Nearly 20% of higher ed CFOs think their schools could close in the foreseeable future

'All of the signals are that this is a sector that is in trouble'

About one in five higher education CFOs say they are worried their institutions are in danger of shutting down in the near future, according to a new survey from Inside Higher Ed and Gallup.

The 2015 Survey of College and University Business Officers is based on responses from such executives at 403 private and public institutions. About 3,000 CFOs were asked to participate.

Nineteen percent said their schools are likely to close within the next few decades—but just 1% predicted it will happen within the next five years. Just 64% of respondents agreed or strongly agreed that their institution's financial model is sustainable for the coming five years, while that confidence drops to 42% when looking 10 years out.

"The majority of the people who are responsible for money think that it's manageable in the short term, but not long-term," says Jane Wellman, a College Futures Foundation finance expert. "All of the signals are that this is a sector that is in trouble."

Yet the survey found 39% of institutions had not recently changed, or planned to change, their budget models. And others are still trying to use strategies that experts stress will not work: 88% of CFOs said their schools primarily aim to increase enrollments and 74% plan to grow net tuition revenue.

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"The kinds of things that would better position institutions for the long haul probably aren't happening. They're still at the edges, and solving this more symptomatically than strategically," Wellman says.

About two-thirds of CFOs said that they had increased their focus on the cost of providing health care, and most CFOs also said they are more closely scrutinizing academic programs' profitability, too.

However, some other initiatives took a back seat:

  • About half of CFOs said they had increased their focus on the cost of providing retirement benefits;
  • Only 44% of CFOs said they had increased their focus on requiring faculty to teach more courses.

"We have to push toward more innovation and more return on investment, and that doesn't seem to be evident in the responses," says Richard Staisloff of the college consulting agency the RPK Group. CFOs and other administrators need to prioritize ways to increase program profitability and improve efficiencies, he says.

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While more colleges are implementing or considering centralizing administrative processes in a shared-services model, that is not enough, experts say.

Institutions must realign academic offerings and deal with employee health and benefits costs before they will be in the clear, Wellman says. 

But 42% of CFOs said they do not have enough data to make decisions regarding academic programs and 35% say they do not have enough information to do so for administrative units.

Additionally, many CFOs said they do not think faculty members fully grasp their institutions' financial problems—something they must do more to clarify, Wellman says (Woodhouse, Inside Higher Ed, 7/17).

Thoughts on the story? Tweet us at @eab_daily and let us know.

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