reaction on both sides. Mr. Trump’s critics object to the use of discredited “doomsday” data to justify the American exit. His supporters argue that it was a job-killing “bad deal.” When asked the generic question about whether they were concerned about climate change, over 70 percent of Americans believe that it is a challenge that Americans must face. But differences in opinion emerge as the implications for the American consumer and taxpayer become clearer.
Higher Ed’s First Climate Leadership Conference was 10 Years Ago
The leadership in American higher education has taken a stand on climate commitment for more than ten years. The American College & University Presidents’ Climate Commitment (ACUPCC) emerged when a group of presidents meeting at Arizona State University sent a letter to almost 400 of their colleagues to join them. By June 2007, the ACUPCC, with a signatory group of 284 higher education leaders, went public with the first Climate Leadership Conference. By 2010, there were 697 higher education institutions in all 50 states and the District of Columbia as signatories. Collectively, they represented 5.6 million students.
Higher Education Leaders Encouraged Support of Initiatives to Battle Climate Change
In December 2016, as the transition of national political power began, 235 senior leaders in higher education sent a letter to the new Congressional delegation and incoming presidential transition team. They asked that the Trump Administration continue to support the Paris Agreement, encouraged research based on leading scientific and technical knowledge, and petitioned the Trump Administration to make investments in a low carbon economy.
In letter to Congressional and executive leadership, these college and university leaders noted that they prepare graduates for the American workforce and that their institutions led the country in innovative and ongoing research to address climate challenges, pledging to work with the new administration to meet them.
Decision to Exit Paris Accord is Global Teachable Moment, Beyond Politics
Mr. Trump’s decision to abandon the Paris Agreement moves the discussion to a new stage. The question that higher education leadership must now address is what to do next. It’s an ethics and morals question that will likely also emerge as a global teachable moment for America’s colleges and universities.
Whatever the next step, higher education now has an opportunity to align with an issue of global importance rather than a policy emerging from a political platform promise. In fact, the opportunity is so large and significant that whatever higher education puts forward will move immediately beyond politics.
It is also, therefore, the perfect opportunity for higher education leadership to regain some ground as a leading voice of moral authority as America’s bedrock institutions like higher education continue to come under fire and diminish in reputation.
America’s higher education leaders must have the courage to lead. And they must be strategic in how, when, and where they exercise this leadership. Colleges and universities must not become centers of unfocused, if well meaning, protest. Yet they must vigorously protect the First Amendment rights of their stakeholders, including the right to protest.
That having been said, the optics must show that colleges and universities are the sane and reasonable centers of rational thinking about the impact that climate shifts will have on global society. They must be the “go to” authoritative source that will dampen nationalist efforts to ignore global challenges for political gain.
In American society, colleges and universities are the conduit through which society passes on its history, traditions, challenges, and aspirations. They are where theories are tested and research is undertaken.
The outlandish efforts to deny climate change must be met with ongoing advanced research that supports the efforts by the American educational community to act responsibly and globally. Whatever the action that emerges to Mr. Trump’s decision, it has to be more than a political response. The federal government is now too dysfunctional to operate effectively to address higher education’s concerns on climate.
As Economic Engine, Higher Ed Can Join Cities & States in Battling Climate Change
Higher education needs a game plan on climate change. A good opening step may be to align the higher education message on climate change with local and state authorities. If the states work together to develop a kind of alternative national policy on climate change – even if only temporarily – then colleges and universities might be able to use their moral influence and capacity as economic engines to work with regional economies to offset the worst excesses of the abandonment of the Paris Agreement.
At least it’s a start. At best it may be a pathway to a sane and seasoned approach to addressing a global problem.
The NACUBO study found that the average institutional tuition discount rate for first-time, full-time students hit an estimated 49.1 percent in 2016-2017, up from 48 percent the previous year. The discount rate was highest at small institutions, where the first-time, full-time freshman rate was 50.9 percent for 2016-2017. And perhaps most troubling, more than 25 % of the institutions surveyed have rates well above 50 percent.
