This Week In College Viability (TWICV) for June 17, 2024

Hey, it's June 17, 2024. Welcome back to another podcast episode of This Week in College Viability. Hi, my name is Gary Stocker. Hey, we are entering the hot weather season and the really hot seat season for colleges. There is increasing anecdotal evidence that the FAFSA debacle will cause much trauma this fall and spring, and I'm already starting to see a small number of colleges take what I'm going to call our proactive layoff and cutback actions. This week, where are we headed? The Philadelphia University of the Arts. We talked about them last week. They are really taking some heat for its really short-notice closure announcement. I think it was 7 or 8 days. There's a reporter, a reporter in Topeka, Kansas who demonstrates again that the U.S. News and World Report data can be grossly misrepresenting. We'll talk about that. We have two stories about vocational and entrepreneurial trends replacing traditional college. That's fine in and of itself, but again, provides yet more evidence that the traditional higher education market is under intense market pressure from across the board. As always, Let's start off with layoffs and cutbacks. Minnesota, we go first. St. Cloud University ends 30% of its degree programs and cuts staff. They are suspending— I guess that means cutting— 42 degree programs and 50 minor programs. This is from thecollegefix.com. University of Wisconsin Oshkosh in Wisconsin is closing, and they're blaming declining enrollment. Well, okay, That's fine, that's pretty obvious, and this is from our friend Kelly Meyerhofer at the Milwaukee Journal Sentinel on June 14th. The enrollment at Fox Cities, University of Wisconsin Oshkosh at Fox Cities, has plummeted from a little over 1,600 to about 550 in just the last 5 years. That's a 65% drop. That data is from the University of Wisconsin Systems, and I think it's now 5 or 6 public colleges, not privates, but public colleges in Wisconsin that have closed in the last year or so. And hey, it's obvious Wisconsin has too many— has had, has or had too many colleges, both public and private. This is a perfect example of market consolidation, and as I've said before, it's going to continue to happen. Alverno College, also in Wisconsin, and this is not an official pick-on Wisconsin week I had somebody challenge me with that on social media this week. Alverno College in Wisconsin declares financial emergency. They're not calling it an exigency, I guess, or wordsmithing here. They plan to cut 33% of their majors and 25% of the graduate programs. To the data we go. Their 4-year graduation rate, undergraduate graduation rate at Alverno College in Wisconsin has hovered around 30% the last 8 years. You've heard me say this before, if that 4-year graduation rate drops below 40%, that's not a college, that's a tuition collection agency or a tuition collection business. So the good folks at Alverno, while cutting back, you got to wonder if they're a college if they can't even graduate not even, not even 40 or 50% of their students. Enrollment is down 27% over the last 8 years at Alverno. Tuition and fee revenue decreased down $8 million. The endowment is a measly $35 million. The admissions yield, interesting, while it's down for almost all colleges, theirs is down 25 points. That's a lot. And they are indeed a heartbeat admissions college where they admitted in 2022 90%, 9 out of every 10 applicants to Oberlin College were accepted. Man, you really have to wonder, are they accepting based on the quality, the academic performance of these students, or just to get their tuition revenue. Page 2, to the University of the Arts in Philadelphia we go. And there's a couple different stories here, and the first one is in the Philadelphia Inquirer. This is on June 12th, and it's by Kristen A. Graham and Jeremy Robuck. And it looks to me like the faculty at the University of the Arts— I'm going to call it UArts, that's their nickname, their short name— UArts in Philly wants their political leaders, the faculty, wants their political leaders to do what they should have done many years ago. That's the faculty. The faculty should have looked at the financial enrollment outcomes and more for their college. Why, why do these faculty across the country keep their financial heads in the sand thinking, hey, whatever the college leaders tell me must be true. I created the app, and I have a special version of the app— we'll talk about that in a minute— for faculty and staff. And I can tell you the data. Full-time enrollment has been trending down since before the pandemic. Tuition and fee revenue at UArts was down $4 million, $4+ million. Their unfunded institutional grants, trying to give away the store, was up $5.5 million. And just in 2022, the revenue-to-expense ratio is 0.9, which means for every 90 cents in revenue They had $1 in expenses. You and I would not like to see our checkbook look like that. Interestingly though, I'm guessing