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Inside Higher Education
Foundering
Finances, the Faculty Role: a Survey of Business Officers
By Rick Seltzer
July 15, 2016
College and university chief business officers increasingly agree
higher education is in a financial crisis, yet many are divided over
the role a key constituency on campus should play as institutions
grapple with budget issues: their faculty members.
Those are major findings in Inside Higher Ed’s 2016 Survey of College
and University Business Officers, the sixth such study. The survey,
conducted by Gallup, drew responses from chief business officials at
386 public and private institutions among the more than 2,700
administrators invited to participate. A copy of the survey report can
be downloaded here.
A headline result is a steep rise in the portion of business officers
agreeing with the idea that higher education is in the middle of a
financial crisis. Nearly two-thirds of those surveyed, 63 percent, said
they felt media reports suggesting a financial crisis accurately
reflect the general higher education landscape. Last year, just 56
percent of respondents agreed.
Chief business officers at public institutions were more likely than
their private college peers to see a crisis, with 70 percent agreeing
with media reports. Still, a majority of business officers at private
nonprofit institutions, 60 percent, agreed there is a crisis.
Business officers were more confident in finances at their own colleges
and universities, however.
This year, 64 percent of chief business officers strongly agreed or
agreed that their institutions will be financially sustainable over the
next five years -- the same proportion as in last year’s survey.
Confidence slipped when the timeline was extended to 10 years, with 54
percent saying they were confident in their institutions’ financial
stability over that time frame. But the 54 percent mark was up sharply
from 2015, when just 42 percent expressed confidence over 10 years.
Chief business officers appear to be recognizing the financial
challenges faced by many colleges and universities across higher
education, experts said. At the same time, they appear to believe
they’re positioning their own institutions for the future.
There has been plenty of bad news to catch business officers’
attention, said Andrew Laws, managing director at Huron Consulting
Group, who focuses on college and university finances and business
practices.
About the Survey
Inside Higher Ed’s 2016 Survey of College and University Business
Officers was conducted in conjunction with researchers from Gallup.
Inside Higher Ed regularly surveys key higher ed professionals on a
range of topics.
On Thursday, Aug. 18, at 2 p.m. EDT, Inside Higher Ed editors will
analyze the survey's findings and answer readers' questions in a free
webinar. To register, please click here.
The Inside Higher Ed survey of business officers was made possible in
part by advertising from AGB Institutional Strategies, Axiom, Jenzabar,
Oracle and Workday.
“It’s become more tangible in the last 12 months,” he said. “There
haven’t been stories of stress. It’s been stories of closings. You’ve
seen the continuation of more credit rating downgrades. You’ve seen
growth in the Department of Education’s list of
heightened-cash-monitoring institutions.”
Business officers may be more bullish on their own institutions because
they feel they’ve taken steps to secure themselves against financial
threats. Those in some parts of the country, like California, with its
increased state higher education funding, may see themselves in better
financial situations. Or some may be ignoring their own problems while
feeling relieved that they haven’t run into immediate crises, Laws said.
But several experts said the survey indicates business offices are not
broadly engaged in the deep, strategic work necessary to deal with the
broad financial crisis they report. They see business officers as
trying to buy their way out of the situation instead of taking a deep
look at costs.
“Reading into this, I don't see a strong thread of evidence that the
deeper work on restructuring this [enterprise] is really underway,”
said Jane Wellman, senior adviser to the College Futures Foundation.
“The problem with higher ed finance is that there will be a time when
the money's going to dry up again. Student enrollments are going to
keep stabilizing or declining, full-pay [students] will go down.
“The conditions that would allow one to be optimistic long term aren't
there,” Wellman said.
Future Strategies
Experts' concerns over strategies started with business officers'
perceived unwillingness to shutter programs at their own institutions.
Those concerns continued when they saw many business officers hoping to
improve finances by boosting enrollment.
A large majority of chief business officers said most colleges are too
hesitant to shut down academic programs, 90 percent. The majority
shrank significantly when business officers were asked about their own
institutions, though -- just 68 percent said their own college was too
hesitant to shut down academic programs.
Another large majority, 85 percent, said colleges need to be more
willing to experiment with new kinds of academic and nonacademic
offerings in order to build new revenue streams.
A hesitancy to close existing programs combined with interest in
starting new ones is not a recipe for sustainability, said Laws, of
Huron Consulting Group.
“I think what you should be looking at is the mix of academic programs
and how you create a sustainable academic portfolio,” he said. “You’ve
got to have enough of those kinds of market-relevant, profitable
academic programs that you can subsidize these high-cost,
mission-critical programs. I think there’s still a hesitancy to do
that.”
The survey gave chief business officers a list of 18 potential ways to
improve their institutions’ financial situation. Business officers
proved most receptive to trying to increase enrollment.