Why Does College Tuition Discounting Matter?
Why does this matter?
As Inside Higher Education’s Rick Seltzer points out, the tuition discount rate is defined as institutional grant dollars as a percentage of gross tuition and fee revenue. Translated, a discount rate of 50% means that fifty cents of every tuition dollar never makes it to the college’s bottom line because it is dedicated immediately to financial aid. All but a handful of American colleges and universities are highly dependent on tuition, although they also work to supplement tuition revenue through fundraising in areas like student scholarships.
The problem is that endowments do not fund much institutional grant aid. In 2015-2106, for example, endowments funded only 12.4 percent of institutional grant aid provided to students. In general, 79 percent of aid awarded went to meet need, regardless of whether that need was classified as need-based or merit-based.
Need for Financial Aid Increases but Tuition Revenue is Flat
Mr. Seltzer notes that as tuition prices continue to increase, the share of students with financial need will also likely rise. What’s especially concerning is that the percentage of first-time, full-time freshman receiving institutional grants is estimated to be 87.9 percent in 2016-17. That doesn’t leave much space for the tuition from full-pay students to make much of a dent in the financial aid budget.
The overriding fact is that net tuition revenue per full-time freshman – the cash that supports the college after financial aid — is essentially flat, rising only 0.4 percent in the past year. Worse yet “well over half of survey respondents, 57.7 percent, reported a decline in total undergraduate enrollment between the fall of 2013 and the fall of 2016.” Further, just over half of schools surveyed reported a decrease in enrolled freshmen. The respondents blame price sensitivity, increased competition, and changing demographics as the primary reasons for this decline.
That leaves many colleges in a precarious position. If net tuition revenue is flat, discount rates are rising, the economic headwinds are blowing against them, and their enrollments are declining, financial options are narrowing at most colleges and universities.
A college or university can no longer depend on rising tuition or increased demand to grow its way out of what is now a systemic financial problem.
Discounting Strategies Aren’t Sustainable; Schools Know It but Few Admit It
Yet the most curious result in the survey was on the question of sustainability. In the IHE study, 44 percent of schools reported that their discounting strategies were not sustainable over the long term. Of the remainder, 32 percent said that they were sustainable over the short- but not the long-term. But only 9 percent “were willing to say that their strategies were not sustainable.” They presumably believe that some combination of new programs, better recruitment, and improved marketing strategies could work to improve their competitive position.
Financial aid is a complex question. Many of the colleges now suffering from their discounting practices have increased their discounts, for example, in an effort to serve more financially needy and diverse students. There can be time-specific reasons as well like the development of major new program initiatives.
But the inescapable fact is that American higher education continues to rely on outmoded and archaic financial strategies that used their primary source of revenue – tuition, fees, room and board – to balance out their expenses.
It’s an expense-driven model in which most of the large expenses – financial aid, cost of labor, technology, health care, and debt on capital expenditures – determine the revenue needed, effectively setting the tuition. Any institution increasing tuition much above the cost of inflation, now running at less than two percent, is effectively kicking the can down the road.
Despite the worrisome results of the NACUBO survey, many of us are still betting on American higher education to thrive. It must change how its financial pieces fit together and think imaginatively about how it can finance itself. It is likely that colleges will abandon long-time efforts to finance their capital expenditures exclusively on debt. It is possible to explore creative ways to manage targeted capital campaigns and rethink annual fund efforts. Change will require consortial efforts that move beyond paper and library purchases to see what can be accomplished in common on health care, retirement benefits, and technology.
The NACUBO study forces three conclusions upon us:
Higher education must evolve more rapidly.
The broad philosophical debates among staff, trustees, and the faculty must be about institutional sustainability.
There is only so much time left to take the first big steps.
There is some truth to the saying that those who fail to learn from the past will be doomed to repeat it.
