The painful merging of state colleges and universities

In mid-July, the doleful news that Professor Chris Hallen and his colleagues at Bloomsburg University were expecting became official. Their university and two other small universities in the northeastern part of Pennsylvania, whose finances are weaker than Bloomsburg’s, are being merged to create (what for the time being is called) Northeast Integrated University.

In the western part of the state, two universities with weaker finances are being merged with California University of Pennsylvania to form (what for the time being is called) Western Integrated University (WI).

Cindy Shapira, chair of the board of governors of Pennsylvania’s State System of Higher Education (PASSHE), characterised the unanimous vote to merge the universities as “the most profound reimagining of public higher education in the Commonwealth [state]” since the system was founded two generations ago.

“This effort has proven we can fulfil what we set out to do – ensuring student and institutional success while providing the highest quality education at the lowest possible price.”

Chris Hallen, who is also vice president of the Association of Pennsylvania State Colleges and University Faculties (APSCUF), agrees that the finances of his university and the others are unsustainable.

“I understand that we do have a severe budget crunch and they needed to do something. I’m not so sure that this [the consolidation] was the something we needed to do,” says the professor who has taught chemistry at Bloomsburg, a regional university of 8,000 students, for more than 20 years and who proudly told me that he sends students to graduate schools and businesses up and down the eastern seaboard.

Pennsylvania’s decision to join the group of at least 10 states – including Minnesota, Wisconsin, Connecticut, Louisiana, Alaska and New Hampshire – that have either considered consolidating their state colleges and universities or have done so, concerns David Tandberg, senior vice president for policy research and strategic initiatives at the State Higher Education Executive Officers Association.

“I think that some of the interest is motivated by real world problems and challenges facing a number of our states and institutions. However, I also fear that some may be quick to jump on the idea of mergers and consolidations as a new fad or shiny object in higher education – and as the one solution to what might be a fiscal or management or organisational problem.

“Without appropriately diagnosing what the problem is, they are applying a diagnosis without digging into the core issues,” he says.

Perilous finances

As was the case in Minnesota a few years ago and is the case in Wisconsin, and as Shapira made clear in the case of Pennsylvania, the push to consolidate state universities is driven by the desire to save money – which is a necessity, given the perilous state of PASSHE’s finances. At one point earlier this year, half of PASSHE’s institutions had less than a six-month supply of cash on hand.

The finances are so precarious that when Daniel Greenstein, chancellor of PASSHE, appeared before the state senate’s appropriations committee to argue for the consolidation plan he’d crafted, the former director of “postsecondary success strategy” at the Bill and Melinda Gates Foundation told legislators: “Unless we figure this out, I will be recommending to the board [of governors] that we come back to the senate next year with a legislative passage to dissolve the system.”

Mansfield University, an institution of about 1,500 students in the north-central part of the state, exemplifies the system’s problems.

Pointing to the fact that in the year prior to the COVID-19 crisis, Mansfield lost US$2 million on auxiliary services and US$7 million on academic programmes, Greenstein said that if it offered the number of programmes it could afford, based on the number of enrolments it has and the level of state funding it gets, it would have to reduce the number of programmes dramatically, from more than 50 to somewhere in the 20s.

“It doesn’t have enough bachelor students in the dorm to pay the debt service on the dorm buildings,” said Greenstein.

However, he hastened to add, the consolidation is meant to head off having to close the campus – and, indeed, to leverage the fact that Mansfield will now be part of a larger institution to diversify its offerings once its finances are stable.

“These are schools that serve rural America and rural America doesn’t just need one flavour of nurse, they need the whole scope of health care, educators, business people, scientists,” he told University World News.

A rural university like Mansfield is “really important” as it is an economic engine of its community, produces jobs and produces graduates to fill the leadership roles rural communities require. “Breadth of programming is essential, not just for individual student choice but for community viability.”

Enrolment declines, budget cuts

There are two reasons why PASSHE’s universities are under severe financial stress.

The first is the rapid decline in enrolment – and the tuition dollars students bring with them – that started a decade ago. The number of students enrolled in the PASSHE system has fallen by more than 25,000 since 2010 when it stood at 119,500.

