When higher education's future is uncertain
While environmental sustainability has continued to be a worthy tangential goal, it has been eclipsed by a more pressing concern impacting on a relatively large segment of the US's tertiary education community.
Recent press reports suggest that as many as 40% of the nation's tertiary institutions may not survive to enjoy a green future. Their financial sustainability is in question. Without it, they will not have a future, green or otherwise.
The coincidence of a bundle of negative factors has prompted concerns that many of the nation's small liberal arts institutions and second-tier regional comprehensive universities are, or soon will be, in financial distress.
Categorised as 'Tuition Dependent Institutions', Bain and Company and Moody's Investors Service have noted that the residual effects of the Great Recession, coupled with declining enrolments at the small liberal arts institutions and lower state appropriations at the regional comprehensive universities, have presented an unprecedented challenge for those trying to balance their operating budgets.
The public and its elected officials' tolerance of decades of tuition increases outpacing the Consumer Price Index has markedly waned in the face of high underemployment and unemployment among recent college graduates carrying high debt obligations.
The once unquestioned mantra that a college degree yields an invariable return on investment is now openly questioned.
Boom and bust
This new and challenging environment has changed the nature of institutional budget planning.
The US tertiary education sector enjoyed decades of buoyant optimism sustained by relatively secure revenue streams, in part bolstered by steady enrolment growth and broad public and governmental support. Federal and state financial aid with loan programmes lessened the sting of ever-increasing tuition.
Planning for growth was often contentious. Dividing the spoils from the expected growth in tuition and enrolment with their added revenue was not entirely an unpleasant activity.
In addition to expected annual salary and wage increases with higher operating costs to absorb, there were an endless supply of promising new programmes or services requiring additional faculty and staff.
Overall planning for growth was a gratifying exercise. At least two generations of US academic executives and budget officers were conditioned to plan for growth.
Planning in the present day and for the foreseeable future is likely to be both contentious and painful, as witnessed by the uptick in the number of faculty votes of no confidence.
With new enrolments and the public's tolerance of tuition increases in decline, budgets must still be balanced. Unfortunately, the number of available cost saving options is relatively few and widely unpalatable.
The once perpetually bright planning horizon has darkened. Laments of having no more fat to cut have been encountered. If an institution's lean muscle is to be saved, hitherto draconian surgery will have to become more frequent.
Five stages of grief
The recognition and acceptance of contemporary financial challenges have been slow and painful, similar to acceptance of a terminal illness. I suggest that in aggregate the tertiary sector's responses partially mirror a truncated expression of Kubler-Ross's five stages of grief.
As revenue goals were missed, anger was expressed. Tertiary institutions as well as their many stakeholders were mere servants of a fundamental social and economic good that were being shameless treated. As aggregate enrolments and external subsidies have continued to decline, anger, dismissals, combined with bargaining, were expressed.
The tertiary sector as a pillar of the economy and society deserved far better. Missteps were acknowledged and promises of better performance were made, if only temporary lifelines could be extended.
When these stages proved fruitless, endangered institutions recognised that they needed to curtail operating costs to match their flagging revenue. Financially stressed institutions have few options in the short term.
Curtailing utility consumption and closing underused buildings produces only marginal cost savings. Continued reliance on deferring maintenance would only further stress their financial outlook as well as become increasingly risky as problems caused by infrastructures that are past their useful lifespan are not addressed.
Painful acceptance has been expressed in an increasing number of cutbacks. Announcements of programme closures and terminations of faculty lines, both tenured and contractual, have been on the up. Support staff have been cut as well as sports teams, which are too often the last to go.
These draconian measures are expressed in career disruptions that, in the current and projected employment market, may take years to remedy, if they ever are.
The shock training being endured by the current cadre of tertiary education executives and budget managers will hopefully be sufficient to overcome their institutional memory for budgeting for growth.
Sustainable institutions must be prepared for growth as well as the inevitable decline.
* William Patrick Leonard is vice dean at SolBridge International School of Business in Daejeon, Republic of Korea.