New Era in Higher Ed

There is no other way to say it, colleges and universities are going through big changes do to budget cuts and the ailing economy. This is not a passing phase taking place over a quarter or two. It is more of a systemic shift , which will last longer and could affect the quality and costs of your education. Even though I am closely connected to Higher Education and job markets, many of these situations have become more apparent in the past couple of weeks. What follows below are a few examples to show why the trend could last and my opinion on what it means for your education.

University of Virginia
The board at UVA ousted the President of the university because, apparently, she was not acting in the best financial interests of the school. She also avoided making difficult business decisions related to operating the university. As you may or may not know, she was rehired due to support from within the institution.  More importantly, I read where the state now funds a mere 10% of UVA’s budget.

California
I also found out a couple of weeks ago in The Economist that the annual budget (i.e., now up for approval in the state of California) will fund less than 50% of the UC system of schools’ budgets.  This level of funding has not occurred since 1960.

Florida
I just heard this weekend where the state of Florida is in such bad fiscal shape, due real estate bankruptcies and foreclosures, that they will soon need to abandon their Higher Ed policy that provides merit scholarships to deserving students from within the state of FL. This situation has been compounded because Florida does not collect state taxes.

What does all of this mean? Suffice it to say, schools themselves will certainly need to find more sources of revenue other than state funding. This means tuitions will continue to rise and endowments will become more important than ever. There will also be new interest in other revenue programs such as technology transfer and licensing research and intellectual property (IP) that the university owns. Finally, look for schools to privatize most campus services besides the academics they provide. Those who do will be able to most effectively control costs and improve services.

The fact that university Presidents and boards need to start acting fiscally responsible and in good faith is important for everyone. Tough decisions will naturally follow. As mentioned above, I also think student services, other than an academic education the school provides, can be improved through outsourcing to private companies. These types of public-to-private partnerships are long overdue.

As a category of schools and colleges, MBA schools should be able to weather the economic turmoil better than most on U.S. campuses. They are the profitable, more independent, well-endowed and relatively small by comparison. However, MBA students should factor sources of institutional funding, reliance on state money, endowments, financial-aid packages and the value of outsourcing non-academic student services into account when making decisions on which MBA schools they plan to attend.

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