This Week In College Viability (TWICV) for November 27, 2023

It's the November 27th, 2023 podcast episode of This Week in College Viability. Hi, my name is Gary Stocker. This week we have still more cutback and layoff announcements. We have two interesting cutback and layoff stories that I'm going to add from Mark Opria at the Cleveland Scene. We're going to talk about tuition deals that don't work. And Forbes writer Derek Newton and I agree to disagree on the state of higher education. Minnesota and North Dakota dive to the bottom of the pit to get students to enroll in their states. And I talk about talented and hardworking, dedicated faculty and staff, yet their micro efforts won't impact the big picture, the macro of higher education. And let's start as we always do with our cutbacks and layoffs list, because they're going to continue to happen. Park University in Kansas City, and this is from KCUR-FM, the Kansas City Beacon, and Maria Benevento. The university is cutting 16 faculty positions, 3 master's programs, and about a dozen total majors that include certificates, concentrations, minors. The number of students at Park University has dropped, I think, more than 30% over the last few years. Drake University to cut faculty and academic programs, slashing more than $10 million in spending, is the story. There might, though, there might be a leadership attaboy here. Drake is not going to close. They're not. They have strong financials. They really just have a cash flow issue associated probably with expenses. It's probably manageable. Um, I think they'll be okay. I'm sure they'll be okay. They're just getting ahead of this like some colleges are, but not enough. The next cutback and layoff list is from the University of Massachusetts. The Chan Medical School to lay off 70. That's from Grant Welker in the Boston Business Journal. And then finally in our list, the University of Nebraska at Kearney to cut around 2 dozen faculty positions, and that's from Higher Ed Dive and writer Laura Spitalniak.

But I've got 2 stories.

These are both from Mark O'Pria from the Cleveland Scene, and the first one is Lakeland Community College to lay off 10% of the staff. And I I've kept this story separate from the cutbacks and layoffs list because it kind of fits into the fictitious category of "we didn't see this coming." So from Marco Priya's story, Lakeland Community College board members voted last week to cut 66 employees, about 10% of its workforce, with the hopes— that's always fun— with the hopes that the layoffs will save the institution from further dire financial straits. Many of those interviewed in the story said they had witnessed worrying changes— this is what I want to talk about— across campus in the past two semesters. Here are the examples. Secretaries, the story reads, started bringing in trash bags to make up for the overflowing rubbish bins that weren't being emptied. I'm guessing they weren't paying their bills. Other staff were yelled at— I guess we'll accept that— for spending $50 over their supply budgets. Or, this is a real sin, for buying coffee for a faculty awards ceremony and the HVAC, the heating and air conditioning, quit working in some classrooms.

And the story goes on.

We've been freezing, we've been hot. I actually had a student get ill in the classroom. One part-time teacher told the scene. They've been letting the school get dilapidated. Dilapidated. It's all a facade. And Lakeland Community College Board Chair Jeri Lee Rispoli says this: these are difficult decisions. I'm sure he said that with a solemn face, but they are necessary to balance the budget as Lakeland—

and it's jumping in with everybody else—

along with colleges across the nation deal with the reality of lower enrollment. She says— so Jeri must be a female— as stewards of the institution, the board has a responsibility to ensure the long-term blah blah blah blah blah sustainability of the college. Why now? They were bringing in trash bags of their own to empty the trash bins. The enrollment had been trending down for a long time. Folks were not following the data closely enough for colleges like this across the country. This will continue. I have all sorts of content to share with you in the coming weeks and months and maybe years And, and just to remind you, I have created a special version of the College Viability App for faculty and staff, and I'll make sure to include a link to that in the show notes. And I've got an end-of-year promo to make it easily affordable for faculty and staff, whether they expense it or not, to look at where their college is in comparison to others so they can ask the difficult questions today and not face the same unexpected trauma that the good folks at Lakeland Community College faced. Before we go to the second story from Mark O'Prya, I want to go to the stupid quote.

And I haven't done this before, but I'm going to go with a stupid quote out of a Pittsburgh Business Journal story. And this stupid quote is from Michael Hicks, who's the director of the Center for Business and Economic Research at Ball State University. Mr. Hicks said, stable and increasing college enrollment means that more people have larger lifetime earnings, said Michael Hicks. College enrollment, he goes on to say, with or without a degree, leads to a more affluent and college-bound community. I don't even know what that means. He continues, just going to college, even if you only stay a semester, tends to have a fairly large threshold of wage premium over just a high school education, Mr. Hicks said. He finally concludes with states that have more college-educated people tend to be more affluent with a higher per capita income and higher productivity. Now, Mr. Hicks, Dr. Hicks, I don't know what he is, if you would please, could you cite your sources for the fact that staying a semester tends to have a fairly large wage premium? And if you don't have facts, would you kindly do next time say, in my opinion? And by the way, what's a fairly large threshold of wage premium Guys, folks, ladies and gentlemen, this is just lazy, pure and simple. This is lazy writing. This is lazy reporting.

