This Week In College Viability (TWICV) for March 25, 2024

Gary (00:02.19)
It is March 25th, 2024. It's a Monday. So it's time for another episode of This Week in College Viability. Good day, everyone. Hi, it's Gary Stocker. Lots of news again this week in higher education. We're going to be talking in this podcast about Marquette is our cutback college of the week. But in a different business sense, we'll talk about that. Is Hampshire College really on its way back?

Columbia College in Chicago is searching for couch money to survive. We'll certainly talk about that. Bluffton University and the University of Findlay Merge is two enough. I don't think so, and I'll tell you why. And Birmingham Southern College is back into the Alabama legislature. And I'll bet this time next year there are more stories like that one that we'll talk about in a few minutes. And Iowa, because they had a closure of Iowa Wesleyan University last year.

The Iowa legislature wants a heads up if a college is closing, that bill is working its way slowly through slowly through the Iowa legislature and Concordia and Arbor and Collateral. We'll talk about that and then we'll wrap things up with my discussion of something called a going concern. And I'll explain that at the end of our podcast time together this week. Layoffs and cutbacks. I have one this week. Marquette University up in Milwaukee.

plans to cut $31 million by 2031. And this story was in the Milwaukee Journal Sentinel from Roy Linane, Mary Spacusa and Alec Johnson on March 19th. And as you might imagine, it generated some controversy and pushback from faculty. But it's $31 million over the next five or six to 2031, so six or seven years. And it's kind of sort of couch money.

This is a different kind of cutback than the desperation one. In the last eight years, Marquette University revenue growth has been about $30 million. This is prudent planning. This is not, in my mind, desperation cutbacks. There was, however, the prototypical faculty pushback. I think it was an English professor quoted in the story as being angry that the Marquette administration had not consulted faculty on this.

Gary (02:24.398)
What's effectively not much more than couch money cutback. Get over yourself, Professor. Teach English if that's your discipline, something you're good at. Others are skilled, more skilled than you certainly, at managing the business and the market. Let them do that, please. They don't need to tell you about every comma and dot, period, hyphen, semicolon that they use. Page two, back from the brink.

Hampshire College is the headline. Hampshire College is nearing financial viability. You can hear the doubt in my tone of voice. In the past five years, the college recommitted to its mission, raised funds and revamped its curriculum. Experts, and I'm going to use that term loosely, say others can learn from this playbook. And this comes from, I believe, Higher Education Dive and Danielle McLean, who we've used for other stories before. This was on March 20th.

And remember that Hampshire College is the College of Famed Documentary and Ken Burns, and some of his famous documentaries are on baseball, Vietnam, or the desk ball and other topics as well. And let's, as you know, we like to do here at College Viability, let's go to the data. And we're going to the data from the 2024 private College Viability app. We're just using the one for faculty and staff version this time. And the FTE, the full -time equivalent enrollment.

is down about 900 students since 2015, but it is up 35 students in 2022. So maybe there's a slight trend. The four -year graduation rate is trending downward. Now, there's got to be something beyond that. It's probably the scope. It is beyond the scope of our discussion today. But a college like Hampshire, I believe, prided itself on strong graduation rates. And the four -year graduation rate is trending down. We'll have to watch that. The admissions yield is down 10 points to 16 percent, but everybody's admissions yield is down.

You only want to focus on the ones where the admissions yield is up. That's big news. The revenue at Hampshire College is down 45 million over the last eight years. The endowment is down six million. So they've been spending some of that to keep the lights on and expenses are down 21 million. As you would expect a college in trouble, they have cut down their expenses and the unfunded institutional grants. And that's the fancy way of calling for discounts is down 11 million credit to Hampshire College.

Gary (04:45.838)
but still at 15 million. So they're using about 15 million per year in unfunded discounts revenue they don't collect to get students to enroll at Hampshire College. And the tuition and fee revenue is down almost 30 million, almost 29 million since 2015. So really what this story was, and my respect to Danielle McLean at Higher Education Diary, but I don't know that this was a bunch more than a PR or advertisement. And so if you're reporters, if...

