Colleges in Dire Financial Straits

[apl68]

There should be a comparable list of newly opened universities, if only to show that there is turnover rather than just loss. US News has a feature on some new ones that are nor in dire financial straits. The ones that start with a bad business plan hit the dire financial straits quickly, so we may not notice them.


Statista has the gross number over time. Apparently the 2008 banking crisis enabled a boomlet.

Interesting.  I honestly didn't know that there had been any new foundations in recent years.  Or that the overall number had grown in the 2000s, and is currently still above where it was in 1990.  I'm guessing a lot of them were for-profit operators.

So a couple of states have formed new campuses in this century, the Muscogee Nation has founded a shiny new school, there are a couple of engineering-only colleges (Wonder how they support themselves without any humanities students whose tuition subsidizes the engineers?), and there is even a newish Catholic college.

[Hibush]

and there is even a newish Catholic college.

Ave Maria is the pet project of Domino's billionaire Tom Monaghan. It is a combination of planned residential community and college dedicated to an especially conservative form of Catholicism. The whole thing is in the middle of nowhere near the Everglades. It will probably avoid dire financial straits in the near future.

[TreadingLife]

This article has a nice rundown of recent cuts and discontinued programs at a number of schools.

https://www.insidehighered.com/news/business/cost-cutting/2024/06/07/rough-month-campus-cuts

[mythbuster]

I will disagree with the articles definition of "new". UC Merced and Georgia Gwinnet College are approaching their 20 year anniversary. And Florida Polytech has been on quite the political roller coaster ride since it was "spun off" from USF. And the majority of these have the relatively stable footing of a state system to back them.

[sinenomine]

The University of the Arts in Philadelphia closed yesterday, after terminating 600 employees via a Zoom call, according to Channel 6 news in Philly.

[apl68]

I will disagree with the articles definition of "new". UC Merced and Georgia Gwinnet College are approaching their 20 year anniversary. And Florida Polytech has been on quite the political roller coaster ride since it was "spun off" from USF. And the majority of these have the relatively stable footing of a state system to back them.

To me, and probably a lot of others, any institution of higher learning started in this century qualifies as "new."  At least in a relative sense.

[apl68]

The University of the Arts in Philadelphia closed yesterday, after terminating 600 employees via a Zoom call, according to Channel 6 news in Philly.

That's harsh.  And apparently of questionable legality, since everybody got only a single week's notice.

I've noticed several articles dealing with how the abruptness of the closure has led to protests and questions by city and state officials as to how this could have happened.  There's talk of official inquiries.  There will likely be conspiracy theories.

There's also talk of efforts to find a way to keep the university open.  Hard to see how anybody could manage that, unless some billionaire drops down out of the sky with unlimited funding to offer.  I guess people can dream.

[spork]

The University of the Arts in Philadelphia closed yesterday, after terminating 600 employees via a Zoom call, according to Channel 6 news in Philly.

The Form 990s look sketchy. The school had ~ $3 million in net revenue on ~ $110 million in expenses for FYs 2019 and 2020. For FY 2023, it had a $6 million deficit on $106 million in expenses, despite $17 million in contributions and almost $9 million in sales of assets. In prior years, the school got $14 million to $20 million in annual contributions. The listed figure for FY 2017 is $34 million. Yet the school's net operating margin never exceeded 3% and was usually far below that.

Meanwhile executive compensation climbed from 1.5% (FY 2012) to 2.4% (FY 2021) of annual gross revenue, with the president, David Yager, getting > $1 million in total compensation in FY 2022. Executive compensation only dropped to 1.9%, and Yager's compensation dropped to $700K, in FY 2023. That same FY, annual investment income decreased to just $170K, from $1 million to $1.4 million in the preceding years, most likely because the people in charge had sold off whatever endowment the school had.

[methodsman]

The University of the Arts in Philadelphia closed yesterday, after terminating 600 employees via a Zoom call, according to Channel 6 news in Philly.

The Form 990s look sketchy. The school had ~ $3 million in net revenue on ~ $110 million in expenses for FYs 2019 and 2020. For FY 2023, it had a $6 million deficit on $106 million in expenses, despite $17 million in contributions and almost $9 million in sales of assets. In prior years, the school got $14 million to $20 million in annual contributions. The listed figure for FY 2017 is $34 million. Yet the school's net operating margin never exceeded 3% and was usually far below that.

Meanwhile executive compensation climbed from 1.5% (FY 2012) to 2.4% (FY 2021) of annual gross revenue, with the president, David Yager, getting > $1 million in total compensation in FY 2022. Executive compensation only dropped to 1.9%, and Yager's compensation dropped to $700K, in FY 2023. That same FY, annual investment income decreased to just $170K, from $1 million to $1.4 million in the preceding years, most likely because the people in charge had sold off whatever endowment the school had.

