College Business Officers on the Future of Higher Education

BY BRIAN C. MITCHELL

Earlier this month Inside Higher Education and Gallup cooperated to produce the third annual survey of college and university business officers on a range of “hot button” higher education topics.

A total of 457 campus and system chief business and financial officers participated. The response from the for-profit community was weak and so this group was largely excluded from the survey’s findings.

This survey is especially interesting because what college CFO’s and their equivalents say is often more telling than what others, including presidents, suggest when they comment on the institutional health of their colleges and universities.

Presidents are effectively the chief institutional cheerleaders. Their perceptions shape their view of the effectiveness of their own leadership. Other senior administrative officers have more defined and narrow responsibilities. But chief business officers are “bottom line” by duty and definition. It’s in their office where philosophy and aspirations confront practical reality.

Reported by Doug Lederman in Inside Higher Education, what strikes readers most in the survey is the lack of long-term optimism about where higher education is headed. They question whether the economic operating and capital models that underpin higher education are sustainable. It’s not so much that the fire is lit that will burn down their campuses, at least over the short term. It’s more that these business officers understand that torches are being set all around them. They also know that only some institutions will have the resources, depth of programming, momentum, and nimbleness to survive the firestorm that will play out across higher education over the next ten years.

Interestingly, the survey respondents tend to dismiss the role that the for-profit community will play in defining a sustainable future for higher education. It’s probably a mistake, even for those of us who do not believe that the sky is falling. But the chief business and financial officers make clear that lower-tier, non-flagship public and under-endowed and enrollment challenged private colleges are the most vulnerable.

Doug Lederman notes that Jane Wellman, a well-respected higher education finance expert asserts: “This is a ‘Houston, we have a problem’ report.”

These business officers report that market limits on rising tuition, rising health care costs, concentrating on retention strategically to maintain tuition revenue, and reallocating dollars rather than offering tuition increases dominate their concerns. Additionally, Mr. Lederman notes that many colleges and universities have increased debt to finance their capital needs and that most business officers desperately seek better data to drive future budget decisions.

The summary conclusion is that there is still time for American colleges and universities to adjust by forming new business models that better predict sustainability. The amount of time depends upon the type and current financial health of the college, the willingness of shared governance (faculty, staff and trustees) to fight cultural inertia, and the ability of higher education to arrive at a new, more sustainable financial model.

The new survey (457 campus and system chief business and financial officers) illustrates very clearly that it is impossible to solve the ongoing financial crisis in American higher education by applying centralized, broad-brush solutions.

Some in higher education make the case that if income inequality improves, many of the financial concerns will evaporate for higher education. Yet most of us believe that income inequality will lessen but not fast enough or in tandem with the ability of college operating and capital budget models to withstand the gale.

Others take the opposite extreme forecasting a wave of closures and mergers. It is likely that these will increase but not at the level that the doomsday prophets suggest. It is also possible that new combinations of programs will form through better examples of collaboration and more focused strategies. The difficulty will be if faculty, trustees and administrators see only one course of action – heavily redirecting resources into on-line programming as one example – as a singular and sufficient way to stop the hemorrhaging that they face.

Perhaps the worst damage will be done to those institutions that don’t have to care yet. They play at the edges of the debate or hide in plain sight. The bottom tier of public and private colleges and universities already know the risks that face them. Some will fail but many will succeed, becoming stronger, better-defined and more sustainable places because they have no choice. It’s the “name” schools with the good regional reputations, respectable endowments, and entrenched, defensive and conservative campus climates that are at the most risk long-term.

The IHE/Gallup litany of CFO’s worries offer strategies to postpone the future. But these efforts mask a deeper concern that no one has come up with a new operating model that makes sense.

The clock is ticking.

 

 

 

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