University Business - November 2008 - (Page 12)

BEHIND the NEws Higher Education Adjusts to Financial Realities The failure of several major banking institutions, and a credit flow freeze that threatens the global economy, have forced higher ed leaders to rethink longterm plans, while trying to shore up current commitments against calls for budget cuts. President Bush’s emergency economic stabilization act of 2008—“the bailout”— was designed to free up frozen credit markets. But it had little if any immediate impact on financial markets, leading administrators to prepare for worst-case scenarios. Then, as if on cue, the credit freeze hit higher education. in early october, Wachovia Bank limited nearly 1,000 colleges access to $9.3 billion held for them in a short-term investment fund. This raised concerns at some higher ed institutions about not being able to meet payrolls and operational expenses, while some smaller ihes had to consider that the long-term effects might mean closing their doors for good. Wells fargo Bank has since moved to acquire Wachovia, with the promise of loosening restrictions, but in the face of such economic uncertainty, leaders at many institutions are making tough decisions. a few examples: • Boston University announced a hiring freeze and a hold on new construction projects, trying to avoid deepening debt. • The University of Memphis (Tenn.), already operating lean from prior budget cuts, considered budget model out the window. With a per-student cost of $6,000 each year, according to utah’s Commissioner of higher education, the increase means that the state will face some $10 million in additional costs—at the same time administrators are being told they must cut budgets by 4 percent more, or about $33 million. The University of Tennessee system has also been ordered to trim $17 million from its budget, as part of a statewide $106 million emergency reduction due to tax revenue shortfalls. Beyond its impact on budgets, the economic crisis has aimed a spotlight on private student lenders as a cause for concern. The $700 billion bailout package includes a provision that would enable the Treasury Department to buy private student loan assets should that become necessary. and as long as the economy is weak, that possibility seems likelier. When graduates’ job prospects dry up, the chance of loans defaulting increases. according to a u.s. Department of education report, about a quarter of freshmen and sophomores who take out loans will default during their lifetime. in october the average rates on some private student loans went from about 10 percent to as high as 14 percent. for both individuals and institutions, one thing seems certain: Nothing is certain. —Tim Goral U must find $4 million more to trim. • Rhode Island’s three public colleges are considering tuition and fee increases to make up for a budget gap. if approved, tuition and fees will increase nearly 7 percent for the spring semester. Perhaps a bigger problem is that as tax revenues fall across the nation, states are cutting budgets to public institutions, resulting in a dangerous cycle. in massachusetts, where higher education institutions contribute about $27 billion to the state’s economy, cuts may mean decreased services and fewer enrollments, which will ultimately contribute to the growing budget deficit. all this comes at a time that enrollments are hitting record numbers. as student enrollments increase, as they typically do in a bad economy, schools may not have the funds to accommodate that growth. in utah, for example, enrollment has so far reached an 8.5 percent overall increase. That’s the good news. The bad news is that the swell of numbers throws a carefully PAssHE makes no butts about smoking ban THE dEcision To bAn smoking EvERywhere at 14 institutions in the Pennsylvania state system of Higher Education ignited a mixed response from the system’s 110,000 students and 12,500 employees. Resulting from Pennsylvania’s clean indoor Air Act, a law effective september 11 that prohibits smoking in most workplaces and public spaces, PAssHE’s ban is based on the interpretation that the law extends beyond buildings at educational facilities to include all campus grounds. kenn marshall, media relations manager, points out the reasoning includes the fact that schools hold outdoor campus events and occasionally have classes meeting outside. student smokers and nonsmokers reportedly organized demonstrations against the ban on at least three campuses. now there seems to be general compliance. Two state system unions filed unfair practice charges. PAssHE officials were scheduled to meet with union representatives, but marshall says there is no intent to change it. The American Lung Association’s “big Tobacco on campus: Ending the Addiction” report ( finds more than 130 higher ed institutions across the country have smoke-free campus policies. —Michele Herrmann 12 | November 2008

Table of Contents for the Digital Edition of University Business - November 2008

University Business - November 2008
Editor's Note
College Index
Company Index
Advisory Board
Behind the News
Sense of Place
Human Resources
Financial Aid
Money Matters
Community Colleges
Expansion, without the Red Tape
Coming to You by Video
Challenging Authority
Road Tour
What's New
End Note

University Business - November 2008