Jeez.

And I don't have a reporter's name on the story. So back to Marco Pria, who does do good writing. And this headline reads, Baldwin-Wallace thought it faced a $3 million budget deficit, then it discovered it was actually $20 million. This is a November 24th story from the Cleveland Scene and Marco Pria. And this is in the category of I can't make this stuff up. The story reads, Baldwin-Wallace University— it's a private college— was already planning on how it would address a $3 million budget deficit accrued from July '22 through June '23, and they called it a product of rising cost, decreased revenue from enrollment, and other factors, when it learned its deficit was actually much higher, a little over $20 million. So this college is now trying to learn exactly how it flew so blindly for so long, and of course figure out how to reduce costs for next year. And they say it's going to include elimination of programs, sizable staff cuts. We've heard it before and we'll hear it again. Here is the kicker from the story from Marco Priya and the Cleveland Scene: accounting issues were first reported by the BWL Exponent. BW stands for Baldwin Wallace. It's the school's student newspaper. First reported the story in a late September story. Mark's story reads, the administration vaguely acknowledged that some recent mid-year reports were inaccurate, giving the university an incorrect snapshot of its budget. The student newspaper scooped the college's leadership, scooped the board of trustees, scooped its accounting firm, and now Baldwin University is trying to learn exactly how it flew so blindly and which cuts to make. And now there are some— there appear to be some personnel issues here. You can read about those in the link to the article that I will provide in the show notes, but The student newspaper scooped the board of trustees.

What were they doing?

Were they having coffee and donuts one day instead of looking at the finances? Were they doing drinks and hors d'oeuvres one evening?

If this were video, you would see me shaking my head back and forth.

This is easily a double geesh, bordering on a triple geesh. And I strongly suspect that Baldwin-Wallace isn't the only college— I know it's not— who the board of trustees and college leadership is either blind to what's going on or not sharing what's going on in private colleges, in some cases public colleges across the country. And like we do often, let's go to the data. And let's go to the data from the 2023 faculty and staff version of the app just to give you a quick picture that I could have told you a long time ago about Baldwin-Wallace. Enrollment's down. FTE enrollments down 431. That's over— that's from the period 2014 through 2021. The admissions yield was down 5 points. Tuition and fees revenue was down about $7 million. Their unfunded institutional grants, commonly called merit aid, sometimes scholarships, was down— I'm sorry, was up, was increased about, about $9 million. So they're giving away more of the store to get students to enroll. The graduate enrollment was down 132 students from It was 617 in 2014 and down to 485. A couple good things, the graduation rate at Baldwin-Wallace, really not bad. It's above our threshold for the 4-year graduation rate. It was at 51% in 2014 and up a little bit to 54% in 2021. The 6-year graduation rate was just below our 70% threshold at 68% and 66% respectively. And the endowment, not bad, $153 million in 2021. It's probably a little bit higher than that. But somebody took business sleeping pills. They didn't know what was going on, or they weren't sharing what was going on. How many other places is this happening?

Onward we go. Mike Nietzel, always writing some good stuff for Forbes. His headline this time reads, Small Colleges Turning to tuition deals to boost enrollment. And he goes off in his story about free tuition, tuition resets, and one just came up here recently, free tuition for graduate programs. That's got to be a doozy for the delayed gratification crowd. And he concludes his story, and then I'll add— I'll follow up on this. He concludes his story, he talks about all these programs in detail and the pluses and minuses, but Mike Nietzel wraps up his story with how much impact these tuition offers will have on enrollment yields— so many people show up once accepted— is uncertain. The track record for tuition resets is sketchy at best. I've talked about that many times. And while free tuition might help sagging enrollment recover to a degree, they do little to help a college's bottom line. And, and Mike Niezel is right, as he is almost all the time. These tuition deals are meant to increase enrollment.

Fine.

Maybe they will, maybe they won't, but they certainly don't enhance the almost universal need to increase net revenue. You just can't have both.

And I have another story later in the podcast that expands on this.

Yet this is another example, this is another example of college leaders trying to manage by public relations. Derek Newton always has some well-researched content, uh, in his Forbes articles.

And this one is from November 24th— excuse me, November 21st.

And he writes, the cost of college continues to decline. And he's doing some comparisons of inflation-adjusted rates.

Fine.

And I have to give the good folks at Forbes credit because they really do a good job of balancing their coverage of the good and the bad in higher education. And from my perspective, it's clear that the talented Derek Newton has been given the dubious task of finding and writing about the good financial news out of higher education. Now, Derek and I have exchanged email messages, and in those email messages politely agreed to disagree on the future of higher education. And if we accept Derek's premise that the cost of college continues to decline, then let's apply that from a macro, big picture, to a micro, individual college level. His thought process, his writing, mostly focuses on higher education as a whole, and as such, I really can't disagree with his data nor his logic. But what Derek is missing is, is the reality that there are hundreds— and I have my list of 230— hundreds of mostly private colleges with a 5 to 10 year history of decreasing enrollment, decreasing tuition and fee revenue really bad graduation rates, both 4- and 6-year, and really small endowments. And my threshold is $50 million or less.