College/University presidents make ENTIRELY TOO MUCH.  And, look at the additional compensation columns as well. This is hidden salary. 

And then they just quit when shit hits the fan.  But, they probably get their contract paid out anyway.

mm

[TreadingLife]

Facing steep financial challenges, the University of Wisconsin at Oshkosh has spent all of the discretionary money in its unrestricted reserves, the Milwaukee Journal Sentinel reported.

What happens to a college when this happens? Do they have to declare financial exigency to tap into restricted funds in the endowment, or can that be done discretely by going back to living donors? What if the donors aren't living?

I worry about the exhaustion of unrestricted funds at my institution. We have a decent sized endowment, but most is restricted. You certainly don't want to start eating into the principal, but it would buy us decades to die a slow death, rather than a fast one.

Does anyone know the protocol once a school blows through unrestricted funds? UW can tap into other reserves, so we can't see what would happen if they were a solo nonprofit, private institution.

[Ruralguy]

Its a state school, so I am sure they are governed by system wide rules. What happens if everything in that chain of rules has already been exhausted? I guess "the system" (meaning the chancellor of U of W) goes to the legislature, if they care to, and ask for more money, or they move it around from elsewhere, or they discuss merger or closure.

Its a lumbering bureaucracy. Perhaps someone from that bureaucracy can illuminate, or at least from some other state system that might have a "member" college hit the rocks.

[dismalist]

...

College/University presidents make ENTIRELY TOO MUCH.  And, look at the additional compensation columns as well. This is hidden salary. 

And then they just quit when shit hits the fan.  But, they probably get their contract paid out anyway.

mm

I don't think university presidents are remumerated too generously. After all, you get hit with demo's on campus that disrupt your institution and your job, you get attacked for being incompetent after you call the cops, you get fired for being an anti-Semitic plagiarist even though the board that hired you was OK with that, your college or university goes under and you lose your job that way.

This is a high risk job! Like going to Vegas.

[apl68]

The job does kind of remind one of Abraham Lincoln's anecdote about the man who was tarred and feathered and ridden out of town on a rail.  "If it weren't for the honor of the thing, I'd rather walk!"  I can see why university presidents insist on compensation that goes beyond "honor."  That said, it's hard to see what some of them have done to earn their compensation.

[jimbogumbo]

...

College/University presidents make ENTIRELY TOO MUCH.  And, look at the additional compensation columns as well. This is hidden salary. 

And then they just quit when shit hits the fan.  But, they probably get their contract paid out anyway.

mm

I don't think university presidents are remumerated too generously. After all, you get hit with demo's on campus that disrupt your institution and your job, you get attacked for being incompetent after you call the cops, you get fired for being an anti-Semitic plagiarist even though the board that hired you was OK with that, your college or university goes under and you lose your job that way.

This is a high risk job! Like going to Vegas.

I'm really curious as to what about it you think is risky. All the one's I've seen who get fired have really good transition packages (usually a sabbatical period at full pay), and then go back to tenured positions at above average salaries (often tied to their former executive compensation). From where I sit it doesn't seem like Vegas at all.

[dismalist]

The job does kind of remind one of Abraham Lincoln's anecdote about the man who was tarred and feathered and ridden out of town on a rail.  "If it weren't for the honor of the thing, I'd rather walk!"  I can see why university presidents insist on compensation that goes beyond "honor."  That said, it's hard to see what some of them have done to earn their compensation.

That's a question best addressed to the boards that hired them.

...

College/University presidents make ENTIRELY TOO MUCH.  And, look at the additional compensation columns as well. This is hidden salary. 

And then they just quit when shit hits the fan.  But, they probably get their contract paid out anyway.

mm

I don't think university presidents are remumerated too generously. After all, you get hit with demo's on campus that disrupt your institution and your job, you get attacked for being incompetent after you call the cops, you get fired for being an anti-Semitic plagiarist even though the board that hired you was OK with that, your college or university goes under and you lose your job that way.

This is a high risk job! Like going to Vegas.

I'm really curious as to what about it you think is risky. All the one's I've seen who get fired have really good transition packages (usually a sabbatical period at full pay), and then go back to tenured positions at above average salaries (often tied to their former executive compensation). From where I sit it doesn't seem like Vegas at all.

The transition package compensates for the risk.

Going back to tenured positions is the non-profit equivalent of the golden parachute in for-profit firms: We want you to take risks, but we have no clue whether what you did was stupid or smart. :-)

I am not claiming anybody is underpaid. I am claiming they are not overpaid.

The money for presidents question is really deeper, involving the whole structure of incentives in non-profits, especially those that have big endowments. We had a thread somewhere.