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V3I1: Financial Sustainability is not a Sprint; it’s a Marathon

By: Sonny Ramaswamy, President, NWCCU

Virtual townhall conversations the Northwest Commission on Colleges and Universities (NWCCU) hosted last Spring on the impacts of the COVID-19 pandemic informed us of extant and future challenges and concerns at our institutions – including crucial financial and cash flow issues, significant credit crunch, declining enrollments – creating uncertainty over their long-term financial viability and sustainability. For some, the situation is an existential threat.

With the worsening COVID-19 situation through the summer, the unrelenting news – reminiscent of the proverbial drip, drip, drip of Chinese water torture – for and from universities and colleges, and indeed over the last few years, has been one of continued declining enrollments because of the strong economy, combined with concurrent budget reductions, contributing to financial instability.

Piled on top of the deep financial hole as a result of the deep economic recession of the last decade many institutions were still trying to dig out of, the current COVID-19-driven financial strain is due to significant loss of revenue, the result of reduced tuition, fees, and cancellation of college sports, along with significant costs related to managing the pandemic’s effects on campus.

The recent spate of closures, mergers, and creation of loose, confederated partnerships has picked up steam, because of the uncertainty of financial sustainability.

As colleges and universities continue to develop a path forward to ensure financial sustainability, it’d be worth remembering that the effort will be akin to that of a marathon and not a sprint. There are a number of options and concomitant actions institutional leadership might consider, as eloquently described elsewhere in this issue of The Beacon.

Sustainable actions institutions consider must rely on data- and evidence-informed projections about budgets and enrollments, articulate specific guidelines for financial decision-making, and use realistic assumptions and scenario planning to inform actions tied to strategy that considers long-term consequences, while balancing cuts with strategic investments. Planning for these actions must be inclusive, i.e., engage all stakeholders to develop a path forward – students, faculty, administrators, alumni, donors, board members, community members and leaders, and as appropriate state legislative and executive representatives. Once actions are deployed, there must be clearly articulated approaches, such as publicly available dashboards, to track results and impacts and allow for mid-course corrections with broad input, as appropriate.

Actions – strategic and tactical – may include a portfolio of approaches, such as generation of new revenue and reducing core expenditures such as furloughs, early retirements, and buyouts, tailored to each institution’s unique location, mission, and size. Of course, revenue-generation may require resources that may exceed potential gains and sometimes may fail to generate the anticipated positive return on investment. Yet another source of revenue could be the potential sale, lease, or rental of real estate holdings. The unprecedented, low interest rates afford colleges an opportunity to refinance outstanding debt, potentially reducing long-term financial strains. Similarly, the low (no?) cost of borrowing money offers yet another opportunity for institutions with cash flow and credit crunch challenges to address short term pandemic challenges.

Another potential opportunity for revenue growth is through focused recruitment of students from traditional (a diminishing demographic?) and non-traditional backgrounds, including veterans, older individuals in the workforce that need to update their credentials, and the almost 35 million individuals who did not complete college for various reasons.

We have heard from some institutions of their intent to develop and deploy online educational programs as a potential source of new revenue. While this is laudable, institutions must remember that this is fraught, because the cost of entry is significant and the online environment is already crowded with a number of players with years of successful experience. Incidentally, if one is seeking to partner with online program managers, be aware of the situation some institutions found themselves in, where the terms were so one-sided that, for example, one of our institutions closed, with all of its concomitant fallout on students, faculty, staff, and the community.

The COVID-19 pandemic crisis affords a rare opportunity to make fundamental changes, including creation of strategic partnerships and significant programmatic changes, such as redirection of resources to programs that offer growth potential and elimination or reduction of investments in programs not core to the institution.

All such decisions must, however, ensure that student success and achievement of educational goals is not compromised. Further, it must take the long view, i.e., after the COVID-19 pandemic has passed, institutions will need to restart some suspended operations, reinstate furloughed employees or hire new employees, and restore on-campus instruction in a changed context. They must also realign budgets with post-pandemic strategic priorities that offer growth potential.

One other important stakeholder that colleges and universities must engage regarding financial decisions is NWCCU. As a reminder, any decision – such as elimination of or changes to programs, reductions in force, changes to student services, closures, or mergers – that impacts student learning and outcomes must be communicated to NWCCU and Substantive Change proposal(s) must be submitted for approval before the decision is instituted. NWCCU’s commitment is to offer prompt evaluation and approval.

Another critical consideration is that any and all business decisions must be student centered and ensure the value proposition of higher education. The value proposition – i.e., of success and reputation – based on a renewed and vigorous commitment to student success by colleges and universities is in promoting ways to enhance graduation rates, closing equity gaps, improving learning and building upon the skills of students to serve a changing world, and reducing the cost of education.

It will take a continued commitment by higher education to enhance the cognitive and non-cognitive skills of students through learner-centered experiential opportunities and include a combination of on-campus, online, or blended/hybrid, and technology driven education and learning models to create anytime, anywhere learning offered in an open-campus environment. This will require continued emphasis on maintaining student-ready campuses, offering courses and programs tailored to the needs of students to help them meet their aspirational goals. It will take a singular focus on what we refer to in NWCCU’s 2020 Standards for Accreditation as core competencies, i.e., a combination of technical, cognitive skills, along with the non-cognitive, essential skills, such as critical thinking, problem solving, communication, teamwork, and other such skills, and, most importantly, the ability to question assumptions. Finally, students need the sense of belonging and community, which are factors that enhance retention and outcomes, both in on-campus and online educational contexts.

To achieve viability and sustainability, colleges and universities must demonstrate the value proposition of higher education to the American public, which requires a re-imagining and re-engineering of higher education, laser-focused on student success and closing equity gaps, while ensuring accountability and transparency. Educators must leverage technology in support of efforts to increase student achievement and success; adopt new and emerging educational models, including alternative credentialing, badges, competency-based education, certificate programs, and other such approaches; and incorporate data and evidence-informed approaches for continuous improvement in educational outcomes.

Creating value is easy, if every individual involved makes a commitment: students, faculty, staff, administrators, parents, alumni, legislators, regulators, and accreditors.

Achieving financial sustainability is possible if one ensures the effectiveness of higher education, particularly as it relates to student learning outcomes and achievement.

The current financial challenges are not insurmountable, if one has the stamina and takes the long view and prepares and acts accordingly.

“You have brains in your head; You have feet in your shoes: You can steer yourself any direction you choose.” Dr. Seuss in Oh, the Places You’ll Go!

 

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