LaGrange College Cutting Programs and Staff

Today's news that LaGrange College in Georgia is planning on cutting several programs and employees was reported in Inside Higher Ed. It's interesting to note at some of the finances and trends associated with LaGrange College. That might have caused this action. Let's take a couple of minutes to look at their most recent audited financial statement and compare them to 5 or 6 other colleges in Georgia to try and get a better handle on why LaGrange College might be in such difficulty. This is the balance sheet from the audited financial statement of LaGrange College for the period ending June 30, 2019, and there also is data from 2018. I've highlighted just some of the interesting fields. It's important to note that some of the results on this financial statement are not that bad. There are some that are concerning, and we'll take a look at those. But let's quickly look at the balance sheet. And really, when I look at their cash and cash equivalents for LaGrange College, there are many colleges in worse shape, um, given their size. The $3 million and change in 2019 and almost $5 million in 2018 Not bad by comparison. Investments at about $40 to $45 million, a little bit more than that, over the last 2 years. Again, not bad compared to many others. It is interesting to note that about 50% of their total assets, about $160 million, and about $80 million of those are tied up in property and equipment. Not always the best ratio. Some are— some colleges have better, some have worse. But illiquid assets like property and equipment can sometimes cause problems for organizations. And when we look at liabilities for the Grange College, really the thing that jumps out is debt. And they're looking at about $4 million, $15 million, you know, about $45 million plus in debt at the end of the fiscal year of 2019, June 30th, 2019. They had to have concerns about the the enrollment challenges, the tuition and fees challenges associated with running the college and paying down that debt. Again, others are in worse shape, but this one was noteworthy given the size of the colleges now below 1,000 students. As we look at the consolidated statement of activities, also known as a profit and loss statement, we can see that in 2019, a little over $29 million in tuition fees at list price. They provided discounts and maybe some paid fellowships, they're all lumped together here, of about $13.5 million. So they're almost $30 million in list price tuition fees. They only collected about half of that. Again, all colleges face pressure on tuition pricing. LaGrange College reflects that. Clearly it's caused them to rethink the number of majors, programs, and employees that they can afford. And then we look at the total operating revenue, as I scroll up, it was about $34.5 million in 2019 against expenses of not quite $33 million. So you can see, you know, they were able to have a profit, so to speak, of not quite $2 million in that reporting period. There are many colleges of LaGrange's size and even a little bit bigger who can't show that kind of profitability. But I keep going back to the debt. They have to be having concerns about their ability to pay down that debt. And I wanna also look at the cash flow, statement of cash flows, for the period ending on June 30th, 2019. Just a couple of things to point out here as I scroll down. The net cash used in operating activities was a negative $5 million. You know, in any given year, negative cash from operations is not a big deal. I'd have to go back and look at previous years to see what those numbers were. But it would raise, you know, a quick little flag of concern. But I also noted that the investing activities, for those that follow that, They— LaGrange looks like they sold quite a bit of investments in 2019, 2018-19, to the tune of almost $13 million. Again, in a single year, not a big deal. But if they are liquidating their investments to keep the lights on, to pay salaries, not necessarily a good thing. I do want to note that they did invest about $7 million in new investments in that same year. So the net loss was only about $5 million. Then I want to look at data from the National Center for Education Statistics and its IPEDS database that we use on our College Viability app just to briefly compare LaGrange College to some of its regional competitors. And since this story is just breaking, I just grabbed 6 or 7 other colleges from Georgia. They're private colleges, private regional colleges, and we'll quickly compare them to LaGrange just to give you a better handle on how LaGrange stacks up against its competitors. And we can see right off the top that LaGrange has really held its own in, in sum in terms of enrollment over the last 6 years. And this data is from the periods 2014 to 2019, the most recent data available from the National Center for Education Statistics. And we can see Berry College and Payne College, uh, and even Thomas University have suffered notable declines, decreases in enrollment in that 6-year period. We look at 6 years of tuition and fees, and really overall, these— this set of 7 colleges hasn't done bad as a group. They've all been able to grow their tuition and fees over the 6 years, some more than others. The only exception to that is Payne College. So again, LaGrange has been able to grow its tuition revenue, not a lot, but a little bit over those 6 years. I'll look at graduation rates in a second, and the Grange did not do well in that area. But the last thing I want to look at on this screen is just comparing the 6-year total changes in expenses of the Grange and these 6 other colleges versus the 6-year change in core revenues. And again, the pattern we see is common almost everywhere in medium-sized, small to medium-sized private colleges in the country, and we see Expenses have gone up about $3.6 million, revenues have gone down about $3.6 million. So about $7 million to the negative over this 6-year period. Interestingly, Berry College, with some noticeable enrollment changes, only had expenses go up about $7 million, $7 million and change, but its revenues, core revenues, went up almost, went up over $26 million. But the pattern is not that for most. Expenses went down $9 million and change at Payne. Revenues went down $2 million. Probably not a bad job keeping on top of things. At Piedmont College's, expenses went up $11 million. Revenues, excuse me, revenues only up $5 million and change. And when we look at the others, not as bad as I've seen before. Wesleyan College, be some concerns there when comparing it to LaGrange because their expenses went up almost $3 million, and revenues went down, went down almost $6 million. I've changed screens to the endowment for 2014 to 2019, and this is concerning. LaGrange shows an endowment at the end of the year of $56 million in 2014 and down to $53 million and change in 2019 for a decrease in the endowment. You don't see that very much, And a fair question would be, what's happening to those endowment funds? They typically increase, although I see some other decreases in this set of colleges as well. And with the little green, red, yellow indicators we have over here, you can see that LaGrange, you know, took a big hit in terms of endowment. But the one area I want to focus on is kind of a lagging indicator. And I'm looking at the 6-year graduation rate for LaGrange College. And it really has gone from 53% 6 years ago down to 41% in 2019, the last reported year, down 12 points. It's not just that it's gone down 12 points, it's that it's such a low number. 41%, only about 4 out of every 10 undergraduates who started at the Grange College in 2014 graduated from the Grange College in 2019. Now, that doesn't mean that others didn't go elsewhere and graduate. Some may have graduated in 7 or 8 years. Some may still be taking classes. But the threshold, the standard that typically is used for this is about 70%. Now, as I look at this list, not particularly impressive across the board. They're all 13% at Payne College. I really have some concerns about that. 28% at Point. You can compare these 7 colleges, and really only Berry has anything close to a decent 6-year graduation rate. So I encourage you to draw your own conclusions from the data that I just shared. The Grange College could very well just be ahead of the curve with its competitors in knowing they need to make changes to be able to be viable in the long term. The challenges that they have are probably more associated with graduation rates, that long-term debt that we showed on the balance sheet. Than they do anything else because they're really pretty much in the middle of the pack compared to other items. So draw your own conclusions. If you have other colleges that you'd like us to look at, go ahead and make a note of that in the comment section down below, and I'll be sure to add that list of colleges to any future videos we do on financial health and viability of private colleges. Mm-hmm.