And most, not all, have substantial debt.

So even as Derek can accurately document the cost of college declining, colleges are, are still engaged in an intense effort to grow their enrollment. They have to, they want to, there's nothing wrong with that. But they're doing that mostly with tuition discounting, even though they call it scholarships and merit aid. They're unfunded tuition discounts. That's even a category in IPEDS.

On a case-by-case basis, on a college-by-college basis, there will almost certainly, certainly continue to be more closings for private colleges along with more cutbacks of faculty, staff, and programs and majors at public universities.

Derek is probably correct on the macro, on the big picture, but not so much on the college-by-college scenarios.

Um, we'll see if we can't follow up on this story at a later date. Liz Navratil is the next story, the Star Tribune. I think that's out of Minneapolis. The headline reads, Minnesota started offering free public college tuition. Now North Dakota State University is too. Now, I can make the case that a college degree is a commodity, like milk or bread or grass seed.

It's dependent in almost—

in a large part, not exclusively— it's dependent in large part on pricing to get customers or students. Now, college leaders, colleges that read this will scream to the mountaintops that they are unique. With different products.

And to a substantial extent, the peripheral parts—

the campus, the degrees, the faculty, etc.—

of a college are unique. I will grant them that.

But the commodity is the piece of paper they award after 4 years. That's a commodity.

Outside of the top 50 or so selective—

some call them rejective— colleges, nowhere will you find evidence that a degree from one college is preferred to that of another college. It's a degree, it checks off a hiring requirement—

degree check. And so what's the easiest way to get a sale with any product or service, commodity product or service?

Also, you lower the price. And with colleges, that is called tuition discounting. And again, they falsely call it merit aid and scholarships.

And falsely is probably not the right word. They disguise the discounting with terms like merit aid, and scholarships. But what's the hardest way to get a sale? The hardest way is to substantively differentiate your product or service.

In the case of colleges, how is one college's bachelor's degree in whatever topic, whatever major, different or better than the same degree offered somewhere else? It's a very challenging task in my mind and one that is probably not accomplished very often. So what do colleges do?

They lower the price.

It reaffirms, it confirms that this is a commodity because they can only sell the product, sell the service through lower prices, through discounting. So let's go back to the good folks in North Dakota and Minnesota competing on price. Well, not really competing on price, they're competing on giving away a college education for free. And, and I understand There are some government programs and funding behind this. But who really wants to be reliant on the stability and consistency of government funding to run a business? That's a risky proposition. And here's the proof that I'm right. And again, this is Liz Navratil in the Star Tribune. And I quote, North Dakota State University's free tuition program is funded for only one year. I'll say that again: North Dakota State University's free tuition program is funded for only one year. We'll continue to look both internally and externally to see if we can continue to fund this longer term, said Cinqueous Leinen, the college's senior director of strategic enrollment management. So is it fair for me to say, are we looking at a bait and switch? In North Dakota? Will this year's free tuition be next year's $10,000, or whatever it is, in tuition and fees for students? Is anybody, is anybody thinking this through in Minnesota and North Dakota and across the country? This is yet another example, another example of colleges desperate for enrollment sacrificing financial stability, financial growth, for some quick public relations recognition in a current news cycle. No way to run a business.

This is a geesh.

And in long term, I think it might even be a double geesh. This is way too short-sighted, and students will end up paying in unforeseen tuition costs. And colleges are simply pushing their financial challenges down the road without any real solutions to increasing net cash from operations. And let's wrap up this episode with what I talked about in the intro. And I know both personally and stories I've read constantly that there are so many hundreds, thousands, thousands of talented, hardworking, dedicated faculty and staff in public and private colleges, 2-year and 4-year, for-profit, non-for-profit across the country. But let's not confuse the micro these individual efforts for the macro, the big picture. There's absolutely zero questioning that there are large numbers of really, really, really good people in higher education. But let's not confuse or extrapolate that as a sign that higher education is okay. It's not. As an industry, higher education is most definitely not okay. And in the macro, to balance this in that big picture, and I've shared this before, there are way too many college seats, way too many colleges, and not enough students willing to pay for all those colleges and for all those college seats to support the number of colleges we have in this country. We are seeing it already We are seeing its micro impact from the macro picture of supply and demand—too large of a supply, too small of a demand. We're seeing its micro impact with cutbacks and layoffs and closures, and each of which sadly will continue. Until next week, this is Gary Stocker with the November 27th episode of This Week in College Viability. Until next week, we'll talk then.