Essentially, this was the message that former Treasury Secretary Larry Summers delivered recently as part of his larger concern that Massachusetts not become complacent despite U.S. unemployment hitting a 10-year low in April.
In an interview with the Boston Globe, Summers compared the problem facing the state — the lure of complacency — to what he found on assuming the Harvard presidency, as Stanford cleaned Harvard’s clock as all things Internet came to dominate the new American economy. The impact locally on Route 128’s hold as “America’s technology highway” was dramatic.
The emergence of biotechnology saved the Boston area from a precipitous decline in economic standing among major innovation regions in a technology-driven global economy.
Mr. Summer’s admits that Massachusetts’ $500 million state deficit might make his call for investment seem a bit odd as Massachusetts’ governor, Charlie Baker, works to close the gap. He argues: “Ironically, sometimes not spending money is taking a much bigger risk than spending money, because it’s gambling with your preeminence.”
Further, Mr. Summers warns that some budget balancing acts, like trying to reign in Medicaid spending (40 percent of the state’s budget) as well as fees on employers and caps on health care might have the opposite effect.
Massachusetts is “Eds and Meds” Capital of the World
Massachusetts stakes a claim as the “eds and meds” capital of the world. Mr. Summers asserts that Medicaid may appear to be a budgetary expense, for example, “but at the margin, it’s coming out of being the place where the smartest scientists want to come and work their miracles.” He suggests that the efforts to end Obamacare and replace it with Trumpcare, moreover, could effectively destabilize the state’s critical health care economy. And Mr. Summers notes that rival technology regions like New York are already making heavy state investments in new life science initiatives.
Mr. Summer’s comments have tremendous implications for the role that American higher education will play in the American economy in the future. When the U.S. House of Representatives passed its version of a new health care bill, it legislated changes that impacted one sixth of the American economy. Separate out how and why this was done. Set aside the timing tied to the first 100 days of the new Trump Administration.
The facts are that the American economy is a little like a three-dimensional chessboard. Any move has a dramatic effect that must be comprehended on multiple levels.
Higher Education Is Foundation of U.S. Economic Competitiveness
There’s much at stake for higher education that reaches beyond the different political philosophy, chronic dysfunction, and incremental governmental bureaucratic practices. From an economic perspective, higher education plays two important roles in the American economy:
The first is that it trains an educated workforce through programs that adjust this education to evolving economic needs.
The second is that the “eds and meds” complexes of America largely moved the American economy – and the regions that they support — into a competitive post-industrial global economy. They are the foundation for the future of American competitiveness in a global market.
These centers of innovation and creativity are typically in urban, blue states or in regions where the voters historically vote or are trending blue. They inhabit one side of a cultural divide in an anxious America. They welcome immigrants, many of whom provide the talent and skill sets to keep the “eds and meds” miracle happening. As such, the “eds and meds” community has a great deal at stake as the states and the federal government move the chess pieces around.
Many in the western U.S. repeat a saying that is pertinent to this discussion: “I’m from the government and I’m here to help.” But, in fact, government at all levels does have the perspective and resources that can move the needle.
What government lacks are the courage and consensus to put an investment strategy in place. Government funding is a rationing tool built on an annual funding cycle. This hardly supports imaginative and enlightened government policy and programs.
We can have the debate over whether higher taxes, deficit funding, or better economic growth will ultimately pay the investment bill. But America must get over its deeply partisan divide to support what drives the American economy.
Mr. Summers was right. Having the vision and confidence to invest strategically — despite the competing pressures on government budgets — makes sense. Combining the social and cultural need to invest in better schools with the economic necessity to make infrastructure and life science investments is a sane path forward.
Last week’s efforts that led to the passage by one vote of a House Republican proposal to change health care illustrates the deeper questions now bubbling up about what Americans demand of their government. The Republican-controlled Senate will now take up their version of a health care plan that is likely to differ significantly from the House plan. Meanwhile the Affordable Care Act (ACA) – tagged by supporters and detractors alike as Obamacare – remains the law of the land.
