Financial Sustainability

An analysis of nearly 1,700 colleges and universities in this country suggests more than a third are on an unsustainable financial path, based on trends from 2005 to 2010, but  Virginia’s public universities fared well in the survey.

Two higher education consultants have issued a report suggesting many colleges and universities could run out of cash if they don’t change their ways of doing business.  Bain and Company and Sterling Partners drew conclusions from two key numbers.

“They looked at how expenses relative to revenues have changed over five years, and they’ve also looked at how assets have changed over five years.” That’s Goldie Blumentsyk, a senior writer at the Chronicle of Higher Education – one of two publications that got a preview of the numbers.  She says the time frame in question was tricky, because many school endowments lost money between 2005 and 2010.

“So when you’re looking at college assets, obviously that’s going to skew some of the figures a little bit.”
Nevertheless, the analysts say many campuses face a cash crunch.

“They found that more than a third of the institutions were on an unsustainable path, and another 28% were on the way.”
The study cited several factors contributing to shaky finances at places like Cornell, Harvard and Princeton.  Debt increased 11.7% on average, and spending to maintain property and equipment rose 6.6%   Instructional costs were up less than five percent over the five year period, but the analysts say universities are spending too much on middle managers.

Virginia’s public universities fared well overall in the survey.  UVA, Virginia Commonwealth, George Mason and Virginia Tech all saw declines in spending, although equity ratios were down 8% at Old Dominion  and 12% at George Mason.  The survey also showed the University of Virginia with a hefty cushion  against future costs — an endowment per student of more than $157,000 – compared with about $16,000 at Tech, $8,000 at VCU, $7,000 at ODU and $1,800 at George Mason.

–Sandy Hausman

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