Bacon's Rebellion

Democracy Thrives in Sunlight

Warning Signs for Three Virginia Universities

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by

James A. Bacon
in

My previous post, “Higher Ed’s Liquidity Crisis,” highlighted the findings of a new report, “The Financially Sustainable University,” that details the rising spending, increasing leverage and deteriorating finances of American colleges and Universities. While 40% of higher-ed institutions remain in reasonably good shape, a third are in trouble, according to the report.

The report allows readers to access limited data on the performance of individual institutions between 2006 and 2010. The publishers, Bain & Co. and Sterling Partners, withheld the juiciest numbers, presumably in the interest of generating more consulting business. However, the data provided for Virginia public universities, summarized below, suffice to whet the appetite.

The following chart displays unfavorable changes to equity and expense ratios that put schools at risk. As I read this, an increase in the expense ratio is a bad thing, indicating that expenses are rising expressed as a ratio of assets. An increase in the equity ratio is a good thing, meaning a higher percentage of equity and a lower percentage of debt on the balance sheet. (Bad indicators are shaded with yellow.)


Thus, the record of public Virginia institutions appears to be a mixed bag, with a bit more bad than good. If I have interpreted these numbers correctly, Christopher Newport is a stand-out, significantly whittling down its expense ratio while also improving its equity ratio. VCU is the only other university to show an improvement in both measures, but those gains were marginal.

By contrast, ODU, VSU and Mary Washington bear close watching, showing deteriorating expense and equity ratios. As an added concern, none of these three have large endowments to fall back upon should enrollments and tuition revenue begin to falter.

Maybe it’s time for their Boards of Visitors to start asking some tough questions.

— JAB

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  1. DJRippert Avatar
    DJRippert

    “Maybe it’s time for their Boards of Visitors to start asking some tough questions.”.

    The last time a board of visitors asked hard questions the university president tried to stonewall them. Then, the board awkwardly and clumsily fired the president. Outrage ensued and the president was re-instated. The lesson for other boards was clear – don’t take definitive action. Let a crisis build until it is obvious and unavoidable. Then, after the crash, pick up the pieces.

    Meanwhile, 37 members of our 140 person General Assembly sit on standing committees that have something to do with public education. The pretend to be interested in education but were practically invisible once the Sullivan affair broke.

    Our governor has a full time Secretary of Education who, in turn, has a full time staff. This governmental organization also turned invisible once the Sullivan affair became public.

    Now we are seeing signs that US colleges and universities are standing on somewhat shaky financial legs. That’s a problem. It will become more of a problem when the peak echo boomers stop graduating from high school. When that happens, the demand for college and university slots will also drop. Fewer students covering the embedded costs of fixed assets may well mean that the students will find it easier to get into college and harder to pay for college.

    Through all this, there seems to be no leadership from Richmond. Dozens (hundreds?) of our elected officials and bureaucrats in Virginia ostensibly concern themselves with education in the state. Yet, I see no assessment of the current condition of education in the state, no discussion of options and no plan for the future. What are these politicians and bureaucrats doing? When Helen Dragas declares that UVA faces an existential crisis, why can’t our elected officials and bureaucrats stand up and say either, Yes, she’s right.” or “No, she’s wrong.”?

    It seems that our state government is as useless when it comes to higher education as it is useless when it comes to transportation.

  2. larryg Avatar
    larryg

    I’d predict this. If the Feds can education loans.. it will become that existential threat come true.

    Once people realize that they have no equity in their homes for college and they have to pay market interest rate for loans, you’re gonna see a sea-change in how people go about getting a higher education.

    But I do not give Dragas credit here. You can be right as rain but if you can tip toe through the China shop…you’re a goat.

    good intentions do not make good change and when it comes to institutions like UVA, the faculty is never going to face the truth – until it happens.

    Just read the NYT opinion piece. Denial. Denial. Denial…

    Change will come as these old dogs go onto their retirement feed.

    1. DJRippert Avatar
      DJRippert

      LarryG – your reaction is typical. Dragas is a part time political appointee. She was appointed by our governor and confirmed by our General Assembly because she is an active campaign contributor in a state that allows unlimited campaign contributions.

      Meanwhile, we have a full time governor and a full time Secretary of Education with a full time staff. In addition, we have 37 members of our elected General Assembly who claim to be actively participating on committees involved in education.

      You (and others) point fingers at Dragas. Where is your righteous indignation at the elected officials in Richmond who seem to have done absolutely, positively NOTHING about higher education in Virginia?

      The clowns in the clown show are able to be elected for life because you and people like you refuse to hold them accountable for what they have been elected to do.

  3. larryg Avatar
    larryg

    well.. my disappointment in Dragas is in her ham-fisted, amateurish approach to “existential” threats.

    I think Dragas was more right than wrong but if what she was on to was important, it was important enough to move it forward rather than have a bloody fire fight and having to eat humble pie on the way back to square one.

    Dragas is not going to move the faculty who are thoroughly vested in the bricks and mortar way of life – Sullivan was correct about that.

    Dragas could not wait so she decided to have a food fight- and to what ultimate good purpose and outcome?

    that’s my problem … and McDonnell would crash and burn just as spectacularly if he took the Dragas slash and burn approach.

    McDonnell would have been (maybe still is) smart enough to realize that running head on into the faculty was …. well..it was dumb… and to do an end-around by possibly setting up a state approach and inviting the Universities to be part of it – or not. That way – he could claim the high ground on online education and UVA could wallow if they wanted to.

  4. reed fawell Avatar
    reed fawell

    Dumb, doing it wrong way, yes, but that’s past. And Thank God she did it.

    Without the good Ms. Dragas, UVA likely would be drifting along, fat, dumb, happy, headed for the chute going over the Falls. Now, its far less likely.

    My sense is that Ms. Dragas would do it all over again if she had too. Like Ernest King, world’s greatest Admiral, hated by most all at the time. At bottom, push come to shove, he could not have cared less. There’s some of that in Dragas, I suspect.

  5. larryg Avatar
    larryg

    ” Without the good Ms. Dragas, UVA likely would be drifting along, fat, dumb, happy, headed for the chute going over the Falls. Now, its far less likely.”

    given the NYT opinion piece and the faculty’s resistance to change..I doubt changing Presidents would have done much but the idea that you give the marching orders to the President AFTER you hire them … and, in fact, AFTER you try to fire them – no… I don’t give Dragas much more credit than a bumbling drunk trying to get into someone elses front door….

    Dragas was trying to push an entire University to do something overnight that she expected the President to do…. or else.

    no credit here, sorry.

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