because of the subject matter, their 4- to 6-year graduation rates were strong. They just couldn't attract enough students to pay the tuition. So credit for them for keeping strong graduation rates at both the 4- and 6-year level. And faculty anywhere, everywhere, If you are listening to this podcast, like I said a moment ago, you cannot let your livelihood rely on the financial health information shared by your leadership. They have too many conflicting interests. The faculty and staff version of the College Viability App, the 2024 version— fork over the $300, use the app, share the comparison of your college with its competitors. Both proximate and non-proximate. And let's do this, tell you what, for the rest of 2024, from now through the end of December, if a faculty member of college, any faculty member or staff member of a college purchases either the public or private college version of the 2024 College Viability App, I will extend the license to all faculty and staff at that location. Everybody gets access to it. You can copy and share the link to anybody that you want in your organization. I'll make sure the license reads that way. And I will put a link to that, to that faculty and staff version of the College Viability App. There's one for private colleges and one for public colleges. And NBC got in the jump here on UArts. And this was a story by Maya Eglin and Lily Yumana on June 14th. And here's a quote from the story, NBC News: The university, UArts, said in its statement announcing its closure that it had worked hard this year alongside many of you to take steps that would secure the university's sustainability. The progress we made together has been impressive, albeit not successful. Unfortunately, the story continues. This is from NBC News, Maya Eaglin and Lily Youmana. Unfortunately, however, we could not overcome the ultimate challenge we faced. With a cash position that had steadily weakened, we could not cover significant unanticipated expenses. Those are not identified. The situation came to light very suddenly. I don't buy that for a minute. And despite swift action, they continue We were unable to bridge the necessary gaps. Hogwash. Hogwash. The trend, the downward trends for UArts in Philadelphia had been obvious for a long time. And now, of course, because of the trauma associated with the closure, both the Philadelphia City Council and the Pennsylvania Attorney General are now looking into the closure reasons for the University of the Arts in Philadelphia. Caveat emptor, let the buyer beware, Latin saying that has been around for forever. There is a student quoted in the NBC story who says, I spent so much money going to this school and I put so much trust in the faculty and the board. It's an investment, the student said. I'm not going to name them. Well, sure it is. Sure, it's an investment for every student who goes to college, whatever their own personal financial investment is, either with cash or loans. In this day and age, students across the country, would it not be prudent, would it not be wise to check on the financial health, to compare the financial health and viability of colleges you're considering? You do it for phones and computers and cars and clothes and social media apps. Why not do that for what's probably one of the most significant financial and time investments you'll ever make? Folks, ladies and gentlemen, boys and girls, we're in an era where colleges are struggling and they will continue to struggle. Look at their finances. Use my app. Use whatever resource you want, but the app makes it easy to compare these colleges. The student goes on to say, you would think that after putting so much more money into something and when it's going away— I don't know what that means— the people responsible— I guess she means college leadership, it's a girl, I gave that away— the people responsible would want to inform you and they'd want to let you know here's what's going on. She continues, but they weren't interested in that and it made me feel very disrespected and made me feel like I wasted my money, she added. And no, students at UArts and everywhere else, they're not going to inform you. The responsibility that college presidents and the boards have is to the college, not to the students. Now, they're going to argue that, but I'm right. And for you artsy folks and those not familiar with business terms, That responsibility that college presidents and boards have is called the fiduciary responsibility. It is to the organization above and beyond the compensation they receive. And if a college leader, college president, or anybody representing a college were to in any form of public communication say, "Hey, we are having trouble," it almost certainly becomes a self-fulfilling prophecy And everything starts to go downhill. And again, like we've heard before, UArts is facing criticism from students and staff on what they say has been a lack of communication and transparency. And apparently