|
Blog ArchiveThe Economic Crisis Hits Academe
Graham Spanier
October 30, 2008 Universities are also victims. University presidents have the current economic crisis very much on our minds. Higher education is affected less severely by these difficult economic times than other enterprises in our society. Even so, we are affected more than most may realize. At a recent meeting with presidential colleagues I summarized the many ways in which the financial downturn impacts higher education. Most of the impacts turn out to be similar from one institution to another irrespective of geography, size, or public/private status. Here is a recap of the top concerns. * Liquidity: The availability of cash for payroll and other operating expenses due to The CommonfundÃs restrictions on access to funds being held by Wachovia bank. * Student Aid: As families feel the financial crunch, we can expect an increase in requests. * Lending: Some banks are getting out of the student loan business, and others are giving out loans more selectively. Schools that did not switch to federal direct lending may have to scramble to connect their students to financial aid. * Capital Construction: There may be increased difficulty in borrowing funds for new buildings, and interest rates may be less favorable. * Contractors: They may have difficulty securing the lines of credit and the bonding insurance they need to do business as usual. * Career Planning: Students will be experiencing increased anxiety about the job market, and young alumni may ask their alma mater for the kind of employment placement assistance they enjoyed as students. * Enrollments: This year could be more volatile than usual with admissions, acceptance yields, deposits, and enrollments as families struggle with whether they can afford our schools. * Governing Boards: There will be a heightened reticence of governing boards to approve new programs, capital expenditures, and spending increases. Many members of our boards are working in businesses that have been hit much harder than higher education. * Legislative Appropriations: State universities in particular will likely see level or even lower appropriations because of state revenue shortfalls. This will put greater pressure on the tuition side of our income streams. * Endowment: Loss of endowment value will put institutions in the position of either increasing their payout rates if their goal is to maintain a fixed dollar amount of payout, or decreasing their payout rates if their goal is to preserve the corpus of the endowment. * Financial Obligations: Some schools are being hit with increases in outstanding variable rate bonds while others are being asked to provide cash for capital calls to which they are obligated. * Donors: As our donors feel the economic pinch, even the wealthiest among them may slow down, or at least postpone, their giving. * Faculty: Opening TIAA-CREF retirement statements can be a sobering experience right now, and some faculty and staff may postpone their retirements. * Federal Funding: Higher education is squarely on the discretionary side of the Federal budget, so we may be seeing cuts in research and other funds. |
