Tuesday, March 2, 2021  |  Category: Eduvation Insider

Financial Downsides Down South

Good morning!

I’m on day 2 at the League for Innovation in the Community College’s Virtual Innovations Conference, while prepping for several sessions – so I’ll be keeping these issues of the Insider somewhat streamlined.

Yesterday I recapped the latest developments in Laurentian’s insolvency crisis – a financial mess largely of the university’s own making – but that leads us to look at budgetary pressures in general. Provincial and state legislators were cutting higher ed funding around the world, even before COVID19 decimated foreign student enrolments and ancillary revenues. Institutions from New England to New Zealand are enduring pressures and considering decisions much like those at Laurentian. Today, let’s look at higher ed finances south of the border.

But first, a surge of new cases…

 

COVID on Campus

Since Monday, there have been 54 more cases of COVID19 reported by CdnPSEs. (See my master spreadsheetfor a running tally of cases in CdnPSE since Sept 2020.)

Mohawk College reported 2 more student cases of COVID19 on Sunday (just a bit late for press time), one at the Fennell campus and one at the Aviation campus.  Hamilton News

Ontario Police College reports that confirmed cases of COVID19 have soared from 18 to 65 (up 47), prompting a second round of testing on “high risk” students and staff. Classes remain suspended for the ~700 recruits. The town of Aylmer has an infection rate of 800.9 per 100,000 residents. London Free Press

Peterborough’s Severn Court student residences is now reporting 27 confirmed cases (4 more than yesterday) including one variant of concern. (23 cases are Fleming College students, and 4 Trent U students.) Fleming has suspended all in-person classes for 14 days. The local MOH is concerned that the outbreak could lead to a lockdown for the entire city. All the cases have been traced to a single social gathering on Feb 20.  Global

uWaterloo reported yesterday that a community member has tested positive.  UW

 

South of the border, the New York Times continues to provide the best data on campus cases…

1,900 American colleges and universities have added at least 120,000 cases of COVID19 since Jan 1, and the New York Times has tracked >530,000 cases and >100 deaths involving campus students and employees since the pandemic began. At least 17 institutions have reported >1,000 new cases in 2021 alone. (They caution that the data is a significant undercount.)  New York Times

 

 

US Budget Hits

The pandemic has hit American institutional finances like a brick wall, cutting billions in revenue, imposing millions in new expenses, forcing some 650,000 job cuts and $23B in endowment spending, and pushing vulnerable institutions towards a financial precipice… 

 

Millions in COVID19 expenses

US higher ed institutions have spent more than expected on COVID19 testing, PPE and online learning, while losing substantial revenue due to the pandemic. The APLU found that the public universities they surveyed lost an average of $11.6M in tuition and fees, $28M in room and board, $52M in auxiliary and other revenues (or about $92M in all). On average they spent $7.5M on COVID19 testing, $3.5M on social distancing initiatives, $1.6M on contact tracing and $1.3M on face masks – and including other expenses, about $21M each on COVID19 measures. The uWisconsin system spent $36M on 350,000 COVID19 tests. And institutions expect to spend similar amounts this Spring too.  Inside Higher Ed

 

$800M Hit in Pennsylvania

uPenn expects to lose $77M for the 2020-21 academic year (not counting its health system), but it can handily cover the minor loss on its $4.5B budget with returns from its massive endowment. Four other Pennsylvania universities (Penn State, uPittsburgh, Lincoln and Temple U) calculate their collective shortfall at $800M – half of it at Penn State alone.  Philadelphia Inquirer

 

650,000 Workers Displaced

The US Department of Labor reported that American colleges and universities have slashed 650,000 jobs over the past year, or 13% of their workforce. Obviously, many were precarious on-campus workers in food service or maintenance, and many adjunct faculty have seen their courses cancelled. “For workers in their 20s, job loss may mean a promising career in higher education is at an end as they are forced into other lines of work. For older workers, their higher education careers may well be over for good.” John Kroger argues that the 4,000 US institutions are ideally situated to offer displaced workers upskilling and reskilling, perhaps heavily discounted or free. “This is a defining moral issue for higher education right now. We have to do better.”  Inside Higher Ed

 

$23B Spent from Endowments

American higher ed spent more than $23B from endowments in 2019-20, according to a new report from NACUBO – 4% more than the previous fiscal year, mainly due to the COVID19 pandemic. Colleges and universities spent 48% of those funds on financial aid for students, and 17% on academic areas including teaching and tutoring. Endowment returns were just 1.8%, compared to 5.2% the year before, and donations declined by 15%. If such low returns continue, endowment managers may need to consider higher-risk investments.  University Business

 

“In this challenging year, higher education institutions reinforced their commitment to students and used their endowments exactly as designed: to provide ongoing, predictable – and even increased – support for their educational missions, a commitment that endowment leaders work to ensure will extend to future generations.” – Susan Whealler Johnston, CEO, NACUBO

 

 

Big Cuts at Small Colleges

Smaller private institutions in New England and the US Midwest seem to be struggling hardest again relentless demographic declines and harsh economic realities. In mid-December, the College of Saint Rose (NY) announced it was cutting 16 majors and 6 master’s degrees including Chemistry, Math, Music, and the Center for Art & Design. (The $6M in academic cuts followed $8M in admin cuts, or ~20% of the institution’s total budget, and followed cutting 23 tenure-line faculty in 2016.) uEvansville (IN) proposed eliminating 35 faculty positions, 17 majors and 3 departments: Music, Philosophy/Religion, and Electrical Engineering/ Computer Science. (The faculty voted no-confidence in the administration last October.) Jesuit-affiliated Marquette U (WI) announced it would terminate 225 faculty and staff (8% of its workforce) to save $41M, acknowledging that demographics dictate “a smaller Marquette.” The AAUP is protesting the lack of consultation.  Inside Higher Ed

