In Closing (Selected Resources Below)

Fundraising is always a wild card. And, with little doubt, financial challenges can provide a compelling argument for outreach to alumni who value the integrity of their degrees. But, leaving that roll of the dice aside, once cash and equivalents are depleted in the normal course, there are only three major options available  if a school wants to remain solvent and freestanding: Invading endowment, taking on more debt, and putting operating austerities in place. 

Diversification of revenue and growing endowment are both noble causes, but ones that usually take investment and a considerable amount of time to mature. And that assumes the efforts are successful in the long run, which is certainly not guaranteed.

The use of available endowment funds and debt options is school-specific, of course. But the averages for the 44 midsize tuition-dependent schools in The 2024 New England Survey and the individual financial profiles of most of the schools indicate that those options are limited.

As a result, reductions in force would be the main way most schools in the Survey might hope to reduce expenses to stay afloat. And if a school takes no steps in advance to deal with potential declines in enrollment, the RIFs that would be needed could be draconian for at-risk schools, at best, and crippling at worst.

The amount of cash and equivalents a school has on hand is a rather good indicator of its downside risk. A tuition-dependent school with no less than the equivalent of 3 months of operating expenses on hand in the form of cash and equivalents has more breathing room than schools that only have the equivalent of a month or two at most. But, more importantly, cash reserves of that order of magnitude reasonably suggest that the school has been managed with cash flow in mind.

But the at-risk schools in The 2024 New England Survey do not have those kinds of cash reserves. And for them, and, frankly, all of the schools in the Survey, the first line of defense against likely declines in enrollment in the future would be phased downsizing – unless, of course, they have a legitimate reason to believe their enrollments will not decline or that they might even hope to grow despite market declines. 

Specifically, schools can exploit normal attrition long before a cash crisis is upon them to reallocate human resources to the highest priority positions. Gradual downsizing, managed well, can be relatively painless compared with the disruption a major RIF in the midst of a crisis can cause operationally and in terms of employee morale. And if enrollments do not decline to the extent expected or at all, downsizing is entirely reversible.

And none of the schools in The 2024 New England Survey should discount the possibility that a merger with another institution could create operational and financial synergies. The average age of the 44 schools in The 2024 New England Survey is 133 years. So, merging might be a bitter pill to swallow. But for some, it may be the only way to carry on.

University Presidents and others in leadership positions: Please take the message delivered here to heart and do what’s right for your students, staff, faculty, and alumni.

Students, staff, faculty, and alumni: Finance is not complicated. The information presented here should enable you to participate in shared governance and advocate responsibly. Please use it.