If colleges are going to feed you advertisements like I think this story was, at least report them as such. Maybe, maybe Hampshire is on its way up. The data doesn't suggest so, but this reporter didn't dig very deep on the actual data they just took, I think, what Hampshire gave them. And guys, it's been a couple of weeks since I talked about Columbia College, but they're going to have a couple of stories in the podcast today. Breaking news, this is from the internal Columbia

student newspaper, I believe, or student website. Columbia College could downscale future commencement and some other important celebrations they have at the college to help save costs. And this was a story written by Olivia Cohen, who's the editor in chief of the Columbia Chronicle.

And I think I have a new predictor of a college that is in deep, deep trouble. And you know your college is in deep trouble when they can't afford a full fledged commencement like they have historically provided. And I got a guess that the cost of a commencement, while substantial, is still relatively couch money. And I use that term a lot. Of course, it means not much more than what you and I would find as quarters, dimes and nickels in our couch cushions.

And to not honor the graduates of your college with a substantial and substantive graduation event is not good. Not good. And I don't recall, have we identified the person who's going to be the last one to turn out the lights at Columbia College in Chicago? And I'm going with a single jeesh on this. And when I done,

Gary (07:04.75)
Here's another breaking news story. I don't have a reporter on this one, but from the Columbia Chronicle, college postpones tenure track appointments. This is Columbia College in Chicago. College postpones tenure track appointment decisions. Shocking faculty who are up for promotion.

And again, Columbia College, another sign that they are in the desperation mode plus is they are apparently either considering or actually decided not to award additional tenure track promotions to save a couple bucks. Again, a couple bucks is my reference, not theirs. But I still make the case that this is still college couch money. And maybe, maybe, maybe if we piece together.

some couch money on top of more college couch money will eventually have real money. I doubt it. But you know, the more I think about this, if I were the electric company, whoever provides electricity to Columbia College, I might want to ask Columbia College to start prepaying future electricity bills. The University, the Bluffington University, University of Finley merger. First of all, credit.

They have taken steps to announce a merger. It's not a done deal, but they deserve credit for working through. And they used an organization called Consolidation of Higher Education. That's not the right term to put that program together, credit to them for providing guidance. But I would not yet bet the farm on it actually happening. Credit is given for trying.

And just looking at the data, there was another story from the courier on this merger, and I call it a transformational moment. Well, all right, the PR folks give them a story and they're going to find big words to use. But let's go to the data like we regularly do here at College Viability. Finley University is about five times larger. The University of Finley is about five times larger than Bluffton University. So this is really a bigger college looking to leverage a lower cost basis.

Gary (09:16.942)
from Bluffton to improve net revenue. All right, nothing wrong with that.

The data, the unfunded institutional grants are up for both colleges. So they're both giving away more of the store to get students to enroll. Their graduation rates are modest. They're not awful, but they're not modest. I think Findlay might be right around 50 % at four years and Bluffton is a little bit below that. The expenses are down. All right. Credit is due. The endowments are marginal at Findlay, I believe about 55 million in 2022 and lower than that at Bluffton. I don't recall the number.

And Finley, to their credit, has been able to raise their net tuition price about $1 over the last eight years. Lofton has been unable to do that. Interestingly, grad student enrollment, graduate student enrollment is down at both, not quite 20 % of both. The more I look at this, the more I realize there's more to report on this. So I think I'm going to go ahead and sometime this week, I'm going to do a full 2024 private college viability app.

YouTube video analysis on this merger and these two colleges. So stay tuned for that. You'll see that published on social media and on my LinkedIn account as well.

One sidebar on this that I noticed from an Inside Higher Education story on the Bluffton -Finlay merger, they are going to merge operations. Good. But they're going to continue traditions and sports mascots, that kind of stuff. And that's good. I've always espoused on this podcast and other media that I produced that the way to consolidate and merge colleges is you keep the mascots, you keep the sports, you keep the foundational aspects.

Gary (10:58.03)
You just merge initially the non -academic stuff and eventually the academic stuff. So in that regard, I think they're on the right path. But two colleges is not enough to generate materially significant results. I have said before and I'll say again, mergers and or acquisitions need to be in the 10 to 15 college rings. They're not there yet. They're not even close.

But I think you'll see that, I believe you'll see that in the coming years. And here's why. And I posted blogs on this model over the past few years. And I'll talk about this in the wrap today is every other industry has had significant merger and acquisition, consolidation activity. There's no reason, no reason to believe higher education is immune from that. Page three, Birmingham Southern, why I was getting lonely.