While Bloomsburg University’s enrolment did not fall as much as the system average (22%), Lock Haven’s and Mansfield’s, the two universities it is to be merged with, fell 58% and 53% respectively. The enrolment of the two universities being merged with California University fell 42% and 47% respectively, while California University’s enrolment fell 27%.

Although Greenstein and the university presidents who report to him are committed to increasing the number of students in target markets, they cannot look to future population growth to dig their schools out of their financial holes.

For, starting in 2024, enrolment is expected to decline even more rapidly. Because of the decline in births during and after the Great Recession that began in 2007, there will be 500,000 fewer students per year in America’s university-aged cohort; without hyperbole, education leaders across the country refer to this as the “demographic cliff”.

This decline will not be distributed equally across the country. States like Pennsylvania are expected to be hit harder by the ‘baby bust’ because Pennsylvania’s population is all but static as compared to the growth of states in the southwest. Worse for these universities that are so tied to the community they are in that they are named for these Pennsylvania towns, there are more than 2,000 colleges and universities in states within a few hours’ drive of the Keystone State.

The second reason for the financial crisis is because, as a number of other states have done, Pennsylvania has drastically cut its grant to regional public universities.

In 2011, Republican governor Tom Corbett oversaw a massive disinvestment of 18%. The present Governor Tom Wolf, a Democrat, convinced the Republican-led legislature to increase the allocation to PASSHE by US$65 million.

According to the American Association of University Professors, Pennsylvania allocates US$6,114 per student. This figure places the one-time British colony in which Benjamin Franklin founded America’s first public library and the continent’s first philosophical society – later, the American Philosophical Society – in 45th place among the 50 states.

Pennsylvania is eight places behind Louisiana and 11 behind West Virginia, which invest US$7,623 and US$7,981 per student respectively, despite both being significantly poorer states.

Raising Pennsylvania’s per-student grant to the national average, Greenstein says, would require increasing the yearly US$477 million grant to PASSHE by US$300 million or 66% – to three quarters of a billion dollars. Harrisburg, Pennsylvania’s capital, has agreed to a 2% increase in PASSHE’s grant and a one-time US$200 million fund to facilitate the integration of the six universities into two, deal with other challenges going forward and begin to invest in growth.

In an effort to make up for Harrisburg’s disinvestment under former governor Corbett for more than a decade, PASSHE’s universities raised their tuition fees which reached US$11,000 this year. The escalating tuition threatens regional colleges’ raison d’être.

“Many of my students are the first in their families to go to university and many of them are Pell eligible,” says Professor Sam Claster who, in addition to chairing the sociology department at Edinboro University, is the chapter president of APSCUF. A Pell Grant is a US federal grant for higher education. “They come from farming families and families that run small businesses.”

Hallen fears that because of the cost of tuition, “We are losing the ability to educate those who we are supposed to – those who are not going to be able to afford higher education because it costs too much. When I started, the state government paid 70% and the students 30%. Slowly over the years this has been taken way back. Now the state puts in 25% and the students 75%.”

Even as Bloomsburg University’s higher tuition forms a barrier to students from poor backgrounds, it acts as a disincentive to students from wealthier backgrounds.

In the early 2010s, the difference between Bloomsburg’s tuition and that of Penn State was between US$6,000 and US$7,000. Today, Bloomsburg University’s tuition of US$11,000 is US$9,000 less than the tuition at Penn State’s main campus in University Park in the centre of the state. However, Penn State now operates 19 Commonwealth campuses, some very close to PASSHE universities, where the tuition differential is about US$4,000.

For those with the means, the allure of a diploma with “The Pennsylvania State University” in Old English font written on the top is worth the tuition difference. Any further increase in PASSHE’s tuition would only increase these two trends.

Financial structure pressure

In addition to the drop in tuition revenue, an added pressure on the PASSHE system is its financial structure. The 14 universities share one bank account because the legislation that created the system superseded the schools’ existing charters, some of which date back well over a century.

Further, Greenstein explained, since the institutions share a bank account, while their debts and reserve funds are segregated for accounting purposes, they are effectively merged.

Lock Haven’s US$45 million reserve fund is, as its employees and supporters discovered to their surprise, not really Lock Haven’s. Over the decades since PASSHE’s formation, at different times, different universities have been in stronger or weaker financial positions.

