How Private Colleges Navigate Tough Economic Waters

Navigating financial waters is almost always a balancing act for college and university presidents. Operations, staff, program, service and a host of other pieces must be balanced and resources allocated wisely even when the economy is strong. Throw in a weaker economy and the events of September 11, and the financial management task becomes even greater.

Three presidents of private colleges and universities tell how they are weathering the recent economic storm. The lessons that they share are applicable for institutions of any size at anytime. At the heart is having a plan and focusing on the services that are provided to students, which is obviously the most critical focus for any institution.

Mercy’s Mission

Mercy College in Dobbs Ferry, N.Y., has an enrollment of 10,000 (7,500 undergraduates and 2,500 graduate students). Of the undergraduate population, approximately 80 percent are the first to attend college from their families. And 50 percent of the undergraduate population has a family income of less than $25,000.

“The make-up of our student body is very different from many colleges and universities,” says Lucie Lapovsky, Mercy’s president. “The average age of our students is 29 for undergraduates and 36 for graduate students, and many come from low-income families and are on financial aid.”

Lapovsky states that, in some ways, Mercy has been less impacted by the weaker economy than some institutions. “We have been less affected because so many of our students receive financial aid. Colleges and universities with a more diverse economic base for their students’ families may have been impacted much more than we have. Our greatest concern was that the federal Pell Grants and the New York State Tuition Assistance Program monies would be reduced, which they fortunately weren’t. This would have had a dramatic affect on our students if it had occurred.”

Strategic planning at Mercy has become even more critical. The college’s administrators have a five-year-plan that includes benchmarking the college both against itself and against peer institutions. The goals that come out of the plan are impacted by what the benchmarking turns up.

“We have placed a strong emphasis on our graduation rate, so we’ve put our efforts and monies into those areas that will allow us to assist our students in the greatest way possible,” Lapovsky says. “We’ve focused on administration, counseling, financial aid, advising and learning support services to make sure that our students graduate.”

The focus on increasing the graduation rate has resulted in an accompanying investment in technology and the infrastructure required to support that mission. While there has not been a cutback, Lapovsky says that this strategy has allowed Mercy to better allocate staff and financial resources. In the future, better service will be provided with less staff, which will impact the bottom line.

On the infrastructure side, online learning is helping to ease demands on building new classroom facilities. For example, a class that meets on Tuesday-Thursday may be in the classroom on Tuesday and online on Thursday. Another Tuesday-Thursday class will use the same classroom on Thursday and be online on Tuesday. This arrangement allows the same classroom to be used for two classes, which can mean that looking at constructing new classrooms can be put off a little longer. Lapovsky says that this scenario also allows administrators to address more diverse learning styles, since some students have expressed a preference for learning from home.

The good news for Mercy is that fund raising has been up 35 percent this year as compared to last year. While she can’t put her finger on reasons for the increase, Lapovsky believes that a portion of the increase may be in response to the events of September 11. “We have a compelling mission, since we deal largely with students from lower-income families,” she comments. “The events of last year have caused many people to closely look at where they are investing, and we have an appealing mission for individuals who want to do meaningful work.” To make sure that this trend continues, administrators plan to reconnect even more with Mercy’s alumni and friends in the future to continually increase gift giving.

The Case at Ripon

Wisconsin-based Ripon College has 900 students who come from 38 states and 12 foreign countries. Like Mercy, the liberal arts college is responding to the weaker economy by taking a hard look at its services and how it provides them based on a long-range financial plan that takes into account numerous factors.

“Like many institutions, we have a spending policy regarding the monies that we can take from our endowment fund, which is now at $35 million,” says Ripon President Paul B. Ranslow. “If the fund as a whole is down, then the monies that are available are also down. We, like many other colleges and universities, have found that, lately, it has been challenging to maintain or increase the level of our endowment fund.”