The present donnybrook is likely to play out over several months. The health care debate is set against an even more volatile backdrop as questions about the federal government’s continuing commitment to Medicaid expansion swirl around the efforts to repeal and replace the ACA. These arguments raise even larger questions about how the government should treat other society-wide entitlements like Social Security.
Almost every American agrees that the government has basic responsibilities in defense, infrastructure, and in other areas that protect and regulate American society and how America relates to the world.
But should its citizens also expect that the government work to improve their quality of life from “cradle through career,” that is, from birth to death?
Whatever the mechanism, should government, coordinated at the local, county, state, and federal levels, determine what quality-of-life “markers” best meet the needs of American citizens? There is an old adage that Democrats must always be stopped from misguided efforts to create new entitlements. The argument goes that once citizens appreciate the new benefit, it is almost impossible to take the entitlement away. Americans must make sense of – and be willing to fund – entitlement programs that improve their quality of life.
Open Since the Great Depression, Entitlement “Door” Unlikely to Close
The plain fact is that the entitlement door swung wide open in the Great Depression and will likely never close. Policy debates over state’s rights, free market solutions, and cost have real meaning but are really more about tactics and philosophies rather than outcome. There are times, like the “guns and butter” policy debates of the Vietnam War years, that inform the partisan arguments over health care emerging from the quagmire of the Washington swamp today.
But voters’ support for entitlement programs has been a given for 80 years. The debate is over even if the skirmishes over tactics, philosophies and funding continue.
We should accept that entitlement programs are a cornerstone principle upon which the foundation of American society is built. Any efforts to end them or diminish their reach or value will meet sharp resistance from American voters. It’s something tangible – like Social Security or Medicare — that Americans feel that their government guarantees to work for them.
Debate About Role of Entitlement Programs is Bigger than Health Care
That having been said one of the most interesting historic policy debates of the 21st century will be the continuing role that entitlement programs play in American society. Central to this debate will be which entitlement programs must be supported and whether there is room for a deeper analysis of how current and potential entitlements contribute most to meet the challenges of the 21st century.
We should prepare for these challenges now.
Americans clearly want a safety net that includes Medicaid, Medicare, and Social Security. The task will be to put these programs on a solid footing, looking at a variety of efficiencies, partnerships, their scalability, and new revenue streams, including tax adjustments to pay for these programs. But within these parameters, any new programs proposed must include progressive thinking about what we mean by entitlement.
Is Education a Privilege or a Right in American Society?
One example illustrates this point: Is education – from pre-kindergarten through college – a privilege or a right in American society?
If we focus on higher education, there’s a pragmatic side to this question. America now competes in a global marketplace, despite the rhetoric about “America first.” We know that a college degree is roughly akin to a high school diploma from a generation ago. Economists studying market and labor conditions estimate that as many as sixteen million jobs requiring at least a college degree may go unfulfilled in the next few years.
Higher Ed Leaders Must Claim College Education as Entitlement
Yet despite the considerable funding available, education is a politicized, chaotic mess that frustrates consumers and policy makers. Higher education leadership must lay out a crisp, common sense justification for why education – specifically, higher education – should move above prisons in the laundry list of fundable priorities.
To be fearless in claiming education as an entitlement right for American citizens, college and university leaders must ask – and answer – bold questions:
Can Americans establish a better, broader definition of “entitlement” that provides a continuous pathway to a productive life from cradle through career?
Is the current definition of “safety net” too narrow and simplistic to meet the global economic demands that America faces?
Is the funding solution to each entitlement different based upon the history, existing revenue streams, and the value to society?
What benefits are Americans entitled to receive from their taxes?
The answers to these questions will shape the quality of life in the United States for generations to come.
Mr. Daniels argued that before the acquisition Purdue had little presence in online education and had “basically been a spectator to this growth.” Kaplan University has 32,000 registered students, but enrollment has been falling for several years. Kaplan’s students are heavily skewed toward military veterans, lower-income students, and members of minority groups, including first generation college students. Their average age is 34, a sharp contrast with the 20-year old average age at Purdue.