there was a situation where there was a meeting at one of the halls on UArts, and the administration, as alleged, shut off the power and locked the bathrooms. Okay, that's mature. That's a commentary on the lack of leadership for sure. And there's a faculty member and the last name is Apple. It's a female. I can't, I don't see the first name here. A faculty member, Ms. Apple, Dr. Apple maybe, said she wants those who have, who had been charged with making decisions about the university's fate to face consequences for its closures. Well, Dr. Apple, what would that be? They're already receiving abundant and earned public ridicule. They'll probably pitch their experience in closing a college for the next gig. And I sincerely doubt— I'm not an attorney— I sincerely doubt there are any criminal liabilities. She goes on, Dr. Apple, I'm assuming it's doctor, I would like to see some accountability not just from the most recent administration, but also from the board of directors and also from the previous administration too. Because she continues, and here she makes a good point, because I just keep wondering at what point was it clear that the university's finances were not salient. Interesting choice of words. And I can't fathom the notion that that was just 2 weeks ago, that on May 29th someone looked at the books and said, hey, we can't keep going. Now I understand this is an angry faculty member. I don't hold Dr. Apple, if I have that correct, for being angry. We'd all be angry, as are many in the past, and as will many in the future be. But boys and girls, ladies and gentlemen, you art, and the others that have preceded it, closed on with long notice or short notice. It's going to happen again and again and again. And I'm not going to cover every one of these closures in this much detail. Caveat emptor. Let the buyer, let the faculty, let the staff, let the employee, let the community beware. You've got to do your own research. You can't rely on the colleges. They are burdened with that self-fulfilling prophecy, and in some ways I can't blame them, although it's, it's not good. It's not good for anybody. Let's move on. Page 3, headline reads, "These 3 Kansas schools landed in the top 100 Midwest colleges by U.S. News and World Report." This is an article by Stacy Saldana Olson in the Topeka Capital Journal on June 12th. Now, first of all, it's a poorly written story, but it also shows how reporters don't do their homework and can mislead students, families, and community with data. This again shows us how these bad ranking systems, not just U.S. News and World Report, can be used to create misleading stories. Now, she talks about Emporia State. This is Stacy Saldana Olson, Topeka Capital Journal. Emporia State ranked 83rd in the Midwest ranking. What does 83rd mean? What's 73rd? What's 103rd mean? It means nothing. As she goes on to say, ranked 83rd, making it a— making it the top Kansas university on the list. All right, well, I don't know that I want to put that on the bulletin board. Emporia State has an acceptance rate of 96%, heartbeat admissions. Have a heartbeat will admit. And clearly it's for many students who don't have the skills to do college work. Only 35% of students graduate in 4 years at Emporia State University, ranked 83rd in the Midwest ranking by U.S. News and World Report. You know, let's, let's do this. Let's move Emporia State away from calling a college, from a college label. And let's call it what it is— they're not graduating students, they're a tuition collection agency. And she has one more. The University of St. Mary, also in Kansas, is a private school and is ranked 95th. Okay, 95th, 125th, who cares? It's located in Leavenworth, an acceptance rate of 82%. All right, not heartbeat territory, but still pretty high. And she goes to talk about student-to-faculty ratio, 12 to 1, blah blah blah blah blah, and 68% of classes have 20 or fewer students. Doesn't do any good at the University of St. Mary because they only graduate 30% of their students in 4 years. 30%. For every 10 students who start at the University of St. Mary in Leavenworth, Kansas, 3 out of those 10 graduate from St. Mary's. No, I know some go on and graduate other places. Some graduate in 5 or 6 years, but it's a small number. Their enrollment is up a little bit, 130-some-odd students. They have really cranked up their tuition discounts. It's up 91% from $6 million to $12 million. Their expenses are up $4.5 million, right? Their enrollment's up a little bit, I can see that. The endowment is a measly $18 million, well below the college viability minimum threshold of $18 million. And interestingly, it was down $1.5 million from the time— from the fiscal year '21 to '22. And anytime the endowment goes down, my red flag goes up because it suggests that the college is using endowment funds to meet payroll and to keep the lights on. Stacy Saldana Olson in the Topeka Capital Journal— jeesh, quit misleading your community with this