The headline for the January 16, 2011 article in The Chronicle of Higher Education , ” Financial Outlook is Brighter for Some Colleges,but Still Negative for Most” doesn’t tell the whole story. This story may be found at http://chronicle.com/article/Financial-Outlook-Is-Brighter/125973/?sid=at (Note: YOu may need a subscription to The Chronicle of Higher Education to view the article.) If the bright side is that a “relatively small number of colleges may be stable (no worse than what they have been), what the down side? The down side is that the financial outlook for most college will be worse. The Moody’s report will be available to Moody subcribers later this week.
What does Moody’s think is the secret to do as well as you did before? You must be well-managed and be diversified, i.e., not too dependent upon one source of income, such as tuition, advancement dollars, auxiliary enterprises or state support.
If the outlook for the have’s is stability, what’s the outlook for the have-nots’? Moody’s suggests that it will be a very bumpy road. They are projecting a number of institutions will have to retrench, merge or fold completely.
According to Moody’s the primary three factors driving the 2011 outlook for colleges are:
1. “Weakened prospects for net tuition growth because of a market preference for low-cost or higher-reputation competitors.
2. “differing degrees of pressure on non-tuition revenues” such as philanthropy or research money.
3. A “need for stronger management of operating costs, balance-sheet risks and capital plans.”
For all who don’t think that higher education is or should be a business, all these negative signs are closely tied to operations of a business. Moody is suggesting that if we don’t operate our colleges as well-run business, we may not be operating at all.
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