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Lesson 3 The Economics of Higher Education Institutions
Why are colleges facing financial difficulties?
To introduce you to the financial challenges facing colleges and universities, let’s watch a segment from Declining by Degrees that examines the financial challenges faced by the Community College of Denver, Western Kentucky University, and the University of Arizona. As you see from the interviews with the presidents of each institution, institutional leaders spend a considerable amount of time contemplating the financial challenges they face and seeking to take action to alleviate those challenges. As we noted at the beginning of the lesson, although financial concerns are not a primary goal of not-profit higher education institutions, they are a central concern because the primary goals cannot be achieved unless sufficient financial resources are available.
We really need you to help us out.
JOHN MERROW: President Christine Johnson is facing challenges of her own. The money CCD gets from the state has been reduced 30%. At the same time, her enrollment was increasing 30%.
What keeps you awake at night?
CHRISTINE JOHNSON: Budgets. Just saying, OK, where do I cut? Who do I cut? And the impact that it has on both the students and the services we'll provide them, and the individuals whose lives will be impacted by that decision.
KAY MCCLENNEY: State policymakers, in a crunch, look around, and say, who can we cut? And the answer often is higher education, and particularly because they see higher education as being the one entity that has the ability to raise revenue on its own through increased tuition and fees.
JOHN MERROW: The disappearing social contract has also hurt colleges, not just students. Nearly every state now gives its public colleges fewer dollars per student, meaning presidents have to find money elsewhere.
GARY RANSDELL: You better either be in a campaign, or finishing one up, or in one, or planning one, if you're going to survive in higher education today.
JOHN MERROW: Since 1999, the cost of running Western Kentucky University has increased nearly 70%. Enrollment has jumped 28%. During that same time, however, the state has reduced the amount of money it provides per student.
How much of your time do you spend fundraising-- thinking about fundraising?
GARY RANSDELL: Thinking about it or doing it? Thinking about it, oh boy, most of the time. 35%, 40%.
PETER LIKINS: The state taxpayer support for public universities is eroding. That creates financial stress that we all understand. And we just manage it. We just deal with it the best we can.
JOHN MERROW: The Arizona legislature has cut Peter Likins's budget nearly $50 million in four years. Today, less than 30% of the university's annual budget comes from the state.
PETER LIKINS: In order to compete successfully, you have to be able to raise gift money. And we've raised over a billion in this recent campaign.
