Yes, It’s Bad. But What Are the Solutions to “Adjust the Sails?”

The COVID-19 impact on higher education has been, and is going to be tough. Really tough. And solutions will be challenging to find — we need to even reengineer solutions. During the 2008 recession, I was part of a leadership team at a mid-sized university. The cuts were nothing like anyone had ever seen – 25% reductions in state appropriations in a fiscal year that was more than half over. The COVID-19 economic recession recovery will be different, and likely worse than 2008, followed by an enrollment surge that may overwhelm many institutions as unemployed folks with no job prospects re-enroll in college. While survey findings from Strada indicate that this recession will be like others in that people will look to go back to college for additional education, it is shaping up to be unlike others in that colleges and universities will not be the only place that people will seek out to obtain new skills. And fewer corporations say they will return to classroom learning.

In this post, I try to synthesize the many articles and resources out there describing what is happening or is about to happen. Then, I’ve taken a shot at offering some action items. Spoiler alert – I won’t talk about furloughs and layoffs as strategies. They are last resorts.

COVID-19 Impacts

The impacts of the COVID-19 pandemic on colleges and universities have been:

• Unanticipated – No colleges had a global pandemic on their radar screens at the beginning of the academic year (or even at the beginning of the Spring semester)
• All-encompassing – Every higher ed institution has been affected, along with every other industry.
• Sudden – The crisis has caused institutions to make dramatic changes to their operation at a speed never seen in the history of education.

Higher Education Outlook

No surprise, the next few years (not months) are going to be super tough, to say the least. Here is a quick overview of the things I’m seeing:

• Federal stimulus aid has been promised to institutions, and if finally arriving at institutions. While appreciated, it’s not enough money — even for the larger institutions that seem more stable because of their size.
• New students in face-to-face programs are anticipated to delay their admissions by a year for the in-person experience they really want.  But, what will students do instead? It isn’t as if they can travel. And there are longer-term implications that are not being considered.
• Over half of institutions are planning to have in-person classes in the fall. Which means that leaders at colleges and universities are working hard to create safe learning spaces.
• Furloughs, layoffs, hiring freezes, travel freezes, and budget cuts are common solutions for many institutions.
• Unemployment is expected to exceed rates last seen during the Great Depression.

Economists expect increased college enrollments due to increased unemployment rates. Largely this influx will come from adults expanding their skills while they wait-out hiring freezes.

Estimates of 500-1000 colleges and universities are anticipated to close.

Typical Options and Solutions for Financial Relief

There are a number of options for financial relief under these circumstances, including:

State Government Aid:

While the arrival date for federal stimulus funds are unknown, state governments are already sending college and university leaders notification that their budgets will be cut effective immediately for the current fiscal year. Budgets have been made. And, for the majority of institutions whose fiscal year ends June 30, funds are already encumbered. Short of some travel and small amounts of discretionary dollars, there simply isn’t money left this year. And institutions are already running have budget challenges for the 2020-21 year as well. This is particularly hitting public institutions hard as they rely on state taxes, which have diminished because businesses are no longer making as much money. Thus, they don’t owe as much (or anything) in quarterly taxes.

Increased Tuition and Fees:

Unlike other state organizations – such as k-12, state colleges and universities are viewed as having multiple alternative revenue streams – tuition, fees, and donations. So – higher education tends to get cut more, and tuition tends to increase to cover costs. We know from past recessions, this doesn’t turn out well for anyone.

Furloughs and layoffs:

These rarely result in long-term institutional health or a successful strategy.

Some leaders may be thinking that they just need a “bridge strategy” to wait out the storm until enrollments begin to increase due to job seekers unable to find employment. How will the institution prepare to serve those new students after reducing capacity and talent due to a likely set of layoffs and furloughs?

Savvy Institutions Will Reengineer for Success, Now (While There’s Still Time).

I get it. No one wants change. Things were going fairly well before – for the most part. There was a plan for improved financial health, growth, and improvement at many institutions. And now all those well thought out 2020 plans are gone! It took months and months, lots of meetings with multiple constituent groups to get to that plan. And now it is all gone.

Most institutions need a new plan – and fast. It isn’t going to be perfect – far from it. But – pivoting to a new plan is going to be better than doing nothing or waiting for money to parachute in from some other entity to save the day. Instead – start chipping away at the new plan as fast as the leadership team can pivot.

In the 2008 recession, I worked with an incredible leadership team. We each had our part of the “elephant” that we worked on to help turn the ship. Similar to today’s crisis, there were lots of early morning phone calls and late nights. Our efforts resulted in no layoffs, no furloughs (other than the two days the state mandated), an enrollment increase, funding for an internal grants program, and money to fund construction. And we were the only one of the state’s 33 institutions that could say that.

What Solutions Are Available?

There is no one solution. In these unprecedented times, institutions cannot afford to consider just one or two strategies. They have to be willing to employ multiple strategies, all at once – and sooner than later.

Every institution is different. And each has different revenue streams. So, let’s start off with the Revenue buckets:

Tuition and Fees

Tuition increases in an economy where even fewer students are paying cash means that more students will take out loans. Increases are an option, but not a particularly good one.

Decreasing tuition may attract more students than would have applied otherwise at higher prices. Some institutions are reducing their Summer tuition. But some public institutions may not have the luxury of controlling their tuition prices with reductions.

Grants

Is your institution already engaged in grants? If so, this may be an opportunity to encourage submission of additional grant proposals. This is a longer term strategy, however.

Other Revenues

Does your institution bring in revenue from other funding sources? Summer camps? Professional Development? What has been the impact of the pandemic on those sources? Can any of those lost opportunities be re-purposed in a way to create new revenues?

On to the Expenses:

Typically, somewhere around 85% of a higher education’s expenses are people. This isn’t very surprising, as the work is centered around educating students. Reducing departmental budgets, (which is around 10% of the total expenses), doesn’t really make a dent in the overall budget. And – now every department lacks money. So – reducing department budgets won’t solve the problem.

The largest expense at any college or university is serving students through education, student services, and institutional support. Thus, leaders need to rethink, pivot, and shift these resources to meet an increased enrollment that is coming. The actions my institution took in the 2008 recession allowed the college to not only weather the storm, but to come out of the recession in better financial shape than we started. Most other institutions couldn’t say the same.

Reengineer – New Ideas and Conversation

This pandemic, and our national response, has impacted virtually every higher education institution in the country (every other industry too, for that matter). And ultimately, some schools just won’t make it. Institutions will need real leadership for survival and strength. It will require engaging in some hard conversations and thinking in innovative ways like never before.

The longer an institution waits to begin this process, the narrower the window gets. And opportunities are lost. There isn’t a one-size-fits-all approach that will work for every institution. However – there are plenty of higher education leaders who were successful in navigating the 2008 recession. Those leaders are now updating their “Recession Toolbox” with strategies appropriate for a pandemic. I’m one of them. If you know of colleagues with that background – reach out to them . . . right away. I’m happy to talk to campus leaders about the successful strategies we used in 2008 that led an institution to coming out stronger than before.

P.S. The institution also had an accreditation visit during the recession, and I was the accreditation liaison. We received a 100% — no corrective actions, nearly unheard of during that time.