 

 

Mergers & Closures

With thousands of institutions, many private non-profits, American higher ed has incredible diversity and some unsustainable small institutions…

 

A Decade’s Damage in a Year

The 10% decline in new enrolments Nathan Grawe forecast for US colleges during 2018-29 instead hit many institutions all at once during the pandemic. Clayton Christensen’s 2011 prediction that up to half of US colleges would go bankrupt in the next decade “seems at least plausible” now. (The 2008 recession led to a closure rate of 9%.) Utah’s Sorenson Impact Center has modelled the impacts of COVID19 on vulnerable students, and forecasts major enrolment declines at HBCUs (historically black colleges and universities), and the growth of “education deserts” in rural America. “The higher education sector now faces a crucial set of decisions that will shape its future for decades to come.” Campus leaders should proactively prepare, downsize and prioritize, but ensure they also “address long-standing inequities and adapt in student-centric ways.”  Inside Higher Ed

 

Will Institutions Survive?

Forbes assesses the pre-pandemic financial health of 921 US institutions and concludes that nearly half of private colleges are “now effectively on ventilators, gasping for air,” thanks to declining enrolments and ancillary revenues. Some small institutions, like Pine Manor College (MA), will merge with more stable competitors, but few will actually close. Since 1995, up to 10 private US colleges have closed each year, but recessions have little to do with it. Forbes notes some remarkable turnaround stories, like Atlanta’s Oglethorpe U and New Orleans’ Tulane U, but also some institutions in decline, like Virginia’s Emory & Henry College, Drew U, and Rhode Island’s Providence College. Atop the rankings, unsurprisingly, are Yale, Princeton, and MIT. (Harvard came in 16th, although the top 38 seem to have identical 4.50 “financial GPAs.”  Forbes

 

“Many academic institutions seem to operate oblivious to financial reality and muddle through year after year on the edge of insolvency.” – Matt Schifrin & Hank Tucker, Forbes magazine

 

 

State System Consolidations

Higher ed system consolidations are increasingly being discussed in the US. New Hampshire governor Chris Sununu is proposing a merger of all 13 state universities and community colleges into a single system, supposedly to save time, eliminate competition, and streamline student pathways between institutions. Tommy Thompson, former governor of Wisconsin and interim president of the uWisconsin system, is talking about merging its 13 campuses with 16 Wisconsin Technical Colleges. The Penn State system is planning to merge 6 of its universities into 2 new organizations. Vermont is discussing a merger of 4 universities and community colleges into a single institution.  Forbes

 

“The new higher education landscape is changing some of the prior calculus, and necessity can be a great persuader. While anxieties about lost jobs, forsaken identities, and sidelined athletic teams remain obstacles, they are increasingly being offset by a recognition that future survival may depend more on collaboration than competition.” – Michael Nietzel, President emeritus, Missouri State U

 

 

Laurentian in Vermont?

Vermont’s State College system has been struggling with longstanding underfunding, increasing costs and declining demographics, intensified by the impact of the COVID19 pandemic. (Sound familiar?) The system chancellor suggested closing 2 institutions – prompting a backlash that led him to resign. The government approved $30M in emergency funding last summer while investigating options, like merging Castleton U, North Vermont U and Vermont Technical College. Vermont State College employees are suggesting that the system could save $7M simply by streamlining redundant upper administration positions. “If any cuts need to be made now, it should be at the top, not at the bottom.”  US News

 

“If any cuts need to be made now, it should be at the top, not at the bottom.” – Helen Mango, Castleton U prof (VT)

 

 

Ethics in the Worst of Times

 

Ethical Leadership in Financial Crisis

The COVID19 pandemic is an inflection point that has dispersed campus communities, decimated tuition revenues and endowment returns, impacted higher ed jobs and careers, and will inevitably push some vulnerable US colleges to close. Campus leaders need to “set a philanthropic example,” lobby government for emergency aid, and provide the same to students. They also have to ensure consistent, transparent communications to all the institution’s stakeholders in good faith, especially when making “truly devastating decisions” around closure. They should consider institutional partnerships or mergers, how to provide severance to employees and teach-outs to current students. “In good times, our colleges and universities have been wonderful examples of diverse and effective learning communities dedicated to producing educated citizens who will make a difference in the world. In this worst of times, we must continue to do just that.”  Inside Higher Ed

 

“In good times, our colleges and universities have been wonderful examples of diverse and effective learning communities dedicated to producing educated citizens who will make a difference in the world. In this worst of times, we must continue to do just that.” – Susan Resneck Pierce, President emerita, U Puget Sound

 

 

Of course, cuts to government funding and institutional cuts are not unique to the US, although (like many trends) examples there are “writ large.” Stay tuned – tomorrow we’ll look at some developments in Australia and Canada too…

 

 

#ICYMI

 

Marching On – Even When Apart

The uVirginia Cavalier Marching Band can’t perform together at football games, due to social distancing requirements, but you have to admire their ingenuity: the band directors recorded hundreds of students on separate tracks and then mixed the recording to be played at games. (And the 1.5-min video is pretty effective to tell the story, too.)  YouTube

 

In a similar vein, I have to commend the Virginia Tech Wind Ensemble for the way they turned the campus into a concert hall, and produced a 1.5-min behind-the-scenes video.  YouTube

 

 

As always, thanks for reading! And while I’ve got absolutely no shortage of topics for future issues, let me know if there’s something you would particularly like me to tackle!

Be safe and stay well,