In this episode of the College Financial Health Show, hosts Gary Stocker and Matt Hendricks conduct a detailed financial and operational review of Chapman University in California. They highlight Chapman’s strong net‑income margins and a rapidly growing endowment—now about $800 million—driven by low appropriations, minimal endowment draws, and budget surpluses. The discussion moves to staffing efficiency in a high‑cost California labor market: a small headcount with many employees earning over $100 k, which keeps payroll costs in line with revenue. Vendor and contractor expenses are also low, reinforcing the school’s cost discipline. Tuition revenue per full‑time equivalent (FTE) is stable at roughly $40 k, positioning the university to use endowment earnings for future scholarships. Academic outcomes are strong, with a 4‑year graduation rate estimated between 70‑80 %. The hosts examine internal market share (e.g., strong enrollment in business, modest numbers in math and fine arts) and external market share, noting low presence in some majors such as economics. Governance issues are raised, including board fiduciary duties and faculty shared‑governance responsibilities, especially in light of recent college closures. The pair also discuss a prospective “recognition” program for financially healthy institutions and emphasize that financial recovery after a bad year typically requires at least four years due to enrollment lag. The episode concludes with a call for listener questions and an invitation for colleges to request future reviews.
Chapters
It is Tuesday, May 6th, 2025. Welcome back, everybody, to the College Financial Health Show with Matt Hendricks and Gary Stock. The next college we're doing today is we're going all the way out to the West Coast. We're going to California and Chapman University. Dr. Hendricks?
Yeah, I'm going to go quick on this one. There's a lot to like about this, and I just want to— it's good to have a break and just show you guys what a what a school that is doing quite well looks like. And in a tough environment too, they're in a state that wages are incredibly high, so they have that huge pain point and they have intense competition from the state system, which is top-notch. But I'll show you Chapman University in California. All right, so net income margins, see how nice and consistent they are. Although it's a bit higher than I would like to see, I'm not going to complain about that in case, you know, those are really high net income margins. I generally would, would like to see more spending. So you're spending more on your mission. But, you know, this is totally fine as well. At least it's sustainable. And then at the same time, where do you suppose all this extra money is going? A lot of it, right? They probably have normal draws because they don't need it. And that extra money goes into the endowment. Look at their endowment, 164%. That may be one of the best in the country. So let's double-check their appropriations. I can't imagine they would be high.
I wonder if their gift volume has increased also in the last couple of years.
Could be. I did the wrong one. Appropriations as a percent of the beginning year value. Yeah, their appropriations are extremely low. So they clearly have a strategy here where they're wanting to grow that endowment and they're doing it right. That's growing like crazy. That's excellent, especially in the future. They'll be in a better position to even outprice other well-endowed schools.
And Matt, can we, can we use apps to see what their gifts have been over the past few years?
Yes, I can show you in a couple of minutes.
I can't remember what that report is.
I think I have— let me go to revenue side here. I have unrestricted gifts, I believe. Yep. Unrestricted private gifts. Interesting. For FTE, we can look at it per FTE. It looks about right, but relative to the revenue, the gifts are a bit low. So the way that their endowment appears to be growing, and I can look at contributions to the endowment as a percent of the beginning of the year. Yeah, the contributions don't look overwhelmingly high. It's mostly the Well, part of those contributions would be coming from their budget surplus, right? So probably the gifts are quite low, like as we saw earlier. So yeah, they're mostly growing because they have really low draws and they have the budget surplus that they're putting into their endowment. So how does Chapman, you know, right-size their budget in such an expensive market, right? And then this is one of the things like if you're in California, if you're in a really high labor expense labor market, you need to have, you know, you still need to fit your payroll into your budget. So let me just show you how they do it. And this is pretty common for Colorado— or not Colorado, California schools. See that their count of staff relative to their revenue and relative to FTE? Let's take a look. It's both of them are low. right? And that's perfect. They need to— that's how the California school really needs to operate. They need to have a low staff and they pay incredibly high salaries, right? And the way to do that and fit it in your budget, you have to have a small staff, right? And, and they need to be quite efficient. And this is about as— this is what it looks like at a high level to have really efficient staffing. So their employees paid over $100K is insanely high, right? Because it's a really high labor market. Per FTE. And again, how do they, how do they manage that? They keep the number low, right?
Keep the number low. Yeah.
Keep the numbers low.
That's, that's interesting and impressive.