For the 2016-17 academic year, 87 percent of chief business officers
said they strongly agreed or agreed their institutions would implement
strategies to increase overall enrollment. That outpaced launching new
revenue-generating academic programs at 71 percent, exploring
collaboration opportunities for academic programs with other
institutions at 65 percent and eliminating underperforming academic
programs at 43 percent.
Those numbers show institutions are not looking to the future, said
Wellman of the College Futures Foundation.
"If they were really doing the anticipatory stuff, we would see higher
numbers on academic program restructuring,” she said. “They haven't
made this a routine part of the way they do business. It's still
something you do when you have to.”
Other strategies a significant portion of business officers said they
would pursue to improve their finances included enrolling more full-pay
students at 43 percent, exploring collaboration opportunities for
administrative services with other institutions at 39 percent, lowering
the tuition discount rate at 36 percent and reducing administrative
positions at 35 percent. Additional strategies were increasing teaching
loads for full-time faculty at 32 percent, shifting more undergraduate
teaching to part-time or nontenured faculty at 31 percent, shifting
from classroom-based to web-based instruction at 30 percent and
outsourcing more administrative services at 26 percent.
The relative lack of interest in increasing teaching loads surprised
Art Hauptman, an independent public policy consultant who specializes
in higher education finance.
“I understand you have limited control over your faculty,” he said.
“The faculty wants to teach fewer courses and do more research. That’s
sort of the basic tension in the system, which [business officers are]
in the middle of. But why, if you really were in trouble five or 10
years down the road, wouldn’t you say, ‘Here’s the situation and we
need you to teach another course a semester’ rather than cut people?”
Just 11 percent of chief business officers agreed they would pursue
cutting spending for intercollegiate athletic programs. That was below
promoting early retirement for faculty at 27 percent, shifting more
undergraduate teaching to senior faculty at 22 percent, promoting early
retirement for administrators and staff at 17 percent, and revising
tenure policies at 13 percent. But it was above outsourcing more
academic programs at 5 percent.
Some experts hadn’t anticipated such a heavy emphasis on boosting
enrollment.
“I was surprised that so many CBOs named enrollment growth as the
remedy of choice for financial difficulties,” said Stefano Falconi,
managing director of the Berkeley Research Group LLC in an email. “This
is a very traditional response, but not very feasible in those regions
where demographics are not favorable. It is also not very meaningful in
the absence of clearly defined discount-rate goals.”
Colleges and universities will need to focus on enrolling a new type of
student if they hope to grow in the future, said Gary Rhoades, a
professor and the director for the study of higher education at the
University of Arizona. Rhoades is also a member of the National
Association of College and University Business Officers’ economic
models national task force, he said.
Colleges and universities are currently pursuing a shrinking
demographic of wealthy, white students, Rhoades said. He suggested more
efforts to increase enrollments by tapping into other, growing
demographics, like first-generation college students, students of
color, lower-income students and immigrants.
Some institutions can chase wealthy and out-of-state students that pay
higher net tuition, Rhoades said. But many others will end up spending
large amounts of money to woo those students, only to lose out to
better-known competitors or fail to retain those students after a few
semesters.
“You’re chasing money at the cost of not only diversity, but you’re
doing it at the cost of quality,” he said. “It’s not even sustainable.”
Faculty Role
Chief business officers varied more widely in their opinions when it
came to the question of involving faculty members in budgeting. Just 33
percent of business officers agreed that faculty members have been
supportive of efforts to address budget problems at their institutions.
The portion who said faculty members had not been supportive was only
slightly different, 27 percent. That left 40 percent neutral on the
question.
Meanwhile, 43 percent of chief business officers said faculty members
played a meaningful role in collegewide budget decisions at their
institutions. The remaining majority, 57 percent, said the faculty did
not play a meaningful role in such decisions.
That question proved to be a fault line between diverging attitudes
toward faculty involvement in budget discussions. Business officers who
said faculty members played a meaningful role in budget discussions on
their campuses were much more likely to value faculty members'
contributions and to say that faculty members understood
institutionwide financial challenges.
They were also more likely to say faculty members should be involved in
budget discussions. Among chief business officers who said faculty
members play a meaningful role in budget discussions, 73 percent agreed
faculty members actually should play such a role. Just 43 percent of
chief business officers who said faculty members do not play a
meaningful role in budget talks felt the same way.
The gap was similar on the question of how much insight faculty members
provide in budget discussions. Among chief business officers who said
faculty play a meaningful role in budget discussions at their
institutions, 62 percent said faculty members provided valuable
insights in the discussions. Only 22 percent felt the same way at
institutions where faculty members did not play a meaningful role in
budget talks.
Divisions continued on the issue of whether faculty members understand
the financial challenges an institution faces when they participate in
collegewide budget discussions. Among chief business officers who said
faculty play a meaningful role in budget discussions, 41 percent agreed
faculty members understood financial challenges. Just 15 percent agreed
among those who felt faculty did not play a meaningful role in budget
discussions.