At present, Slippery Rock University, at which enrolment has not declined as much as any of the institutions being amalgamated, and West Chester University, where enrolment has been increasing, collect more tuition dollars and are subsidising the universities in financial crisis.

“It is essential for all of our schools to operate in a manner that is sustainable. Those that do not because of our structure are basically imposing a burden on the others,” says Greenstein.

Merger cost savings

For PASSHE’s accountants and others focused on efficiencies, combining the universities’ ‘back-room operations’ – purchasing, the registrar’s office, payroll and human resources – makes the consolidation of six universities into two little different than any corporate takeover or merger. Savings will also be realised by a reduction of the number of senior managers.

After the merger of two institutions to form University of North Georgia in 2013, “We had one chief financial officer, we had one president. So, you save money on upper-level administration,” said the president of the university, Dr Bonita Jacobs.

The greatest savings will come, however, from reducing the number of faculty – Greenstein estimates about 90 – which will occur before the two new institutions are accredited in August 2022.

According to Guilbert Hentschke, dean emeritus of the University of Southern California’s Rossier School of Education and one of four co-authors of Strategic Mergers in Higher Education, savings can vary between 3% and 15%, a figure hard to pin down for several reasons.

One example he gave me was: “If you just track only the savings side or what you spend less on, for example, president salaries, you downplay necessary, indirectly related expenditures, for example, reconciling incompatible information technology systems. The so-called saving is bled off into ‘investment’. Money is more redirected than it is saved.”

In the case of Georgia’s consolidation, where in addition to the creation of the University of North Georgia, two other universities were merged to form Georgia Southern University, the mergers saved about 1% of the system’s more than US$2 billion budget.

According to Shelley Nickel who, in addition to having been a former budget director for the state, was interim president of Georgia Southern from 2018-19, this US$35 million was spent on strategies which noticeably improved student retention.

As an outsider watching the Pennsylvania plan take shape, Hentschke thinks it is more savings-driven. “It seems more motivated by cost reduction than resource reinvestment. What gets better with this major move?

“If the only result is a reduction in operating costs, you are going to have, at best, more efficient operations, but nothing else new on the plus side of that consolidation. There obviously is, but it’s not been front and centre in the public conversation,” Hentschke said.

Stakeholders left out

For students, academics and the communities in which these regional universities are situated, consolidation has an entirely different feel, especially because they feel they’ve been left out of the process.

Greenstein has tried to convince students that the merger is being undertaken with their best interests in mind and that he hopes that the financially stronger institutions that emerge from the consolidation process will offer students more options.

Yet, as an article in the Philadelphia Inquirer detailed, students are less than enthused. “I’m nervous about the future and what’s going to be offered,” Kayla Shutters, a triple major in art, English and psychology, told the newspaper.

Though she loves Lock Haven, where her professors know her name, had she known of the coming changes, she would not have enrolled in Lock Haven. An art major told the newspaper that while she doesn’t want to leave Lock Haven, she is considering doing so, as is a psychology major with a 3.98 GPA.

Other students are worried about the impact of the National Collegiate Athletic Association’s (NCAA) rule that allows only one team per accredited university. Once the three universities are amalgamated, and therefore operating under one charter, two thirds of those on the institution’s various teams could find themselves on the sidelines. Greenstein is aware of this issue and has applied to the NCAA for a waiver that will allow each campus to retain its sports teams.

For his part, Hallen has a number of criticisms. The first concerns each university’s corporate culture. His institution is in Columbia County, which has a hospital and industries with whom his chemistry programme works closely. A large number of his students go to work at the Geisinger Medical Center in Danville, a few kilometres away. Mansfield, one of the universities with which Bloomsburg is merging, is 144 kilometres north, near the New York State border where forestry is a major industry.

“Trying to put two dissimilar programmes together is more problematic than the [leaders of the] system realise,” Hallen says.

As are many students, Hallen is concerned about which campus is going to get which programme. The big loser in the new Northeast Integrated University, he believes, will be the Mansfield campus. “It’s the smallest of the institutions. They are expecting retrenchments that will lead to the firing of faculty. Now, they have 92 faculty. You can’t have 35 programmes with 92 faculty for the number of students,” he said.