manipulation of data. And another story along the same lines. This is from a college president. Uh, Smith— President Brad Smith at Marshall University is optimistic about, about the fall enrollment push as a well-known bond rating agency expresses concern about Marshall University's finances. And Marshall's in West Virginia. This story comes to us from the West Virginia Metro News and Jeff Jenkins. And as always, I'll have a link in the show notes. And this is, this is a mixed bag of spin and hope. We see that a lot, but it has an interesting piece of data that I'll share. So Marshall has had a projected budget deficit of $28 million according to CFO. It's down a little bit from some funds for the state. And the Marshall Chief Financial Officer, a gentleman by the name of Matt Tidd, T-I-D-D, predicts Marshall will have about $35 million cash on hand. All right, good to know. A lot of colleges don't have that much at the end of the fiscal year on June 30th, a couple weeks out, which will represent about 123 days of expenses. Now this is good data. So the cash they have, they do the math and it shows about 123 days of expenses. So cash on hand by definition is how long any organization can run with zero revenue, and there's not a dollar coming in the door. So Marshall can run about 4 months. 4 times 3 is about 120 days. It is 120 days, so they can go 123 days. I have done this for other colleges. I don't talk about it much. I have seen colleges whose days cash at the end of their fiscal year is less than 5 business days. Talk about living hand to mouth. And then from Michigan we go, and this is from Matt Miller, uh, at the Michigan Live. This is on June 16th. Fewer Michigan high school grads are filling out the FAFSA. Now it goes on to say, and this story is about Eastern Michigan University, got more applications this year than it did last year. Duh. It admitted more students than it did last year. Double duh. But far fewer of the new admits had filled out the FAFSA. All right, well, we know that's happening, meaning that these students who apparently more applications and more than more accepted by Eastern Michigan meaning these students didn't get— didn't— did not get an accurate sense of how much going to Eastern Michigan University would cost. Now let's talk about the terminology. Applications— anybody can fill out an application. The Common App makes it just as easy to apply to a college as it does to add another ingredient to your pizza. You check another box. Accepted is in the college's unilateral decision-making process. They can accept anybody they want. So in both cases of applications and acceptances, that doesn't mean much at all about whether students are going to show up. What we really want to look at is the number of deposits, and more importantly, especially this year, is comparison— comparing the number of deposits, students who have written a check to a college in 2024 as opposed to the same number this time, mid-June of 2023. I'm hearing numbers in the vicinity of down about 10%. And if you have 10% fewer deposits, realistically, that's going to be about somewhere in the vicinity of 10% less revenue. And here's what we're going to see: colleges looking to survive the FAFSA debacle and the downward trend, the overall downward trend in higher education, will start announcing proactive layoffs. Soon. They have to. If they're looking at prior year-to-date comparisons of deposits and they're down something like 10%, it's not going to change that much in either direction, probably, between now and September, October. Those that don't start adjusting their academic or fiscal '24-'25 budgets when they get those Title IV fund checks from the government, the loans in September, and when they get those Title IV funds and realize that it won't cut it, that they won't have the funds to keep the lights on, to meet payroll, and then they have to scramble to do the layoffs, or even if it's that bad, turn the lights off for good, I will be concerned. And I think you should be too. For colleges that don't announce proactive layoffs in the coming days and weeks. Page 4, a couple stories on again just the overall market. And this story is from Liz Mary Evans in the Fayetteville Observer. Education trends show in the U.S. show shift toward vocational programs. All right, well, we've seen that before. I'm not going to go into any detail. I'll include the link in show notes. And then another one for entrepreneurs, and this headline reads, adults who skipped college and were successful urge high school grads to follow suit, saying the rewards are immeasurable. There's a story behind that, I'll include the link. It was from Nicholas Lanham on June 4th in Fox News, so a big-time source on that stuff. And both of these are really just anecdotal news stories. And the story from Fox goes on to quote some, some costs associated with college. I think they just did list price. I think the numbers are really high, but it still goes to point