Those attitudes had some calling for business officers to listen to the
faculty more. Professors can provide important information on a range
of issues, including whether shutting down programs is a good idea,
said John Barnshaw, senior program officer and senior higher education
researcher at the American Association of University Professors, who
previously directed the Delaware Cost Study. The insight faculty
provide can be important when hard decisions have to be made, he said.
For instance, an administrator might push to close an academic program
because it generates few degrees. But those programs might host classes
that are requirements for other majors, so shutting it down can have
unintended and expensive consequences, Barnshaw said. He added that
faculty members can have ideas that would reduce costs or prove helpful
to institutions’ bottom lines.
“That is a tremendous opportunity for education of business officers,”
Barnshaw said. “Faculty actually know a lot about their subject areas,
and they have a lot of connections in the communities in which they
work.”
Others cautioned that additional faculty involvement can be a challenge.
“There often aren’t processes that bring [faculty members] into a
meaningful role in collegewide budget decisions,” said Donald Heller,
provost and vice president of academic affairs at the University of San
Francisco and a researcher who studies higher education finance. “You
can’t separate financial issues from academic issues at most
institutions, but the fact of the matter is relatively few faculty
members have an interest in the broader financial issues at an
institution.”
Ultimately, the question becomes how much faculty are involved and in
which issues, Heller said.
“It’s always a balancing act,” Heller said. “For example, if you’re
looking at the issue of faculty compensation and the impact that has on
your budget, then of course faculty are going to be much more involved.”
Over all, 54 percent of chief business officers said faculty members
should play a meaningful rule in collegewide budget decisions, and 40
percent said faculty members provide valuable insight during budget
discussions. Also over all, 39 percent said faculty approval should be
required when colleges consider new revenue-producing programs, and 27
percent said faculty members understand the financial challenges
institutions face when they take part in collegewide budget discussions.
Faculty involvement is an important point when considered in light of
other survey findings on performance and program evaluation. A large
portion of chief business officers signaled their institutions lack
information needed to make decisions. Just 51 percent said they had the
information needed to make informed decisions about which academic
programs should be eliminated or enhanced, and 49 percent said they had
enough information to make informed decisions about the efficacy of
specific academic programs and majors.
Additionally, 44 percent said they had enough information to make
informed decisions about the performance of individual faculty members.
Only 40 percent said they had enough information to make informed
decisions about the performance of academic technology, 39 percent said
they had the information to make informed decisions about
administrative technology performance and 34 percent said they had
enough information to make informed decisions about each administrative
unit on campus.
Faculty members could provide information in many of those cases,
Barnshaw said.
“If an institution is going to move forward, it’s important that budget
officers reach out to the faculty in real, cogent ways,” he said. “I
often hear from budget officers that faculty have no idea. Those budget
officers can educate, and faculty members can probably educate budget
officers.”
Debt Levels, and Other Findings
Other results of the survey include the following:
Fifty-seven percent of business officers agreed or strongly agreed that
new spending at their institution in the years ahead will come from
reallocated dollars rather than new revenue. That was especially true
of public university CBOs, a full two-thirds (67 percent) of whom
responded that way, and 75 percent of those at public master's and
baccalaureate institutions.
A question on trustee understanding of campus finances revealed a major
public-private divide. While 80 percent of business officers at private
nonprofit colleges agreed that board members at their institutions "are
aware of and understand the financial challenges confronting my
institution," just 64 percent of those at public institutions agreed.
Business officers at public doctoral institutions had the least
favorable view of trustees: just 45 percent of them said board members
understand their institutions' finances.
Almost three-quarters of business officers believe their institution
has the appropriate amount of debt. Seventy-two percent of those
surveyed gave that answer, while 14 percent said they believed their
college or university had too much debt and 14 percent thought it
should take on more. Only 62 percent of CBOs at private baccalaureate
institutions said their college had the appropriate amount of debt --
but 20 percent said they had too much, and 18 percent thought it should
absorb more. A majority of business officers (52 percent) disagreed
with the view that their institution had underutilized debt as a
financing strategy.
Nearly half of CBOs (49%) say their institutions cannot make
additional and significant spending cuts without hurting quality.
4 in 10 business officers say their institution’s tuition discount rate
is unsustainable; figure is 50 percent at private colleges, 28 percent
at publics, and 60 percent at private baccalaureate colleges.
CBOs overwhelmingly agree that financial issues, not ethical or
political ones, should drive decisions on investing endowment funds.
Acceptance of the federal financial responsibility score appears to be
on the rise. Sixty percent of business officers said they included the
federal score among the menu of indicators their institution uses to
gauge its financial health. In the 2015 Inside Higher Ed survey, that
number was 52 percent.
Doug Lederman contributed to this article.
See supporting charts and read other stories at Inside Higher Education
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