Wednesday, September 16, 2020  |  Category: Eduvation Insider

Fiscal Schadenfreude, Finances, and Shiny COVID Tech

Good morning!

Another day, another COVID19 case (at uWindsor), another party broken up by police (at UBC), and now Quebec is starting to clamp down on bars in several regions, out of concern for an imminent second wave (joining Ontario and BC). Queen’s has announced on-campus COVID testing. Western researchers have found a connection between COVID19 and strokes, and for half of patients under 50, stroke was the first noticeable symptom.

On the other side of the world, Central Europe got off easy in the spring, but is now seeing cases spike to record high levels in the Czech Republic, Hungary, Slovakia and Slovenia. And after 313 years, Scotland seems to be contemplating independence from England again, mainly in disgust at Boris Johnson’s mishandling of a “no-deal Brexit” and COVID19.  

This week I’ve been tackling some weighty topics: COVID fatality on Monday, and relentless climate change on Tuesday. After those opening acts, I’m hoping that institutional finances won’t seem like NEARLY such a downer… and if you stick with me to the end, I’ve got some shiny new COVID tech to share!

Global Budget Issues

In the wake of the pandemic, higher education worldwide has incurred additional expenses for social distancing precautions, testing, and heightened sanitization, and lost revenues from campus housing, recreation, parking and food services. For those lucky enough to have them, endowment returns have been disappointing. Some jurisdictions have pressed on with funding cuts, which have put public institutional budgets under intense pressure too.

But the biggest financial impact of COVID19 has been on tuition revenues: declining domestic enrolments for some mid-market institutions and particularly those with hands-on programs, but even more declining international tuition, either because of closed borders and suspended flights, or because the pivot to online delivery has caused students to delay their plans.

The importance of these issues varies by region…

National Anxieties

A global survey of 200 university leaders in June highlights regional differences in higher ed financial models. Most expected international enrolments to be impacted by the pandemic, but for 100% of respondents in Australia and New Zealand it will have “a significant negative effect” on finances; compared to 83% in the UK, 80% in North America, and 58% in Europe. (Some countries charge domestic rates for international students, and others are less dependent on foreign students.) About half the respondents in North America feared that the pandemic would negatively impact government investment over the next 5 years, while only about a third in the UK and Australia/NZ agreed. Almost 90% of respondents in North America believed the pandemic would accelerate institutional bankruptcies over the next 5 years, and about 80% in the UK agreed. The concern was more muted elsewhere in the world (perhaps where respondents were more likely to be at public institutions).  Times Higher Ed

Job Losses Down Under

Australia’s universities have been a prime destination for Asian students, and the closure of its borders this year has thrown institutional budgets into chaos. For months now, universities have been announcing thousands of layoffs and job cuts. Top-ranked uMelbourne plans to terminate 450 permanent staff and faculty FTEs, and even more casual and fixed-term employees, to address a projected $1B shortfall in revenues by 2023. Sydney U lost $470M this year, and is looking for at least 100 staff for “voluntary redundancy.” In Perth, Murdoch U is planning to cut up to 200 jobs to save $25M in salaries, and Curtin U plans to cut employment costs by $41M. Facing a $370M shortfall, UNSW has saved $36M through a voluntary redundancy program for about 250 staff, and plans to cut 256 more FTEs (involuntarily). Southern Cross U is eliminating 24 academic and 47 professional staff in a VR round. Macquarie U has announced $120M in staff cuts, and U Technology Sydney warns up to 500 jobs may be lost.

With three-quarters of institutional budgets going toward payroll and benefits, layoffs, furloughs, pay cuts, non-renewals, and early retirement packages seem like the obvious way to cope with half-billion-dollar deficits. But there might be alternatives too…

Optimizing Faculty Time

Instructional costs are typically about half of higher ed budgets, but before reducing salaries or eliminating positions, be sure to allocate instructors for optimal student credit hours. EAB found a 25% gap at many institutions, caused by under-filled sections, excessive student withdrawals, and partial course loads for full-time faculty. They recommend fine-tuning gateway courses (the 5% of courses responsible for 85% of student repeats), and investigating consistency in courses with more than 24% variability in completion (often introductory Calculus and English). Consolidate courses with fill rates <75%, and consider offering single-section courses less frequently. They also recommend that administrators consider whether student advising, administrative and other tasks are still warranted in these unprecedented times.  EAB

Relief from the Crown

Since the spring, British universities have been panicking about the impact of reduced international student revenues. In April, Universities UK estimated a $12B annual loss of foreign student fees, and urged government to provide a “transformation fund” for partnerships and mergers. A London Economics report concluded that a 47% decline would cost 30,000 jobs in the sector. Scottish universities project a $700M deficit, thanks to COVID19 and Brexit, and fear a government-led amalgamation could be in the works. Even the UK’s wealthiest university, Cambridge, has been considering delayed sabbaticals, a voluntary part-time working scheme, and perhaps pay reductions or redundancies to address a revenue drop of hundreds of millions of pounds. Three-quarters of UK universities slipped in the QS World University Rankings for the 4th consecutive year (ever since Brexit), and 13 universities could face insolvency, based on one analysis. Mid-ranked institutions without substantial financial reserves, but with high exposure to international enrolment, face the greatest risk.