Ripon got an unexpected and pleasant break last year when Wisconsin had a milder winter. Ranslow says that the college saved approximately $250,000 that could be used for other things. “We caught a break last year, which we obviously know won’t always happen. We will spend some of that savings in other areas, but we won’t spend it all, and we won’t count on it in next year’s budget. It’s a gift that we’ll take, but one that we won’t expect to happen again.”

The services that are provided to students and faculty are also very important at Ripon as they are at Mercy. “We’ve taken a hard look in the last few years at our services and how we’re providing them,” notes Ranslow. “In some cases, this has caused us to change how we’re providing services and who is providing them, which has positively impacted the bottom line as well as how efficiently we are operating.”

Ripon administrators formerly bought computers and replaced them every few years as technology changed. Now, the college has a leasing arrangement that lasts for three years. Ranslow says that the arrangement has been positive both from a technology and financial standpoint.

Food service and physical plant operations have also been outsourced in recent years. By outsourcing these services, Ranslow contends that the college has experts providing service, which, in turn, allows the college to concentrate on faculty and staff needs. “Our service was good before, but it’s better now, and we’re running a more efficient operation. Outsourcing can be beneficial if it’s done right. For us, we’ve saved money that we could put into other areas.”

Ripon administrators also use a five-year financial plan, though Ranslow says that it’s probably not realistic to evaluate this out more than 18 months. He states the example that September 11 drastically changed things for many higher-education institutions because their donors gave money to other worthwhile associations or took longer to make donations because they were waiting to see what would happen.

There may be some good news on the horizon. Ripon’s financial management board, which works with college officials on both short- and long-range planning, believes that the third and fourth quarters this year will be stronger for the stock market, which would, in turn, impact the endowment fund. If this holds true, then there may be more money in the coffers to access.

The Money Line

“We basically have three income sources: tuition fees, annual giving and our endowment fund,” says Dr. Loren J. Anderson, president of Pacific Lutheran University (PLU) in Tacoma, Wash. “We’ve had increased pressure on all three areas in the last year that has produced less money than we would have liked. If gift giving is flat or down, then our only other major source of funding is to increase tuition, which is a measure that we’ve had to take but certainly don’t like.” PLU is raising tuition 4.3 percent for the 2002-2003 academic year, which is below the national average of 5.5 to 6 percent for private institutions.

PLU has a strategic plan like the other institutions that have been profiled. In this case, an action that was part of a previous plan may have actually saved a step that may have been required given recent economic events.

“In the 1990s, we reduced our program offerings, a measure that we had identified as necessary in our plan at that time,” Anderson says. “While this was a difficult measure then, it is one that we might have ended up taking anyway given recent economic circumstances. Thankfully, we’ve been able to avoid any further program cuts.”

Anderson says that, when costs go up, PLU has been trying to absorb the increases in other ways. Postage is one example. As we all know, postage rates keep increasing and seem to be doing so more frequently than anyone would like. PLU’s intelligent answer has been to put the campus newsletter online. This has saved printing, paper and distribution costs, an approach that is also being used with correspondence to incoming freshmen.

Another example at PLU is the consolidation of student services during the last three to four years. A one-stop facility has been created where students can attend to all business needs, including financial aid, registering and fee payments. This step has increased the efficiency of the services that are provided -- students no longer have to go to multiple buildings for business services -- while also saving staff positions. Administrators are also considering a similar arrangement for student services such as counseling, testing, and career planning and placement. Not only are things easier for students, but facility resources can also be reassigned to make better use of available space.

College and university bookstores often compete with private enterprises, and here PLU administrators have found an edge. Students can go online to order books from the campus bookstore, which are then delivered and waiting in their rooms when they arrive on campus. Anderson says that this tactic has enabled the bookstore operation to maintain and actually grow its revenue since it can offer something that the competition does not.

By focusing on the efficiency of the services it provides, particularly those geared toward students, three private institutions have been able to weather the current weaker economy fairly well. The answers have been found not in dramatically cutting programs or faculty and staff resources, but by following a plan that seeks to continually assess how resources are allocated.