Birmingham Southern loan viability remains in question after public hearing. And this is from the Alabama Daily News. Here's the quote from this story. I'm going to read it to you. A substitute bill is expected to be voted on in a House committee in Alabama. And besides shifting oversight of the loan program from the treasurer of Alabama to the executive director of the Alabama Commission on Higher Education, I presume a

friendlier position, the new bill, the new proposed bill, also adds some steps loan recipients would be required to meet to avoid default. Now this is where it gets interesting. I continue, colleges approved for a loan must see an annual enrollment growth of at least 10 % a year.

and must also see budget deficits, I presume they'll have some, and must also see their budget deficits improved by at least 15 % over a five -year period. The loan would be considered to be in default where either of those simple two milestones not met and would be required to be paid in full, I presume, from assets from the college. So, Alabama citizens,

Gary (13:11.502)
Get your towels out. If you're in Alabama, you're about to take a financial bath. If this bill becomes law, and so let's look at BSC Birmingham Southern. Their enrollment is down seven out of the last eight years and that this bill would require a 10 % growth. That's from 2015 to 2022. Revenue is down 11 million. They wanted to see a 15, 1, 5 % growth over a five year period. It's down 11 million. I don't have the percentages over eight years. And here's the paradox.

One of the paradoxes, I think, and the four year graduation rate at Birmingham Southern over the last eight reported years is hovering around 60%, 60 % That ain't bad. That's not bad at all. There are too many privates, not even close to that throughout the country. And I don't know if they're giving away diplomas at Birmingham Southern like Easter eggs at an Easter egg hunt, but that's a decent number. But just sit back and think about.

the higher education market in Alabama. How many students, how many families are in some form or fashion aware of these Birmingham Southern college stories and have already ruled them out of their search? What about employees? You know, what employees, what number of staff have strapped on their parachutes getting ready to jump out of this struggling college? And finally, a great quote, and this is from the same story, and it's from Representative Debbie Wood from Alabama.

And she said that you do not make a loan because of collateral because Birmingham Southern is offering their colleges collateral. So representative Debbie Wood says you do not make a loan because of the collateral, which is the case that BSC is making. You make it because you think you'll get paid back. All right. She gets a, she gets five stars in my book. She continues because in my mind, if I'm writing a check for an investment, which is what the Alabama legislature is doing, I'm hoping that I get.

My money back, said Debbie Wood, representative in the Alabama legislature. And she actually concludes, I want my money back. I don't want your buildings. And what we're seeing is not just here in Alabama, but we're seeing the similar kinds of thought processes and even some, some media with bondholders, bondholders that invested in a college loan, whatever form or fashion, and it happens across the country. They want their money back plus their investment, plus their interest.

Gary (15:40.494)
They don't want a 50 year old science building.

that can't be reasonably expected to be used for anything else. They want their money back. They want their money plus their investment back. And when bondholders start to call those bonds due, ladies and gentlemen, boys and girls, it's going to be ugly. To Iowa. They're kind of a day late, a dollar short compared to Alabama. But the year after, here's the headline, the year after Iowa Wesley and Shuttered lawmakers in Iowa proposed private

campus closure mandates. And this is from Vanessa Miller at the Gazette. I presume that's an Iowa publication. And just let me read some of the highlights. The closure of private institutions of higher education language have built -in supports for impacted students. So if a college closes in Iowa, here's a proposed legislation. It's working its way through the legislature, whether it passes this year or not as problematic, but maybe in subsequent years.

But here's what it proposes within five business days of notifying the state of Iowa of plans to close under the measure, any private, any closing private college would have to provide the Department of Education, I presume, with a list of relevant details, including a teach out plan, a student directory with contact information related to every student status as a date of closure, a transcript retention plan, and there's three or four other items that I'm not reading to you.

and a process and contact person for student concerns, complaints, and questions about the closure.

