Friday, May 29, 2015

Why Most Colleges Don’t See the Crisis Coming

By Professor Doom

      It’s no secret that there’s a big problem in higher education, a problem steadily getting worse. Tuition prices are rising to ridiculous levels. Quality of education is dropping to laughable levels. 

     And competition for those last few suckers students that are willing to go into debt is rising every year, due to worthless accreditation and widespread online coursework fraud making it relatively easy for anyone willing to pay the accreditation fees to put up a school that can compete with every other institution on the planet for that student loan loot.

      It’s obvious this can’t continue forever, and the game is coming to an end. Can administration look that far ahead and start planning for a change?
Admin: “We have determined that your volunteer service does not count as community service.”
Me: “I represent this college, and show the kids that neither mathematics, nor college professors, are meanies to be feared.”
Admin: “That may be, but the average age of the children there was barely 14. We’re a college, our students generally run 18 and up. So, you’re not getting credit for community service.”
Me: “Just how old do you think those 14 year olds will be in 4 years, you shortsighted imbecile?” “Okeedoke.”

--The gentle reader needs to understand that most college leadership simply cannot plan ahead. Instead, college administration looks to sell out the school’s reputation as quickly as possible, jack up growth numbers by whatever means (including fraud), and move on and up through the system.

      Most administrators in higher education never bother to look at the big picture, never try to connect the dots between what’s happening at the institution, and what’s going on in the real world.

Admin 1: “Our new facilities will be at 100% capacity from day 1. Every room, every seat filled.”
Admin 2: “Our plan is to double in size as quickly as possible as soon as we move into the new facility.”
--The entire faculty was forced to listen to these people. These two administrators have offices that share a connecting door, and said this at a mandatory meeting. Nobody seemed to see any issue with what was said, although, much like in my previous anecdote, faculty know better than to point out obvious issues with administrative thinking.

     Even as higher education’s intense fascination with questionable online coursework moves more and more students online, no administrator has figured out that means we really don’t need to keep on with a madcap building spree in higher education…a building spree that’s loaded campuses down with expensive-to-maintain buildings. There’s no interest in building parking places, of course, nor has anyone in leadership figured out what will happen when straight demographics says we’ll start losing students, no matter what, because of an aging population. Each administrator at every institution plans for growth, growth, growth.

     Some schools are already feeling some pain from the forces that are bearing down on higher education:

--great place to work for, indeed. I’d love to see the breakdown of who was eliminated. Usually it’s one admin for every 3 to 10 faculty lost—because of the vast disparity in pay, admin can justify doing this because “ultimately both groups lost as much in terms of salary…” One administrator represents as much salary as 3 to 10 faculty, you see, and you can—apparently—always increase class size to make up for lost faculty.

     Because the finances at a school are completely opaque except to a select few, nobody ever sees it coming when a school is in serious financial trouble. “Nobody” includes even the federal government:

Sweet Briar provides an excellent comparison to Birmingham-Southern. Shortly after the decision to close the College was announced, the US Department of Education awarded the institution its highest financial rating – a 3.0 grade based on it’s FY2013 audit. So, why then did Sweet Briar’s Board decide to close the College?
…As Jim Douthat notes, the march toward bankruptcy often begins slowly and then accelerates suddenly. That 3.0 federal grade had been based on past history. Their Board moved in response to the likelihood of fiscal collapse in the near future.

      So right after the school announces “we’re shutting down” because of money issues, the Federal government awards that same school the highest possible financial rating.

     If “highest possible financial rating” means “fiscal collapse in the near future”, only a fool would put much stock in a Federal government rating. Well, I guess that’s always been true, and only a fool believes government economic numbers today. I wonder if anyone else can connect the dots between the government’s complete inability to figure out the financial future of a small school, and the government’s ability to figure out the financial future of an entire country…but I digress.

    While many administrators can’t connect the dots even when done for them, a few colleges have realized that a crash in higher education is coming, and the time to prepare is now.

      These few schools, like Grinnel College, are doing the obvious things in preparation for a collapse. Grinnel has 1700 students, and isn’t making plans for nationwide advertising campaigns for online coursework to encourage massive growth. They’re not covering their campus in dust from endless new construction. They’re not bloating up their administrative caste with high numbers and huge salaries. And everyone gets to see what’s going on:

     When the stock market collapsed in 2008, Grinnell’s Board of Trustees concluded that the College faced the triple whammy of declining tuition revenues, growing operational expenses and a seriously weakened endowment. To prepare for change, they shared a computer program that allowed its users to project future institutional budgets using existing income and expense trends. The effect produced consensus on the need to work together.

To this end, Grinnell integrated the concept of institutional sustainability into their budgeting, financial forecasts, governance and strategic planning. In doing so, they anticipate what the College will face by looking at key metrics including, for example, admission rate, net tuition revenue by student, percentage of no-need students, total gifts per year, and change in per cent revenue by source.

     So, actual long term planning that doesn’t depend on maintaining a 15% growth rate indefinitely, and everyone can see what the budget plan is. There won’t be any “we’re fiscally solid” announcements within a week of “we need to fire almost everyone” announcements at Grinnel.

      Sadly, what Grinnel is doing won’t be copied and modeled anywhere, and hence the title of today’s essay. Why don’t other colleges prepare for what’s coming? Because the only metric administration uses at most institutions is “growth”. It’s why a school with 0.6% graduation rate over 10 years is still considered a success because it grew so much. Since Grinnel isn’t growing, any administrator that looks at Grinnel will think “I’ll never get a million dollar salary using their ideas”, and then move on to look at what other schools are doing.

     That’s a shame, because most schools are engaging in policies that are guaranteed to end in complete destruction as soon as the student loan money (or the mass of students willing to indebt themselves forever) stops coming, or even simply stops coming in ever larger numbers.

      When that happens, many institutions will go bankrupt. Administration won’t care, of course, because they’ve already granted themselves golden parachutes…but someone’s going to ask “how did these schools have billions of dollars a few years ago and have nothing but abandoned buildings and a bunch of retired administrators living in mansions today?” For the sake of those administrators, I sure hope the people that ask that question don’t have guns.

      I admit that sometimes, however, I hope the people that ask that question will have guns after all. Lots of guns.

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