COVID-19: How the higher ed business model is changing
Several months ago, 21% of finance professionals at higher education institutions were not at all confident in their institutions’ ability to quickly and easily adjust strategies and plans in the face of change, and 65% were only somewhat confident, a Kaufman Hall survey showed.
Now, as COVID-19 requires rapid reinvention of higher ed learning structures to slow the spread of the virus, leaders must take a hard look at how their business model will be affected—and how to position their institution for the “new normal.
I’ve spoken to several higher ed finance leaders to understand the challenges they face and what they’re doing to adapt. Here are insights from five leading colleges and universities, who are demonstrating leadership and agility during these unprecedented times.
Q: How is the COVID-19 crisis affecting your institution? How have your priorities shifted?
Megan Lasso, director, University Budget Office, Montana State University-Bozeman: As a public institution, we must continue to serve our students and our constituents while navigating unchartered waters. Much of our bandwidth right now is centered on evaluating our options and making decisions thoughtfully and collectively based on the direction of Gov. Steve Bullock and the Office of the Commissioner of Higher Education for the state of Montana. We spend a lot of time talking with our executive and leadership teams to make sure everyone has the information they need to make the right decisions. We then communicate these decisions early and often with our students, faculty and staff, and we continually seek their feedback.
Angela Martin, vice president of financial planning and chief budget officer, University of Kentucky: Our top concern is protecting the health, safety and well-being of our entire community. Our faculty and staff, clinicians, and caregivers have risen to every challenge this unprecedented crisis has presented. But we’re not sure what this crisis is going to mean for the summer term and longer. We are exploring difficult questions. What will be the impact of the economic losses on returning students? Are they going to continue their education at the University of Kentucky? How will the virus and the economic losses impact the recruitment of the fall 2020 class?
We are pushing classes online, developing the infrastructure for more remote work by various staff, calculating refunds, and modeling financial impacts on operations for summer and fall. —Sal Tripoli, Tufts University
Sal Tripoli, director of budget services, Tufts University (Massachusetts): We are pushing classes online, developing the infrastructure for more remote work by various staff, calculating refunds, and modeling financial impacts on operations for summer and fall. Our budgeting software helps with all of this, and in part because of that, my office is at the center of the conversation and partnering with schools and administrators across units.
Q: What are some of the changes you expect to see regarding shifts in enrollment?
Megan Lasso: The economy certainly has an impact on enrollment. Some students who had planned to attend Montana State University-Bozeman prior to COVID-19 may be experiencing changes to their financial resources to do so after the pandemic. For example, if a parent is no longer employed or has suffered stock market losses as a result of the pandemic, a student may no longer have the funding to attend an out-of-state college or university.
Even a small percentage decline in our nonresident population will have a big impact on our total revenue. In that modeling scenario, even at full enrollment, our revenue stream could look quite different in the year ahead. —Megan Lasso, Montana State University-Bozeman
At Montana State University-Bozeman, we’re modeling scenarios with fewer out-of-state students during the 2020-21 academic year. That may mean that we’ll see more in-state students. However, as a land-grant institution, the difference in tuition between resident and nonresident students is very large—about $18,500 during the 2019-20 academic year. As a result, even a small percentage decline in our nonresident population will have a big impact on our total revenue. In that scenario, even at full enrollment, our revenue stream could look quite different in the year ahead.
Q: What are your institution’s finance professionals doing now to address the financial challenges associated with the COVID-19 outbreak?
Kevin Toso, associate director-Tampa budget liaison/systems, Resource Management and Analysis, University of South Florida: We’re rolling out in-year forecasting so we can get projections on where we think we’re going to finish the year. As part of doing that, we are trying to identify the additional charges that we’re incurring to address COVID-19. We created a tracking characteristic that we’re putting on expenditures so we can get a handle on them and see the financial impact.
We want to see whether we have any budget that we can shift around to address all the needs that we’re having. That’s our primary focus right now: trying to determine financially where are we going to be at year-end.