Purdue University photo/John Underwood
The deal has a number of parts. For Kaplan the deal offers a profitable way out of a battered reputation and declining enrollments.
Deal Could Be Game Changer for Purdue
For Purdue, the deal may be a game changer if the right puzzle pieces fall into place. Purdue’s total enrollment will grow from 30,000 to 70,000, with 30,000 registered online. The new online initiative will receive no state funds and rely solely on tuition and donations for support.
Under the terms of the deal, which would create a new public university, Kaplan students, academic programs, 15 campuses and learning centers, and academic staff of about 3,000 will become part of Purdue. Kaplan, Inc., the parent company (a part of Graham Holdings that for decades owned the Washington Post), will continue to provide the technology, marketing, admissions, and financial aid, as well as other back-office operations. In return, Purdue will pay Kaplan 12.5 percent of the online program’s revenue, but only after Purdue and Kaplan have both recovered their direct costs.
The deal could stretch 30 years. Purdue will also be guaranteed a minimum of $10 million annually by Kaplan before Kaplan is reimbursed for its direct costs or receives 12.5% of any additional revenue. Kaplan will no longer be subject to the “gainful employment regulation,” that scrutinizes career-focused programs that load debt on to students relative to the income that they will earn.
Proposed Deal Has Critics and Supporters Alike
Many independent analysts suggest that the deal makes sense, although the move also has its critics. For Purdue, the structured deal permits the University to move quickly and efficiently into online education without developing the technology, staffing, marketing, and enrollment start-up costs that it would otherwise incur. It will now compete at a scale and in the same market as other large non-profit online education programs like Penn State. The deal will also improve the national and global reach of a major research university that is best known for its highly regarded science and engineering programs.
Purdue will need to undergo a series of regulatory, accreditation, and internal administrative hoops before the new arrangement takes hold. Mr. Daniels estimates that this process might take several months.
The move by Purdue will be watched carefully across higher education. It represents a startling realignment of the for-profit and non-profit community, in which one of the lead players has an established reputation, but is weighted down by the baggage attached to the highly public criticism of large for-profit educational providers. On the other side, Purdue’s president is perceived as a maverick change agent whose approach may not be received well by Purdue’s faculty who were not part of the acquisition discussions.
Is Purdue-Kaplan Deal the Higher Ed Partnership of the Future?
Beyond the internal dynamics, there are a series of important policy questions to address. If we accept the premise that higher education will evolve at a faster pace because of the accumulated pressures – especially on revenue – that its institutions face, is it likely that the Purdue/Kaplan arrangement is an outlier or instead a prediction of the kind of tectonic changes higher education is likely to face?
In this respect, Purdue provides an interesting case study. What is most intriguing about Mr. Daniel’s approach is that he understands that sustainable growth in the University’s future could not be built off tuition, state appropriations, and debt. Purdue is a research university but also a state institution committed to educating Indiana’s citizens. It must think strategically in a league in which other large research universities play.
A Follow-the-Money Moment for Purdue
As such, this is a follow-the-money moment in which the Purdue brand goes global and the financial underpinnings of what Kaplan will provide pay for the move to online education. Done correctly, the new arrangement will likely improve Purdue’s competitive standing among its peers. If the test fails, then Purdue will become the poster child for why non-profits and for-profits can’t mix.
Despite the uncertainty, Purdue earns an “A” for the effort it has made to move strategically by searching for new resources under new terms and through new arrangements to meet its strategic goals. It left the old understandings and financial foundation for the flagship and branch campuses untouched. Now, we’ll watch to see if big chess moves can match ambition to reality.
Community colleges are the entry point to higher education for millions of Americans, but, according to Inside Higher Education’s 2017 Survey of Community College Presidents, their leaders report significant enrollment challenges and precarious financial support.