Gary (17:20.174)
So here's my question. Where else will this legislation begin? It's already been enacted in Massachusetts. There are other states considering it. And what pressures will that add to financially challenged private colleges? Massachusetts, that I just mentioned, has a more aggressive heads up requirement for their colleges. They promise that bad news that private colleges share with the

Massachusetts education authority will not become public, but I don't want to bet the farm on that promise being kept. Page four. For this small college, the headline reads, this is from The Chronicle and David Jesse on March 14th, for this small college, a merger was a lifeline. Now it's the focus of suspicion. And the essence of this story is the

value of the property in Concordia College in Ann Arbor, Michigan is valuable. And Concordia, Wisconsin, and Concordia, Ann Arbor had a merger a couple years ago. And that's the essence of this story, the history of that. The essence of the story in this case is Concordia, Wisconsin, back when this merger was put together, wanted some coverage for taking on the risk that was Concordia, Ann Arbor. I believe I'm being sarcastic here.

I believe the term is called collateral. And what's developed in the last couple of weeks is that Ann Arbor, Concordia Ann Arbor has announced are going to remain open for another year. That's a promise I could do without. And the students, interestingly, in a story that I think I covered previously, the students were thrilled to find out that Ann Arbor will be open for another year. But here's what Ann Arbor needs to be financially viable.

It needs about 500 to 1000 fully paid for dorm rooms to generate needed income. Concordia, Wisconsin has contributed the story reports around 90 million since the merger to Ann Arbor. And if that was my money, if that was your money, wouldn't you want access to some assets if the investment goes into the dumper? And that's all Columbia, Wisconsin is asking for. They have provided financial support.

Gary (19:46.99)
They wanted access to some of the property and now the folks at Ann Arbor are saying, hey, that's not fair. Well, of course it's fair.

Of course it's fair, it's done all the time. Can we please, can we pretty please start adding some business common sense to these emotional college financial distress stories? I don't deny the emotions. Not for one second. I would be distressed also.

Gary (20:19.278)
But among many other resources, our college viability app is there for students and their families to compare the financial health and viability of these colleges. It's relatively new, I understand. And it's past time. I make this case regularly. It's past time for students and families to start using financial data about colleges' financial health, just like colleges do when they eventually get a family's FAFSA report this year. And you can call the college viability app the reverse FAFSA.

that lets families see the finances, enrollments, and graduation outcomes of private and public colleges they are considering. And finally, I want to talk about something called going concerns.

A going concern is usually is always in an audited financial statement. And it's a responsibility that auditors have to share their concerns if an organization in the organization, but we focus on colleges, auditors share their concern that a college may not be able to continue as a viable business. This term is called going concern. A going concern is a business that will continue. It's ongoing, ongoing concern.

Where the term came from, I have no idea, but that's what's used. And issues with a college being able to continue as a going concern is a big deal. Now, in the last four or five years, I have only seen it referenced two times in the past year when auditors had a concern about a college's ongoing liability and said, hey, we have concerns about it continuing as a going concern.

Gary (22:08.622)
In my experience, though, it has not been referenced in the financial statements of colleges that have closed. Now, as I get time, I'm going to research a set of closed colleges to see if their auditors referenced a going concern. But I did do a check of Notre Dame College in Ohio that closed just a few weeks ago. And in the two or three audited financial statements I looked at for them, there was no special reference made by the auditors of those.

financial statements for Notre Dame College that it might not be able to survive as a going concern and it closed. That bothers me. That makes me wonder about some of the things that go on with these audited financial statements. I think I'll have more on that in the coming weeks and months. And if you want to do this on your own, here's the process. Go to federal audit clearinghouse. And I have a YouTube video on how to do this on my YouTube channel, my college viability YouTube channel.

and search for any college that you want. When you bring up the PDF for that financial statement, do a control find, control F or command F, depending on PC or Mac. And you'll normally see two basic references to going concern. It's just responsibilities that are in the standard template for financial statements. And they're not a big deal. It's just standard stuff. But if you see more, if you see more than two references to the phrase going concern, continue on in that audited financial statement and read them.

It's probably not good news and it's almost certainly bad news about a college's ability to continue as a growing concern. As I shared earlier, there continue to be many reasons to believe we're in the midst of a two -phase college consolidation in both the private and public college markets. We're in the closure phase now for privates and we'll look back in a couple of years and realize it.

And the closure phase will be followed by the consolidation phase of mergers and some acquisitions. Every other industry, as I shared earlier, has undergone some form of significant consolidation. And there is no reason, no logical reason to believe that higher education is immune from that reality.

Gary (24:34.414)
Until next Monday, hey, it's Gary Stocker again for this week in college viability. Thanks for listening. I am grateful. We'll talk again next week.