When its trustees abruptly shut down Mount Ida College, a small, private college just outside Boston, they unleashed a debacle that resulted in a torrent of criticism and considerable finger pointing. Rejecting a merger or acquisition (depending on the characterization) with Lasell College, the trustees opted to sell the campus to the University of Massachusetts at Amherst, whose leadership saw the location in the middle of Boston’s high technology belt as an opportunity. UMass Amherst also assumed all of Mount Ida’s debt.
According to UMass Amherst officials, the acquisition permitted them to find a location that would assist their students who held internships with Boston area companies, among other benefits. Mount Ida’s students (and their parents) were caught off guard and speculated openly and angrily about where and even how to continue their education. Transferring to the UMass Dartmouth campus – about 50 miles away – made little sense to students who chose the bucolic, suburban Mount Ida campus for its fit, programs, and location. At their last Commencement, students successfully banned the trustees and president from attending the ceremony.
UMass System Criticized for Favoring Flagship Over Other Campuses
The backlash increased as UMass Boston weighed in on the closure. Many at the Boston campus saw the acquisition as an infringement by UMass Amherst on their territory. More significantly, they faulted the UMass system for failing to advocate more directly for the UMass Boston campus as aggressively as for the Amherst flagship.
Local newspaper columnists openly criticized the UMass administration for a lack of transparency and for failing to listen to UMass Boston faculty and staff on this and a wide range of other issues, including the collapse of a recent search for a chancellor for the Boston campus.
State Inquiry May Result in Greater Regulation of Private Colleges
As the navel gazing begins, Massachusetts Attorney General Maura Healey has opened an inquiry into Mount Ida’s closure, suggesting that additional regulations may be needed on private higher education to prevent these kinds of messes from occurring again.
Richard Doherty, president of the Association of Independent Colleges and Universities of Massachusetts (AICUM), has argued that Mount Ida’s failures were specific to that institution and should not be extrapolated to produce more regulation for the other private colleges and universities in the state.
What a mess – on several levels.
Let’s set aside the finger pointing and the effort to condense a slew of bubbling frustrations and emotions into a crisis that shapes bad public policy. Is there anything that can be done to right the ship?
Core Issue is a Failure of Trustee Leadership
There is, beginning with the understanding that Mr. Doherty is correct when he argues that Mount Ida is one incident and not a more damaging trend. The failure at the core of the controversy seems most clearly to be a failure by Mount Ida’s trustees to lead.
Mount Ida’s trustees did not exercise appropriate, conservative fiscal oversight of the institution. Further, they permitted the college’s financial mishaps to drive the timing and the transparency that led to the closing and resulted in the public implosion and outcry.
College’s Closure Also Points to Accreditation Failure
Second, the accrediting agencies should have known more about the condition of the institution.
When accreditation works well, it’s always a better alternative to state and federal oversight.
The fact is that we need better predictive, analytical tools by which to measure financial health across peers – even if only confidentially for internal institutional use – to determine in consort with accrediting agencies the true financial picture. Knowing earlier will better prevent future debacles like Mount Ida.
New Approaches Needed to Prevent Closures of More Colleges
Third, we need new products and approaches to assist colleges to help ease the inevitable. It is likely that colleges and universities will be forced to cooperate more to improve efficiency and create economies of scale. This is especially likely among small- and mid-sized private colleges and universities.
It is apparent that there will be an uptick in mergers, acquisitions, and occasionally, closures across America. Higher education needs an orderly process and a clear pathway to cause minimum disruption for students.
State governments can help by working to develop new programs like catastrophic insurance that will address how to handle closures, including the disposition of assets, laid off employees searching for work, and displaced students seeking to complete their degrees.
This is especially true if colleges have a reasonable financial stress test against which to measure the need for additional insurance.
Fourth, when public universities play a role, we need a better understanding of regulatory authority. For issues that cross campus lines within a system, the central administrative offices must have more authority to say yes – and no – over how debt shapes opportunities and challenges across the system.
Beware of One-Size-Fits-All Regulations for Colleges & Universities
Finally, beware of state regulators applying a uniform standard developed from a self-inflicted crisis. Government operates on an annual appropriations cycle in most places. Elections further shape how long-term strategy – if any – gets made.
The right kind of regulatory assistance – like catastrophic insurance – makes sense to explore. Intruding deeper into the management of colleges and universities – especially private ones – is unnecessarily bureaucratic.
Let’s hope that we learn the lessons of Mount Ida. It would be a shame to see a sad moment become a harbinger of worse things to come.
The following essay was published in the Boston Business Journal on April 13, 2018.
The catastrophic closure of Mount Ida College in Newton [Massachusetts] has everyone, especially Mount Ida’s students, wondering what happened. Parents, faculty, staff, trustees and donors feel betrayed by the abrupt closure. What is going on?
Moody’s recently warned that the number of college closures and mergers would triple between 2017 and 2018.
Private higher education is especially vulnerable to the four horsemen of the higher education apocalypse: galloping debt, spiraling deficits, unfunded deferred maintenance, and out-of-control tuition discounts. Many of our colleges are borrowing and spending more money than they take in.
We applaud Gov. [Charlie] Baker for calling for an inquiry of the decision by Mount Ida’s trustees. We believe that it is time for the Commonwealth of Massachusetts to lead by monitoring institutions that depend so heavily upon federal and state dollars.
Here are some steps to take:
Insure colleges and universities against catastrophic closure. Colleges are businesses with increasingly limited lifespans. By pooling risk among institutions, students and citizens will be protected from the often unforeseen consequences of catastrophic closure. After the College of Saint Catharine in Bardstown, Kentucky, closed in 2016, the bondholders hired a litigation firm. They sued any former student who held a balance, from unpaid tuition to a parking ticket. The judge added a kicker, adding 12 percent interest to those unpaid balances over the course of 10 years. The results of that have been disastrous.