Six in 10 of the 236 community college presidents reported a decline in enrollment over the past three years. Their response often was to add new programs, increase strategies to support student transfers, grow their marketing budgets, add new online programs, and freeze or cut tuition. Significantly, most looked first to program enhancements designed to boost enrollment rather than cuts to cover deficits and meet expenses.
Community college presidents report financial matters and enrollment management are top concerns.
The enrollment and financial difficulties faced by community college leaders reflect broader trends. Employment opportunities have increased with the improving economy, for example, causing some enrollment declines. Further, the tactics utilized to stabilize community college finances often reflect the approaches adopted elsewhere among four-year, graduate, and professional schools.
Community Colleges Often First Entry to Higher Education
But what’s most telling is that a uniform communications and marketing message has not yet taken hold to build a case for community colleges.
The plain fact is that community colleges are the defining point of access for most students in the American higher education system.
Well over forty percent of American college students have some educational experience in a community college. For most of these, it is their first college experience.
If community colleges provide primary access in a world of shifting demographics, persistent income inequality, and the failing college and business and financial models that are causing open consumer revolt over sticker prices, should enlightened local, state and federal policies reward community colleges more deliberately for the public good that they provide?
Isn’t it time for policymakers to set basic parameters in place to offer an agenda that sponsors access and better supports the institutions like community colleges which provide it?
Higher Education is Lifelong Learning Experience
For policymakers to make a difference, they must first see what educational consumers already understand – education is a life-long learning experience “from cradle through career” and beyond — that creates a pathway along which citizens travel.
Education remains the great safety valve in American society, assimilating new immigrant groups and providing Americans in general with their best hope to secure a sustainable place in the American middle class.
But the pathway goes beyond access. Getting students into the educational pipeline, as free tuition plans in states like New York and Rhode Island propose to do, is not enough. The likely effect will be to jam the pipeline and blame the students or the institutions when retention and graduation rates do not improve.
Regardless of how the financial pieces are put together, community colleges must have reliable sources of revenue to do their jobs, ensuring that accepted students not only attend but persist and graduate in reasonable time.
A realistic community college operating model is not likely to suggest that they be like four-year colleges, offering a full range of residential and non-academic programming. There is a good case for public/private partnerships in areas like housing, dining, and wellness facilities, however, to support students who need basic services. But any new money that flows into community colleges must assist students to move along the education pathway at reasonable cost.
Community colleges are different from residential four-year institutions. It’s part of the secret to their success. It’s also one important reason why they remain more affordable than most other types of postsecondary education.
In the future, it’s essential to better position community colleges within higher education where internal infighting often erupts over questions of process and prestige. Community colleges are not junior colleges nor are they four-year wannabe institutions. They are the primary access point for most Americans seeking to live out the American dream.
For policymakers, it’s time to take a step back to avoid the pitfalls and costs of populist strategies, band-aid solutions, and knee-jerk, reactive panaceas.
Changes in American higher education must be systemic and systematic. It begins by understanding higher education, how it works, and how and why the pieces fit together.
American higher education institutions must change their operating models, which are now built too heavily on tuition and government aid. Determining new pricing strategies requires imagination and new thinking, but it does not absolve local, state, and federal governments from some measure of continuing support.
Since GI Bill, Higher Education is a Right
American society decided with the GI Bill after World War II that education was a right and not a privilege. In the minds of most Americans, this debate is over.
It’s time to understand instead that a successful and robust higher education system — one that includes community colleges — must be decentralized and well funded to be a continuing safety value.
Education grows the middle class, supports a well-educated citizenry, and develops an employable workforce. It’s not a solution built on incremental funding increases that don’t address, access, choice, persistence, graduation rates, and employability.
But it is an urgent question. How do you build and fund a life-long education pathway that best serves American citizens?
Everyone knows that money plays a major role in students’ college enrollment decisions. How big a role?