Yeah. Um, I, I've run into these cases several times with schools in California and they're like, oh, well, we have normal staff. You can't have a normal staff. It has to be low. Yeah. You're in a, it's like, you know, if you're gonna operate a business in the United States versus Mexico or versus China, right? You totally different makeup of the number of employees that you'll have in the business. Okay, so yeah, a lot of things look great here. I'll just show you contractors, right? Another pain point we typically see. They don't look bad. In fact, they're quite low on vendors, which is impressive. Getting it done. Let's see, compensation, occupancy, Costs look a bit high, but again, they're in California. I'll just show you what really good vendor numbers look like down here and then we can go on. But Chapman's got it going. This is what it should look like. There's no flags on any of these vendor contracts. They're all very—
Yes, in California.
Yeah, in California. You know, and again, this is adjusted for the size of the school and for the revenue, right? And I know this is a high revenue school, but Yeah, they're doing a good job. I've seen high revenue schools get their contracts out of whack as well. So yeah, this is great. One thing that's interesting is net tuition revenue. I'll do one more thing here. Net tuition revenue. So their net tuition revenue is up, I believe, just a little bit, right? Per student FTE, pretty stable on the revenue side.
Right, about $40,000.
But their endowment's growing like crazy, so they'll have all that money that later on they can use for scholarships and, and so on and, and outcompete other schools. So it's really a great—
do you recall the overall value of their endowment, Matt?
Yeah, let me check. Uh, endowment, uh, we'll do end of the year endowment value. They have an $800 million endowment, uh, per FTE. It's pretty high.
Nice. Very nice. Well, okay. Yeah.
So nice endowment. Um, it's quite a bit smaller than the endowment at the University of Tulsa though. The place that I came from that did have—
the reason I asked that question, I was wondering if that, if this is the kind of college that would be subject to an endowment tax and $800 million. Well, nice for sure. Is not a big enough number to really draw. Probably it's going to be impacted by any kind of endowment tax, but we're going to look at the Harvards and and Yales and Browns, those kind of places. Let's take a look then at— and all right, Matt, so guess for me, what's the 4-year graduation rate at?
[Speaker:MATT] Oh, I'm sure it's excellent.
[Speaker:ROBERT] How many are going to be? Look at that.
[Speaker:MATT] It's going to be 80%, 70%.
[Speaker:ROBERT] Look at that, above 70%. And again, two ways to look at this. The first is fine finances and exceptional graduation rates. We've also seen colleges, too many colleges, Matt, we've talked about this, with really strong graduation rates but not the good finances that you have attached to Chapman University, that Chapman University has earned. And that's— I know I've shared that that's disconcerting, that quality colleges that graduate students are still facing financial problems. I don't know, Matt, maybe they should have a— maybe Chapman University should have a webinar on how to manage the finances for colleges that can graduate 70-plus percent of their students. Impressive, very impressive. And even when I looked at their internal market share, look at the diversity of strength across all of these disciplines. Double-digit numbers across all these disciplines. Now, when you look at 16 in mathematics, you multiply that times 4 for 4 years of students, so 60+ math students, 60-ish fine arts students, you know, 1,600+ business management students. Look at the diversity of internal market share of all these. Now, a little bit high on the business side, but I'm not going to complain about that. And even when I look at— you've heard me whine before about colleges that try to be everything to everybody. Well, Chapman is somewhat guilty in that. Matt, maybe they should have you go out there and teach some more economics because they don't have much out there. Human resources. So again, this internal market share data can say, hey, maybe these are areas that the data supports I should take a look at not continuing to offer, especially if you do any kind of cost comparison. Let's go to California. And look at the market share for privates. We'll leave it just privates. And let's take a look at what do we have up here. We have the major is going to be accounting, and all sorts of colleges. Where is our college, Chapman? You know, 5% of the accounting. Let's take a look at economics because I have Matt Hendricks on the, on the call. Let's take a look at economics. And again, you can see the external market share. Again, we can make it bigger. And you can see the external market share, the colleges that have a decent market share, the colleges that don't have a decent market share. And of course, I'm going to make the case: why are you in this business if you have a minuscule market share for that market? I understand for those of you say, well, it generates tuition revenue, no question. But can you really make the case, Matt, that if you have a low volume of economic students compared to somebody has a high volume, that you're providing them the same quality? You can pay the same faculty compensation, that concerns me that, you know, well, it gives us tuition revenue. Okay, I'll grant you that. But who are you in business for, the student or for the college? And it's a rhetorical question because I don't have a perfect answer, but that's one of the things that we look at for all of these colleges when looking at market share.
Yeah.
And I got, you know, the numbers that I've noticed as we've done this show now, we've done more than 100 colleges, 100 private colleges. And what do you think? 1 in 3 show financial strength?
