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ACM Voices-Summer 2013

ACM Notes-Summer 2013

In the Summer 2013 issue of ACM Notes

Addressing the Economic Challenges We Face

Guest columnist: Michael T. Orr, Krebs Provost and Dean of the Faculty, Lake Forest College

Michael T. Orr

Michael T. Orr

The first event of the ACM Institute on College Futures, a project funded by a generous grant from The Andrew W. Mellon Foundation, was recently held in Chicago on June 19-21. I was in attendance as a member of the grant steering committee and as one of the scheduled presenters.

Approximately 60 faculty participants — comprising teams of three to five faculty members nominated by each of the ACM colleges — gathered at the Holiday Inn Chicago Mart Plaza for a series of presentations and discussions about the economics and finances of higher education, with a focus on the particular challenges faced by the liberal arts college sector.

In designing the curriculum for this first institute, the steering committee tried to put together a program that would help faculty members develop a deeper understanding of the economic challenges our institutions are facing.

Although ACM institutions differ widely in their structures and processes for shared governance, faculty members have a critical role to play in helping their institutions make — and execute —  strategic choices.

Ultimately, we hoped the institute would not only deepen understanding but also provide a framework and language that participants could take back to their home campuses and use when discussing these issues with colleagues.

After reviewing the evaluations completed by participants at the end of the seminar and reflecting on the experience, I would identify some of the most important take-aways from this first conference as being the following:

  • Tuition increases have consistently outstripped the rate of inflation during the past 30 years.
  • Over the past decade, median family income at almost all levels has declined in real terms.
  • For most institutions, financial aid (aka, tuition discounting) has grown faster than tuition, with the result that net tuition revenue per student has tended to grow at a much slower rate than the increase in the tuition "sticker price."
  • If the most important question for your college president from May until August is "will we make our class?" then your institution is tuition dependent.
  • Especially for students from low and middle-income families, the actual cost of attending an ACM school is not necessarily greater than that of attending a state flagship institution.

Read more:

Institute on College Futures webpage

Opening seminar:

  • It can be in an institution's self interest to compete with other schools in offering substantial merit aid awards, even though the end result is a lowering of revenue received from students and families who have the capacity to pay more.
  • Compensation to faculty and staff forms a disproportionately large share of an institution's total expenses, typically as much as two-thirds of all expenses.
  • Financial projections suggest that we are facing the risk that revenue growth will not keep pace with expense growth. However, expenses cannot be permitted to grow faster than revenues if an institution is to stay in business.
  • Increases in annual giving, new revenue streams, and improved endowment performance (while highly desirable) are likely to be swamped by the size and dynamics of our basic financial model.
  • Although ACM institutions differ widely in their structures and processes for shared governance, faculty members have a critical role to play in helping their institutions make — and execute — strategic choices.

As one of the presenters, I was struck by the level of engagement of the participants, the quality of the questions and discussion, how much faculty members valued the opportunity to share perceptions and experiences with colleagues from other institutions, and the conviction expressed by many participants that the material covered in the institute should be made more widely available to faculty across the ACM.

The Institute for College Futures is a four-year program and further conferences are being planned for each of the next three years. Our hope is that these activities will help to develop a clearer understanding among ACM faculty members of the financial issues confronting our sector of higher education and will strengthen their ability to assist our institutions in addressing the economic challenges we face.

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This column was written for the Summer 2013 issue of the ACM Notes newsletter for faculty and administrators.

Copyright 2013