According to a recent study by Royall & Co., the enrollment management and alumni fundraising arm of EAB, “almost one-fifth of students who were admitted to their top choice of college or university in 2016 but decided not to go there turned it down because of the cost of attendance.”
The study’s finding was echoed in my recent conversation with a well-heeled mother of a high school senior, who expressed sentiments I’ve heard repeatedly for more than 20 years. Her daughter wanted to attend an Ivy League institution that had accepted her. The mother preferred that her daughter accept a large merit award to a prestigious research university. It was a simple cost-benefit analysis by parents, who likely would not qualify for financial aid, seeking relief from high tuition sticker prices.
The Royall findings were fairly uniform with different SAT scores and minority groups. Royall’s managing director, Peter Farrell, concludes: “Something has happened more recently that’s accelerated change. It could be demographics. It could be what we’re seeing on the macroeconomic scale about low socioeconomic (status) families being pinched. I don’t know the actual causality of this change in sentiment, but the slope line of concern seems to be upticking.”
When viewed from other perspectives with different data, the conclusions are the same. The fact is that over 40 percent of the first-time college experiences of admitted students are in a community college.
How Colleges Market “Cost of Attendance” Matters
The obvious answer may be that the sticker prices – now approaching $70,000 at a handful of the selective private colleges and universities — are the culprit. In their interpretation, however, Royall argues that families are more fundamentally questioning the value proposition. Royall asserts that colleges must focus on both their marketing and aid strategy. It’s not so much the discount but the marketing and packaging of the cost of attendance.
“Cost of College” Result of Many Factors
The Royall study also highlights other problems in how Americans understand the cost of a college education. Much of the confusion emerges from a variety of factors including how colleges price themselves, what role state and federal aid play in cost of attendance calculations, the differences between need-based and merit financial aid, and the growing importance of merit aid among higher income families.
The consumer and political pressures over the level of indebtedness that stretch back to the days in which some states offered free college tuition further compounds this problem.
New York’s Free Tuition Plan Resonating Across Other States
It is especially relevant today as the progressive agenda in American politics moves forward with new free tuition plans. Governor Cuomo’s program to extend free tuition to New Yorkers whose families make $125,000 or less annually is last week’s dramatic example.
But the New York State approach will likely resonate elsewhere as the progressive wing of the Democratic Party seeks programs and strategies that will re-attach the American middle class by re-aligning the Party’s value proposition to popular middle class entitlements.
It’s gone beyond major policy shifts emerging from polling and anecdotes that have formed the basis of some education policy. The fact is that America has a growing student debt problem set against a backdrop of persistent and historically worsening income inequality.
It is equally uncertain that free tuition will do anything to build a seamless pathway for students to improve retention and graduation rates.
For families and independent students, it’s all very confusing. Neil Swidey’s feature in the Boston Globe was a sobering assessment of how students did not fully appreciate the ramifications of their grant and loan commitments.
America’s colleges and universities must bear significant responsibility for the confusion students and families face in determining costs and indebtedness. They are hotbeds of cultural inertia, embracing college aid and pricing strategies from the last century that no longer apply, however noble the original intention might have been.
The hard truth is that the pricing of tuition, fees, room and board has broken down. It’s an “all individuals for themselves” approach that conflates and confuses grants and loans without simple definitions and clear direction. It pits one educational institution against another.
It’s a hopeless educational quagmire because the range of state, federal, corporate, donor and college partners all operate under different rules that make it extraordinarily hard to calculate what and whether to save, where to go, and how to know when you have struck the best deal.
It’s time for common sense to win out in tuition pricing strategies. For families, it begins with a better sense of who’s on first base. For tuition-dependent institutions in an uncertain political environment, time is running out.
One of the great myths about American higher education is that all colleges are wealthy. If most Americans have an mental image of a college, it’s often a bucolic bricks-and-mortar residential facility separated by rolling green lawns, entered through an impressive if forbidding-looking gate, and populated by attractive students who drive fancy cars.