Some low-demand courses, Spanish for example, may only be offered at the Bloomsburg campus. Mansfield is only about an hour-and-a-quarter drive from Bloomsburg which, in an area of the United States where driving is a way of life, is not considered all that far.

Yet, David Tandberg says, studies show that “students from certain areas are unlikely to travel very far for higher education”. Hallen characterises Pennsylvania State Route No 15, the road between Bloomsburg and Mansfield, as being a “lovely trip in the summer, if you like roller coasters”. In the winter, when the average snowfall in the mountainous region reaches 114 centimetres, “it can be quite a challenge”.

Worry about closures, jobs

As Greenstein has underscored in public and to me, there are no plans to close any of the campuses; indeed, the law authorising the consolidation does not allow for them to be closed. The PASSHE board “shall develop policies and procedures by which the board may create, expand, consolidate, transfer or affiliate an institution”. However, “This subsection shall not be construed to include the power to close an institution.”

Sam Claster is less than sanguine. “Once merged, each of these consolidated universities, three in the east and three in the west, will become one institution each. There’s nothing to say that this consolidation in time will not result in the closing of campuses.”

Doing so would have a devastating economic impact on any one of these towns, a point Greenstein made to me.

Not only is Bloomsburg University the largest employer in the town of 14,000, but (excluding the university’s expenditures) the faculty, staff and students pump approximately US$185 million into the local economy. “We have a few industrial parks and some white-collar jobs outside the university, but we [also] have a Walmart because the kids go there,” said Hallen.

If anything, Mansfield University is even more important to its namesake town, where it is by far the largest employer. Faculty, staff and students spend approximately US$38 million in the town of 3,301 people. “There’s not another large employer in that area,” said Hallen. The university is likewise the largest and best employer in Lock Haven (population 9,247), Claster’s home town, which used to have paper and hammer mills as well as a Piper Aircraft factory.

The impact of the COVID-crisis, Hallen told me, gives an idea of what would happen to any of these small towns were their university campuses to close. “We are an economic driver. I don’t know if they could survive.

“Think of all the restaurants. How many have closed because we switched to online learning and the campuses were empty and, as a result, they had no customers. If one of the universities closes, there are several thousand customers who are not going to be there,” he says.

Overall, PASSHE argues that the consolidation of the universities will increase economic activity in each region. The economic impact for Northeast Integrated University is predicted to rise by 1.9% to US$573 million by 2025-26. The impact for Western Integrated University is expected to be much greater, US$758 million by 2025-26 or 8% higher than 2022-23.

A paper written for the Political Economy Research Institute at the University of Massachusetts at Amherst, by economics professor Michael Ash and two colleagues, disputes these predictions.

Using figures PASSHE made public at the end of 2020, Ash and his colleagues show that by 2023, the two new universities will employ 809 fewer faculty than today. Bloomsburg will lose 15% of its faculty or 154 positions, while Mansfield will lose 33% of its faculty or 101 positions. Edinboro will lose 236 positions or 37% of its faculty.

“Over the short term, the loss will be real: a large number of white-collar – faculty and professional staff – and blue-collar jobs. These are unionised positions, high quality employment in a region of Pennsylvania that can little afford this type of loss,” Ash told University World News.

Worse, instead of spin-off jobs associated with increased hiring in the region, these cuts will cause the loss of jobs beyond the campus gates. Ash’s analysis shows that the scaling back of economic activity – purchasing fewer meals from an in-town caterer or buying stationery from a local office supply store – because of job losses at Northeast Integrated University, for example, will lead to an additional 40 job losses in the area (on top of 370 at the university itself).

“But,” said Ash, “the news is even worse than that, because you not only lose those jobs but these are no longer people who go home with a paycheck and so they won’t be spending money on buying a set of tires or they will cut back at the grocery store. That will have an additional negative impact that will be of the order of another 120 jobs lost.”

Finally, Ash rejected PASSHE’s claim that the newly restructured universities will be more efficient and therefore better for students’ education.

“There’s a certain element of ‘you get what you pay for’ here. These are universities that provided an engine of mobility to working class students from regions of Pennsylvania that have seen extensive job losses. And this is going to cut off this important access point to white-collar employment for young people coming up,” Ash said.

He added, “The description of these three university consolidations into one as creating efficiencies does not capture the loss of access that’s going to happen.”