That’s our primary focus right now: trying to determine financially where are we going to be at year-end. —Kevin Toso, University of South Florida
Angela Martin: Typically at this time, the Kentucky legislature and governor would adopt a two-year state budget, which contains funding support for all Kentucky’s public universities. Given the uncertainties we are facing, the legislature decided to move forward with only a one-year, largely continuation budget. The state budget is a critical piece of our institutional budget. Our finance and budget professionals continue to craft our FY 2020-21 budget while analyzing liquidity, monitoring and reporting expenses related to COVID-19, and working with our Office of Institutional Research, Analytics and Decision Support and the Center for Economic and Business Research on revenue forecasts.
Megan Lasso: The most pressing financial challenge is managing cash flow. Our finance professionals are looking across fund types to determine where cash might be available and whether we could create internal loan processes that enable funds with greater liquidity to provide necessary support in the immediate future.
As we perform scenario analyses to project the impact of changes to specific student populations on revenue and on state appropriations, we’re also considering questions such as: “How many courses will be necessary to offer during the next academic year?” This requires us to estimate not just the number of new students who will enroll in our institution, but also the percentage of existing students who will continue their education at Montana State University-Bozeman. We’re also exploring incentives we could offer current and future students to encourage them to study here.
Q: Are you using any technology or data to help determine next steps in your coronavirus response?
Beth Boatwright, CFO, Emory School of Medicine (Atlanta): We are all home and working harder than ever to deploy processes needed to navigate the impact of this virus. We just got off a call where we are going to use the helpful reports we developed from our financial data to determine our financial impact due to the virus. Our software has positioned us well to support these efforts.
Megan Lasso: We use financial planning and analysis software to model the financial impact of various scenarios, which informs our decision-making. For example, we use Tuition Planning software to model rates and fees and to apply them at the cohort or program level. We’ll likely analyze our student data—such as the majors of existing students—to determine where we could reduce expenses, if necessary, without affecting the quality of education our students receive.
We’ll likely analyze our student data—such as the majors of existing students—to determine where we could reduce expenses, if necessary, without affecting the quality of education our students receive. —Megan Lasso, Montana State University-Bozeman
We’re also reviewing fund balances to better understand the differences in expenditure types. This will better position our institution to renegotiate contracts based on what we believe our needs will be in the year ahead. There are certain fixed costs that are not likely to budge, but certain variable costs could provide opportunities for savings.
Q: What advice would you share with your peers on how to navigate financial planning in the new normal—now and after the pandemic?
Angela Martin: Communication and working collaboratively is key. We are facing difficult financial times and we will likely have to make unpopular decisions for our future. We must carefully plan during this heightened economic uncertainty. We must act in a thoughtful, timely manner. For example, we recently implemented a “hiring pause” to provide the time, space and flexibility to assess current and future work needs.
We must act in a thoughtful, timely manner. For example, we recently implemented a “hiring pause” to provide the time, space and flexibility to assess current and future work needs. —Angela Martin, University of Kentucky
Megan Lasso: Use all of the data that you have available—and make sure you build understanding around that data with all key stakeholders. You also need to be strategic in how you invest money now to see a return in the future. Right now, it’s hard to think about spending money, but you have to make investments in your future. Those institutions that do not prepare for their future by making investments during times of crisis will be less likely to weather the storm over the long term.
Finally, understand that higher education is more adaptable than we’ve been taught to believe. It’s often said that higher education is like an aircraft carrier: It takes us forever to turn around, and we don’t change course easily. But during this crisis, our faculty have really jumped on board and come up with unique ideas to solve complex challenges. Now, we know we can move quickly when needed, and this gives us the confidence we need to pivot with agility in any circumstance.
Kermit S. Randa is CEO of Kaufman Hall’s software division.
UB’s coronavirus page offers complete coverage of the impacts on higher ed.