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A Tough Future: Higher Education Faces a Fiscally Challenging Environment

Budgets and Finance

A Tough Future: Higher Education Faces a Fiscally Challenging Environment

Higher Education Faces a Fiscally Challenging Environment

Few appreciate how fundamentally different the fiscal future of colleges and universities in the United States will become. The 2017 tax law changes will increase pressures on higher education to deliver better outcomes for students and families, while simultaneously reducing available federal funds, families’ abilities to leverage rising home values to finance higher education, and state support for higher education due to the costs of underfunded pension programs and continued rising health care costs. Colleges and universities continue to accelerate their expenditures for enhanced facilities, athletic programs, and student affairs support programs to aid in the retention of lesser prepared, less healthy, and increasingly mental health-challenged students.

The combination of reduced governmental and family support for tuition and fees and the increased burden of marketing competition driving campus expenditures outside of the classroom calls for a dedicated and focused financial survival and stabilization program created and led by college and university administrators. What might such a plan look like in its outlines?

Program review as central to fiscal stability

While academic program review has been in place for decades, it has been weak in implementation and achieving fiscally meaningful outcomes. It has often centered too much on identification of academic programs for further increased investment or the closure of small, financially non-meaningful programs in terms of enrollments or revenues. Clarity regarding the centrality of specific academic programs to any college’s overall mission and its publicly communicated brand has been weak. Additionally, these review systems have not done a good job of examining costs and benefits of non-academic programs as administrative positions have grown more rapidly than faculty lines for decades, and student development units have grown dramatically. Only recently, with few exceptions, have there been closures or reductions in athletic programs to reallocate budgeted funds to academic programs and student learning initiatives.

A strong program review system covering all major financial expenditure units of colleges and universities is the first critical step toward a responsible approach to fiscal survival and financial stabilization. Without it being put into place and rigorously enforced, no other actions will achieve enough flexibility in college and university finances. Robert C. Dickeson, in Prioritizing Academic Programs and Services: Reallocating Resources to Achieve Strategic Balance (2010), anticipates the most likely source of needed resources for the future for institutions will come from reallocation of existing and currently budgeted resources. He argues that strong leadership by top administrators in academic affairs and student development will be necessary. No other action will make up for a weak program review system in ensuring the future vitality of colleges and universities. Informing the program review system with management theories like, Management by Objectives, Strengths, Weaknesses, Opportunities, and Threats (SWOTS), and zero-based budgeting will provide best chances for success.

Refine students served as a revenue enhancing necessity

After program review improvements, higher education leaders should look at refining their recruitment and retention portfolio of students they serve consistent with their mission and marketplace competitors. Students expect a strong return on their investment of time and deferred compensation. Administrators should recruit and admit students only where they can prove the market value of their degrees and services. This is necessary to diminish unnecessary remedial coursework, reduce semesters to degree completion, and avoid disruptive classroom learning due to underprepared and unmotivated students. One strategy in this regard is to build productive alliances with neighboring community colleges to provide remediation and to accept transfer credits at the lower community college rates for general education.

Build alliances and share costs with other institutions and businesses

A third requirement of a more secure financial future is rooted in the practice of collaboration and resource sharing. Other educational institutions, including high schools and community colleges through advanced degree credit programs and dual admission, are important allies. Another best practice is aligning effectively for field experiences with businesses and health care institutions in the regional service area of the college or university. Paid internships and access to field experiences for degree programs can save money on facilities as well as better serve institutional marketing and provide better post-graduation employment benefits for graduates.

Reduce labor costs and focus on classroom excellence

Most higher education institutions have limited or reduced their tenured and tenure track teaching staff. Unfortunately, they have often done so while using underpaid adjuncts serving multiple institutions. It is time to improve teaching evaluation systems and invest in a well-defined faculty portfolio blending tenured and adjunct faculty based on classroom teaching excellence. This strategy will improve student retention and learning. It will assure better long-term relations with alumni and potentially improve alumni gifts to the institution.

Use technologies and free online learning resources within degree programs

Every degree program should require one or more courses delivered online to reduce teaching expenditures. Additionally, institutions should identify potential courses available online that are free and can count within specified degree programs to accelerate degree completion and reduce student debt.

Fine tune alumni fundraising campaigns and search strategies

More effort should be put into major gifts acquisition than general campaigns focused on the percentage of alumni participating or small gifts. This source of funds will be more productive under the recently passed tax reforms which will negatively affect middle class taxpayer incentives to make contributions.

Increase investment in market research detailing the value of degree programs

Since not all degree programs return significant value to graduates and more and more critical articles are challenging long term financial gains of degrees today, it is critical that each institution defend with statistical data, not just personal success stories, the likely returns on investment students can expect as graduates. This marketing data set will enhance enrollments and retention to graduation.


Dickeson, Robert C. Prioritizing Academic Programs and Services: Reallocating Resources to Achieve Strategic Balance. San Francisco, CA: Jossey-Bass, 2010.

Henry W. Smorynski, PhD, is a Midland University leadership fellow.


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