Happy Holidays 2018

Last month I wrote about the multi-year death spiral at Iowa Wesleyan University. My 2017 column for Inside Higher Ed discussed four broad signs that a small college or university is headed toward failure. But how can a faculty member employed by a tuition-dependent institution like Iowa Wesleyan get a firmer grip on his or her employer’s financial health?

One way to do this is to calculate the percentage change over time in a school’s annual total expenses per full-time equivalent (FTE) undergraduate. The larger the expansion in expenses per student, the worse the school’s financial condition and the lower the chances of its long-term survival. 

Is this measurement the only sign of serious trouble? No, but it’s a good rule of thumb that is simple to calculate. Enrollment data can be obtained from the Integrated Postsecondary Education Data System (IPEDS). Not-for-profit colleges and universities report their operational expenses on Line 18 of IRS Form 990, which are available from organizations like ProPublica or Charity Navigator.

I decided apply this rule of thumb to several colleges and universities that suffered declining enrollment, eliminated academic programs, or were otherwise reported as in financial difficulty.  My analysis uses data from fiscal years 2011 through 2016. Why use this time span? Prior to FY 2011, colleges and universities were trying to cope with the immediate effects of the Great Recession, which, as I have previously argued, accelerated what are probably near-permanent changes in undergraduate enrollment. It seemed fair to give schools six years after the economy had begun to stabilize to adjust to the new normal. Finally, when I began my analysis, the most recent publicly-available federal tax filings were from FY 2016.

Below are my results, ordered from the smallest increase in expenses per FTE undergraduate to the largest. I bear none of these schools any ill will. Many have histories of serving marginalized populations. But I predict that at least half of them will close within the next five years. 

20: Goucher College

Goucher announced in August that it was eliminating eleven academic programs, all but one in liberal arts and humanities fields. The college’s Form 990s show budget deficits in deficit FY 2011, FY 2014, and FY 2015. For FY 2016, it sold securities—likely from the endowment—for a net gain of $14.7 million, yet total net revenue was only $7 million. Paring down the curriculum appears to be an attempt to reduce its operational expenses.

20: Guilford College

While Guilford’s budget was in the black for every year except FY 2015, its FTE undergraduate enrollment plummeted by a third to fewer than 2,000 students. Its plans for restoring enrollment to former levels appear to be focused on campus construction.

21: Fisher College and 24: Emmanuel College

Fisher and Emmanuel are both in Boston, a city dense with colleges and universities that until recently included Mount Ida and Wheelock. Though Fisher’s FTE undergraduate enrollment increased by 14 percent and its budget remained in the black, its net operating margin shrank from over 16 percent in FY 2012 to just above 2 percent in FY 2016. Emmanuel’s undergraduate enrollment fell by 7 percent, and it was in deficit in FY 2013 and FY 2016.

32: Viterbo University

When Viterbo announced the elimination of a dozen academic programs in April, its president, Glena Temple, described the university as being in a good financial position. Yet Viterbo’s FTE undergraduate and graduate enrollments had fallen by 15 percent and 30 percent, respectively, by the end of FY 2016. Its net operating margin had decreased from over 14 percent to less than 3 percent.

33: Fontbonne University

Fontbonne reported a deficit every year from FY 2011 to FY 2016. During this period, its FTE undergraduate enrollment shrank by nearly 30 percent. Its geographic location puts it in direct competition with a half dozen other universities that are less than twenty-five miles away, yet it is investing in creating a satellite campus for graduate and adult education and building new athletic facilities. In May, Fontbonne laid off 10 percent of its employees.

36: Warren Wilson College

Warren Wilson’s FTE undergraduate enrollment fell by 15 percent and it had double-digit negative net operating margins in FY 2014 and FY 2016. The college eliminated twenty positions and cut employee salaries in 2017. It currently enrolls only about 700 students.

51: College of St. Joseph

In FY 2014, the College of St. Joseph had only seventy-five full-time undergraduate students. Half of the college’s $5 million endowment was invested in the creation of a physician assistant training program. The program was denied accreditation and the effort was abandoned in 2016. For that fiscal year, expenses exceeded revenues by one-third. By May of this year, St.Joseph’s endowment had dwindled to only $500,000. In August, it was placed on probation by its accreditor. *Update: NECHE terminated St. Joseph’s accreditation, “with the understanding that the College will cease instruction as of the end of the Spring 2019 semester. The accreditation is continued until August 31, 2019 for the sole purpose of allowing students to complete their degree from an accredited institution . . .”

69: St. Augustine’s University

St. Augustine’s posted deficits in FYs 2013, 2015, and 2016,and its FTE undergraduate enrollment collapsed by more than 50 percent. Currently on probation by its accreditor, St. Augustine’s was given until December to demonstrate that it achieved financial stability, but senior staff and external consultants doubted that it would happen.

80: Bacone College

Bacone’s IRS filings show that its total expenses more than quintupled from FY 2013 to FY 2015. In FY 2016, its FTE undergraduate enrollment had dropped to below 800 students. In May of this year Bacone announced that it was suspending operations and laid off most of its employees.In June, its new president claimed that the college would remain open, but it did not meet payroll in July. Bacone is selling three properties to raise an expected $4 million and has cut the number of its degree programs in half, but it supposedly has only a few hundred students for the 2018-19 academic year.

89: Wilberforce University

Wilberforce reported deficits for five of the six years examined. It had a net operating margin of negative 27 percent in FY 2016. For FY 2017, its FTE undergraduate enrollment was less than half what it had been in FY 2011—only 332 students. Wilberforce’s accreditor placed it on probation this past July.

91: Bethune-Cookman University

Bethune-Cookman’s expenses nearly doubled while its FTE undergraduate enrollment fell by more than 25 percent. Salary increases for the university’s executive staff were responsible for a significant portion of the additional expenditures. In early 2014, the university committed to construction of a new dormitory that will eventually cost $306 million in loan payments. A document examiner concluded that the signature of Bethune-Cookman’s president on the contract had been forged, yet trustees went forward with the deal anyway. Since then the university has had budget deficits totaling at least $30 million. Bethune-Cookman was placed on probation by its accreditor in June, and its trustees began resigning in August.