Use a valid stress test to monitor the fiscal health of colleges and universities. The U.S. Department of Education issues a list of colleges and universities that failed to maintain stable financial composite scores annually. Financial Responsibility Composite Scores determine a college or university’s financial health and qualify them to receive federal aid under Title IV. Based upon a now outdated method of ratio analysis once used to predict corporate bankruptcies, these composite scores are unreliable, outdated and prone to manipulation.
In August 2017, the General Accountability Office issued a report entitled “Higher Education: Education Should Address Oversight and Communication Gaps in Its Monitoring of the Financial Condition of Schools.” The GAO warned USDE that composite scores are famously unreliable barometers of stability that are sometimes “gamed” by unscrupulous institutions.
Find ways to address the coming tsunami of unfunded deferred maintenance. The quality of facilities is often ignored when budget decisions are made. Unless an institution is using a “plus 10” (+10 percent of capitalization) formula to fund ongoing maintenance of buildings and grounds, most colleges and universities have unfunded maintenance costs totaling at least $100 per gross square foot of constructed space. Some smaller institutions are carrying deferred maintenance of $50 million or more, causing students at Brooklyn College, for example, to rebel at their condition of their facilities.
Find innovative ways to give tuition-dependent colleges and universities access to capital markets. Public bonds, private bonds, and hybrid financial instruments now make it possible to repurpose crumbling buildings. Real Estate Investment Trusts (REITs) enable colleges and universities to fund building projects. Some colleges and universities, like Marygrove College in Detroit, have turned their buildings and grounds over to land conservancies. Still other institutions have used equity or sale/leaseback agreements, which exchange a deed or title for uncapped portions of a property’s fair market value.
Brian Mitchell is a principal in Academic Innovators and past president of Bucknell University and Washington & Jefferson College. He is co-author, with W. Joseph King, of How to Run a College: A Practical Guide for Trustees, Faculty, Administrators and Policymakers. Gerard O’Sullivan is a former provost and dean, CEO of Corvus Education LLC, and Visiting Professor of Higher Education at Immaculata University.
Along with students and alumni, the citizens of Rensselaer, Indiana, expressed shock last week when St. Joseph’s College announced that it would close at the end of the academic year. The small, private Catholic college was founded 128 years ago and was a fixture – and major employer — in the town.
St. Joseph’s president, Robert Pastoor, argued that the College would need about $100 million to be feasible, with an immediate infusion of $20 million needed before the end of June. He stated: “Despite our best efforts, we were not able to escape the financial challenges that many tuition-dependent smaller universities have faced in the past several years.”
Financial Challenges, Decades in the Making, Were Insurmountable
Mr. Pastoor cited extensive debt, fears the College would permanently lose accreditation, depreciated facilities, and pressure from auditors that would limit access to student loans as the reasons for the Board of Trustees’ decision. Last November, an accreditor, the Higher Learning Commission, placed St. Joseph’s on probation through 2018 citing concerns over “resources, planning and institutional effectiveness.”
There are many lessons to be learned from the financial failure of St. Joseph’s College. There are also strong views about the failure of the Board and administrators to demonstrate transparency even if the signs were there after the accreditation actions last November. The finger pointing will likely begin, especially directed to the Board of Trustees, but there’s undoubtedly plenty of blame to go around. The cold fact is that no one expects a college to close even when the signs point to it.
Much of the reporting on the closure focused on the sense of loss felt by students and alumni, who invested their sense of self – psychologically and emotionally – in the place. Students are now scrambling to find a way to complete their education affordably. Alumni feel strongly about their alma mater and wonder if their degrees will continue to hold value.
Impact of College’s Closure on Local Community Cannot Be Ignored
The story of loss that is more often ignored, however, is the impact the closing of a college has on its community. In college communities affected by closures, the economic impact of a college’s business operations suddenly becomes important. In the case of St. Joseph’s, the College employed more than 200 individuals, making it a major employer in a town of 6,000 people in a largely agricultural region. These soon-to-be former employees will face limited options as they begin to think about future employment.
There are also secondary effects on a community when larger employers like St. Joseph’s close. The college is the town’s third largest utility customer after the local hospital and the school district, spending $640,000 last year, according to its Mayor. The ripple effect on local businesses will spread across the region as the employment base shrinks and 900 students spend their consumer dollars elsewhere.
As Melissa Shultz, a local businesswoman and lifelong resident lamented to a Chicago Tribune reporter: “I just don’t want this to become a ghost town.”
The loss to a community is comparable to an auto plant shutting down or a mine closure except for an important distinction. The business of higher education is a public good whose benefits extend well beyond employment. America’s colleges – of whatever size – prepare citizens for the workforce. They are also among the principal economic engines in their region. They bring visitors to Main Street, anchor the quality of life, and provide continuous stable employment in a way that the much touted reopening of the Carrier plant in Indianapolis cannot do.
America can continue to let its Rust Belt deteriorate as demographic shifts depopulate its rural stretches. Or, policy makers can see the impact that inattention has had well beyond the slogans and the politics of nationalism that will delay but not stop globalization. That boat sailed before this century began.
Instead, what is most needed is a kind of Tennessee Valley Authority approach to re-imagining the towns that America’s post-industrial economy will otherwise leave behind.
The closing of St. Joseph’s College is a warning shot to America about the loss of bedrock institutions that defined entire towns.
It was like a death in the family. The solution to solving the problems of the Rust Belt is not simply to find more manufacturing jobs for unemployed workers in new Toyota plants.
In the end, all politics is local.