Yeah, we're not like randomly drawing schools, but we usually get school requests for, you know, obviously requests for schools that are struggling. There's a reason why people are requesting these, right? Most of these schools are requests, right, Gary? I think sometimes—
and that's what I was getting ready to say. I don't even have to go and find colleges to put on the show anymore because I get requests all the time. And we're now at least 6 weeks out. With requests that others have submitted. Yeah, that number is not going to shrink. I doubt that I'll ever have to go back to our proprietary database anytime soon for obvious reasons. That closure pattern is going to continue. And we had Limestone on last week. I think we had St. Andrews on prior to that. Those are colleges that recently announced closures. And you've heard me say this before, both on this show and on the podcast and other media that I do, we're, we're in the middle of the closure period. And it's going to continue for a long, long time.
In general, I think Chapman is great. I'd be curious to know why it was requested. But, you know, it could be something with the, you know, even though the school's doing well overall, it could be that they're readjusting some of the staffing and stuff like that. All good schools should be doing that all the time, right?
And it could be somebody who knows they're doing well and just wanted to brag. They know what we do on the show. And they know that we would do a good job of saying, hey, this college is doing well, and that's fine. If your part of college is strong and you want us to do a review for you so you can boast about that, we're happy to do that. You might also want to know that Matt and I have been pondering a recognition event, a recognition component for those colleges that do well. We're not there yet, but we really want to make note and share with the world those colleges that are financially healthy. And look for more information on that maybe in future shows, Matt. As you and I fine-tune what that might look like. Picture items that I wanted to talk about today and that we've talked about as we wrap up the show is we talked— you talked earlier about boards really needing to monitor the costs, the financial statements. And I get that, that fiduciary responsibility is part of a board's responsibility. I will grant you that. What about faculty? Because we saw with Limestone University, they didn't let their president and board attend the graduation because they said They didn't tell them what was going on, but the data shows they could have found out. Is it fair to hold faculty responsible for that?
Fair criticism. Yeah, the faculty— clearly the board has a legal responsibility to do this stuff. The faculty is not necessarily legal, but they do have a shared governance responsibility that they need to take seriously. They need to at least ask the right questions. It's really hard to ask those questions if you don't have the data. Right. If you're just going to— and the same with for the board, right? Again, I brought up that example of Averitt. I think you—
yeah.
And basically the board is suing the former CFO for something they should have known just based on standard best practices of boards when you— they have a responsibility to sign off on the audit, right? And study the audit and use it to set the new budget. Right. And so they should be benchmarking all these things over time, including the endowment draw. And so it's just pretty shocking that they didn't realize— it appears, right, I don't want to mischaracterize it, but it appears the board didn't know that their endowment had basically shrunk to zero, uh, which is like, I have no idea how that's possible. But, um, it was all clearly laid out in their, their audits, so, uh, really easy to catch this stuff. You just follow best practices.
Yeah, and essentially the business that you and I have is all the data we use is publicly available. We have added our value by making it easy to compare. That's a gross generalization, but that's what it is. And so if you're faculty, if you're staff, if you're community leaders, if you're students and families, you know, the stuff that we have out there makes it easy to compare. And so if the leadership at your college, public or private, is not sharing this information, well, that's their decision. But just like there is a Blue Book for cars, there is Consumer Reports for everything God ever created. Matt and I have done the same thing for colleges. We don't kick the tires on cars, but we kick the tires on finances for you. We make it easy for you to compare both public and private colleges across— it's not countless, but really, really large numbers of reports. And then one other thing we've talked about before that I want to use as we wrap up this show is that 4 years, You saw some bad data for 2 of the 3 colleges in today's show, although they'll be published as separate shows. It takes at least 4 years to recover from a single bad year. Matt, expand on that for me.
Yeah, I think, uh, a lot of folks, you know, on the boards don't understand the dynamics necessarily of how the business works in higher ed. It's not like you can just turn your revenues around, you know, in one year. The reason is that really each year you're only influencing about a quarter of your enrollment or less with your new freshman class coming in. So realistically, it will take a minimum of 4 years to rebuild enrollment unless you somehow can enroll a freshman class that's 4 times bigger than the normal freshman class, right? Which is really unrealistic. So you need to plan for that. And what it means is there's momentum, right? When you're losing students, it's probably going to continue for 4 years, and then turning it around is going to take another 4 years, right? So you should plan on fitting your expenses in that new budget for at least the next 4 years. Otherwise, you're, you're making more problems for yourself.
So the 3 colleges we looked at today, um, even though they'll be published as separate shows on the edited enhanced version of the show, If you have questions, if you have comments, whether it's for the 3 shows we've done today or any other college we've already done shows on or you want us to do shows on, drop me a note. I'll make sure to add the contact information in the show notes. We can get your college on the show. It'll be a couple weeks out 'cause the list is long, but we can also make some time to set some private time aside to show you what these apps look like for your college. So as always, for Matt Hendricks, I'm Gary Stocker. Thanks for making time to watch the show. We'll be back next week with 3 more colleges. We'll talk then.