What they can’t see past the stately columns or newest facility highlighted by energetic tour guides is the level of deferred campus maintenance. They fail to comprehend the amount of debt or the inability for a college to sustain its existing campus footprint. They don’t see is that the average discount – the percentage of total gross tuition and fee revenue institutions give back to students as grant-based financial aid – is now 50 cents on the dollar at most colleges. And they seldom appreciate how reasonable staff and faculty compensation, including health and retiree benefits, the impact of technology, and the rising cost of government regulations and reports constrain most college operating and capital budgets.
On one level, a college is a business. But at the same time, it’s a heavily regulated business that produces – in business terms – a product that requires significant inputs of labor, capital, and technology.
College Revenue Streams Are Drying Up
The problem is that college and university sources of revenue are drying up. Consumers are voting with their feet as over half choose public- or locally-supported options like community colleges, for-profit providers, or certificate programs. The sticker price that “sticks” in the minds of these consumers is the widely-reported $70,000 annual price tag at the most selective colleges and universities.
At most colleges, it’s no longer possible to match revenue to expenses by setting tuition prices to meet annual operating needs.
College Endowments Are Not Magical Money Trees
But what about tapping into the endowment? In the minds of consumers and many public officials, an endowment is a kind of imaginary money tree from which additional needs are met.
The reality is that few colleges or universities have large enough endowments to produce significant revenue. In 2015, the National Association of College and University Business Officers (NACUBO) and the Common Fund reported that the 94 institutions with endowments of $1 billion or higher control 75 percent of all endowments nationwide. If colleges typically draw down five percent on a rolling quarterly average, the amount available to most of the remaining 3,900 institutions surveyed is negligible at best.
The other potential sources of revenue are auxiliary services, like residential housing or athletics, or debt. Revenue from auxiliary services are essentially flat, with many colleges using residential housing to support their academic programs. Only one in eight colleges have sports programs that break even. And debt – often used indiscriminately and for the wrong reasons – is a particularly worrisome source of support. Many colleges are at the end of their debt capacity or find the amount capped by trustee action.
Fundraising Campaigns Aren’t Financial Panaceas
What is left is revenue from fundraising. Colleges will sometimes tie a presidential search to the reputation of prospective candidates as potential fundraisers. But the cold facts are that there may only be about 50 colleges and universities in America where fundraising is anything more than running in place.
The problem is that fundraising has become seen as a panacea to cure all ills that plays out like every college is a major research university with a significant, mature fundraising machine in place. To create momentum and garner visibility, most colleges favor a comprehensive campaign. Under this approach, colleges throw almost everything into the mix, including their annual fund, deferred gifts, and any specially cultivated donations. The college establishes targeted goals in specific categories. The president makes periodic reports at campaign events. The college offers updated reports within a specified time frame about how well the institution is doing to reach its stated goal.
Campaigns are expensive, and at times, counterproductive to the immediate goals that a college needs to meet. To assess the success of a comprehensive campaign, multiply the “all in” amount raised annually before the campaign started by the number of years of the campaign. When this number is subtracted from the announced comprehensive campaign goal, how much is needed to reach the announced campaign goal?
Does it really make sense for colleges to play like the big boys when what they are actually doing is re-characterizing money that they are already raising without the costs associated with a full-fledged campaign?
Targeted, Micro Campaigns are Alternatives to Comprehensive Campaigns
For colleges and universities that do not have the money, staff, and alumni and donor base to run a full-scale, multi-year comprehensive campaign, there may be better, more targeted approach. These institutions should consider putting most of their work into cultivating – that is, growing — the annual fund and deferred gifts.
To the extent that a college seeks the optics of a successful campaign, its leadership should think about micro-campaigns that address specific, identified, and fundable campus needs. College stakeholders can touch and feel these advances. The effect is the same, absent the bragging rights to an inflated comprehensive campaign goal.
One size – or approach – does not fit every college. Success in fundraising relies upon common sense and a clear understanding of what’s possible given the scale and resources available.
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