Cut Tuition, Raise Funding

The OECD’s director of education, Andreas Schleicher, argues that COVID19 lockdowns eliminated the key benefits of a traditional university education: meeting amazing professors, mingling with brilliant students, and having a great experience. Much of the value of PSE is found in “the conversations that you had, not those courses that you take.” Without that, international students in particular are questioning the value proposition of high fees at UK institutions, which are facing a potential enrolment collapse. He believes “there’s a strong case for lower fees and more government contribution.”  Times Higher Ed

American Crisis

American colleges are faced with financial impacts of the pandemic on an incredible scale. A June survey of higher ed financial officers found that half feel little confidence in their institution’s short-term financial stability, and the mood has dropped most sharply at community colleges and private non-profits. Most incurred <$2 M in unanticipated COVID19 expenses, but have already invested “significantly” in infrastructure to support virtual learning. uMass Amherst has furloughed or cut hours for 1,300 staff, to address a $169M deficit. Stanford disbanded 11 varsity teams to save $200M. Harvard lost $415M last year, and projects a $750M shortfall in the next. Ohio State has cut a quarter-billion dollars from their budget. uMichigan is projecting losses between $400M and $1B this year. A study of 2,600 US colleges has identified >500 at risk because of enrolment, tuition dependency, endowment and state appropriations weakness, and many analysts expect COVID19 to drive hundreds into bankruptcy.

Enrolment Dependency

Subtle shifts in enrolment can mean the difference between survival and closure for colleges on the brink. Fall numbers are not yet available, but the National Student Clearinghouse Research Center summarizes almost 7M students enrolled in May-July 2020, observing that community colleges and for-profit institutions suffered most, losing 5.6% and 7% of undergrad enrolments, respectively. (Male enrolments at community colleges dropped 13.6%, twice as bad.) On the other hand, public and private 4-yr colleges saw increases of 2.8% and 4% respectively – on top of 3.8% increases in graduate enrolments overall. Rural and small-town institutions generally saw greater losses than city and suburban campuses. All enrolment growth was driven by students aged 20 and under.  NSCRC

The US landscape is unique, with thousands of institutions ranging from affordable community colleges to ultra-expensive ivy league schools, but the challenges facing community colleges and rural colleges seem to be reflected here in Canada already. Unlike Canada, though, many US institutions invested heavily in campus retrofits and procedural changes to allow for a (sometimes disastrous) return to campus this fall, and atop their expenses they discounted tuition aggressively to make their class…

Tuition Discounting

The US Dept of Labor reports that college tuition dropped 0.4% from July to August, while Bloomberg reports the consumer price index for college tuition and fees fell 0.7%, “the steepest drop since 1978.” From 2019, the CPI rose just 1.3%, the smallest increase on record. Over 20 years, the tuition and fees CPI has risen 164% — more than 3x the general CPI. When students balked at paying full fees for an online experience, many institutions waived ancillary fees, postponed tuition increases, or even reduced tuition. (Williams cut fees 15%, and Princeton 10%. Georgetown cut tuition 10% for students studying online.)  Bloomberg

P3 Liabilities

Public-private partnerships (P3s) have allowed institutions to outsource food services or access private capital for the construction of student housing, supposedly to distribute risk. When things go sideways, though, they can prove costly, as when Ryerson had to cover >$5.6M in losses for Aramark. And this spring, boy, did things go sideways! Some institutions, like UC Irvine and uToledo, covered their partners’ losses. Other management companies refused to release students from their leases, prompting hundreds of lawsuits from angry parents. One of the largest property management companies, Corvias, faced congressional scrutiny for reportedly pressuring multiple institutions, including the University System of Georgia, to bring students back to campus this fall.

Financial Exigency?

Declaring a state of “financial exigency” is a last-resort measure that allows administrations to undertake drastic restructuring, like merging or eliminating programs, or even downsizing tenured faculty (although it can take a year for savings to materialize). A state of exigency does not necessarily signal impending closure: Moody’s says it can actually improve an institution’s credit rating. And it does not usually bypass faculty or shared governance. Typically, though, short-term crises or natural disasters are insufficient grounds: the AAUP argued that even Hurricane Katrina did not warrant exigency at Tulane. While the COVID19 pandemic might not itself be sufficient, it could set in motion long-term revenue slides, expenses, or reductions in government funding that might be grounds for exigency. Missouri Western State U declared exigency in March and downsized its faculty by 30%.  EAB

(Tomorrow: CdnPSE budgets!)

COVIDTech

Smoke Detector for COVID19

Ontario-based Kontrol Energy claims to have developed a wall-mounted “BioCloud” sensor that can detect airborne COVID virus and trigger an alert. A microbiologist at Western tested the device and is convinced it works: “our results are absolutely conclusive.” The company hopes to start installing the $12,000 devices in schools, hospitals and public transit stations by November.  CBC

Fancy New Face Tech

Inventors and designers are trying to build a better facemask, something cheaper, more comfortable, more effective or even reusable, for frontline health workers and for the general public. Numerous designs for transparent masks to facilitate lip-reading have been developed. Crowdfunding campaigns have raised millions of dollars for PPE, particularly for the $249 UVMask, which uses an N95 filter and treats air with UV-C light in a “sterile vortex.” Many designs are still in testing, and medical professionals warn that the general public needs better training to use their existing masks, rather than expensive new masks.  Undark

Stay tuned… tomorrow, I’ll sum up the latest from CdnPSE, and step back to look at some big picture observations about the budgetary challenges we face.