out it's not just a financial piece. The market is changing. I've said this so many times and we'll say this so many more times. It's going to continue to happen. And then finally, back to our Vernal College and what we see with Alverno College is what we have talked about before, but I want to add a comment that I got in one of my social media posts, and I'm going to kind of paraphrase. There are 1,700 students at Alverno College, and they have a choice of 74 majors, and only 5 of those 74 majors had at least 20 students graduate in 2022, I think it would be his last year reported. And there's simply no way a school this small can sustain the operating costs of this many programs. And I, I'm not sure how this is an emergency, as the data is obvious, as is almost in almost all cases a pattern of trend is error. And I'm not sure where the Higher Learning Commission has been on this, or any accrediting agency. We saw that show up with Middle States a week or two ago. What are they looking at, these accrediting agencies? Could they have not suggested that Alverno College can't financially or operationally or quality-wise support 74 majors for 1,700 students? And I guess I'll wrap with this on this story. All these programs, all these 74 programs, are approved by the Higher Learning Commission, or in other, in other states and colleges, other accrediting agencies why, why HLC thought— did not think to ask why a school this small has so many programs. And I bet, I know, I'm certain that many, many, many other colleges with small enrollment have way, way too many programs and majors to support. Hey, let's wrap this one up. Brian Rosenberg, who wrote the book that was published and released last year, and the title of the book, one of the best titles ever, is Whatever It Is, I Don't Like It. And of course, it was about college faculty. And Brian Rosenberg, who was on the podcast earlier this year and will actually join me for a panel discussion, uh, podcast this Friday discussing the potential for federal bailout of struggling private colleges. And Dr. Brian Rosenberg is a thoughtful engaging and long-term president of a very successful college, Macalester College in Minnesota. He wrote a piece for the Chronicle of Higher Education this past week. And the essence of it was a long story, long article, it was an opinion piece. The essence was that college presidents take a lot of grief from many, many different stakeholders, pundits, politicians, and more. And much of the article, includes the politicalization of college. And I don't do politics on This Week in College Viability. I'm just not going to. But Dr. Rosenberg writes, on the many non-Ivy campuses, figure a couple dozen Ivy and Ivy-like campuses, where there have been few protests or encampments, most colleges across the country, presidents, he writes, are being blamed for attempts to tackle existential threats like sharply declining enrollments, and deep structural budget deficits. True. For every one of those threats that is a result of bad management, and there are some, he says, dozens are the result of nearly irresistible economic and demographic trends. I have said this for a long time. Frequently, he goes on, new presidents are brought in by boards as change agents— he puts that in quotes— to deal with those intractable challenges. Attempts to deal with them, he writes, are blessed with the faculty vote of no confidence. We've talked about that before, which are occurring in huge numbers, Dr. Rosenberg writes. And these college leaders, these new college presidents, disappear within a few years. I think he wrote about that in his book a little bit as well. The problems with which they were asked to wrestle meanwhile remain unsolved. And so the frequency of budget cuts continues to increase, and colleges this year are closing at the rate of about 1 per week. Now, Lord knows I have taken many college leaders to task for a variety of reasons, but Brian Rosenberg's article struck a chord with me. And there's no doubt, no doubt that the gig of a college president is a tough one. When I do these podcasts, when I do my social media posts, my intent is to point out the economic and business realities that too many college leaders and their boards, their board of trustees, are either ignoring, hoping go away, or are just plain unable to address. The purpose of a college— many have said this— the purpose of a college is to educate the next generation of students. I sincerely fear I sincerely fear that this is not happening at too many colleges because of the tight financial constraints. The market needs to consolidate. It is consolidating. My role is to provide the news and commentary that might in some small way move the higher education market toward that reality. Brian Rosenberg, thanks for the reminder. Thanks for the perspective. Until next Monday when we do another episode of This Week in College Viability, when it will still be hot, this is Gary Stocker. We'll talk then.