With the financial and operational landscape in higher education shifting rapidly to address today’s challenges, many institutions seek strategies to overcome short-term volatility and ensure future business continuity. These strategies are needed to protect budgets, jobs, research grants and recruitment efforts while balancing continually evolving demands on resources. Yet despite the unique challenges the COVID-19 pandemic presents, the situation facing higher ed institutions today is not entirely unprecedented in recent history.
ARRA provides a blueprint
From 2007 to 2009, the country underwent “The Great Recession,” and the subsequent funding and operational challenges institutions faced ten years ago are not unlike the ones they’re facing now. In fact, the lessons learned shape a blueprint of sorts on what to expect and how to prepare as we enter this economic downturn, with an eye toward stimulus packages across educational technology, infrastructure and energy efficiency. If the country follows the same package plan as the American Recovery and Reinvestment Act of 2009 (ARRA), it is likely funding will be available to those with shovel-ready projects.
Higher education institutions that waited for ARRA’s announcement to begin the process were rushed to design, engineer, procure and engage implementation partners. Consequently, strategic opportunities were likely overlooked and some of these institutions were unable to get funding approved on time. The opportunity cost was more than that of the one-time financial boost. According to the Department of Education, those who maximized their ARRA applications were able to freeze tuition increases, retain and hire more educators and maintenance staff, expand programming, and make significant capital improvements.
Compared to 2009, the opportunity cost is greater today with business continuity in jeopardy for many colleges nationwide. Enrollment numbers and associated revenue have plummeted since then, and Gordian predicts that enrollment will sharply decline again in 2026. While campus modernization is key to attracting and retaining students, according to a recent University Business survey, 80% of higher education leaders say that competing priorities are already redirecting budgets away from mission-critical energy and infrastructure projects. In addition, institutions expressed concerns about the future of campus operations including a growing skills gap among their facilities staff.
With the National Education Association predicting a loss of 1.9 million jobs in the education sector without additional funding—and with the mounting concerns around workforce, revenue streams and escalating deferred maintenance backlogs—it is imperative that colleges and universities have their projects ready to go at the announcement of a new recovery act.
Here are the three ways to get positioned for success:
1. Prioritize projects for business continuity
It’s tempting to move the project list as-is up for approvals, but it may not be the most strategic way to apply the funds. Federal funds should be viewed as a tenant of a long-term fiscal plan over immediate cash flow. This means prioritizing projects that support future business directives and the campus demands of tomorrow, such as increased reliability, resilience, sustainability and technology.
Examples include projects that aim to:
– Extend lifecycle of buildings and facilities
– Reduce a deferred maintenance backlog
– Contribute to an enhanced, competitive learning environment for students
– Reduce the need to increase tuition after the funds are depleted
– Create efficiencies and automation to relieve operational burden on existing workforce
Tools such as capital asset planning can help with scenario planning. For example, instead of replacing all chillers, it may be more optimal to replace select chillers close to end-of-lifecycle and use the remaining funds for new building automation systems. In the last round of funding, a state university used its $4 million to “replace an aging boiler that serves several buildings on campus, upgrade elevators, and install more energy-efficient windows in one of the residence halls,” while also renovating its physics, chemistry and biology labs that had not been upgraded since the 1970s.
2. Create your partnerships early
The team attached to the priority list will be key in the successful application and implementation of stimulus funding. For projects related to infrastructure and fiscal planning, additional expertise in energy infrastructure will help fine-tune both the prioritization and shortlisting. The inclusion of these partners in the designing and implementation planning will significantly shorten the time to approval and construction, positioning administrators to move quickly on the front- and back-end of the process. As seen with the ARRA, those that did not source their partners early enough either missed the opportunity or were unable to maximize their allocations.
With a team and project scope pre-defined, they’ll be ready to move quickly to implement upon disbursement. Additional financial returns are possible with a faster implementation of projects, as institutions will recoup those operational and energy efficiency gains quickly.
3. Prepare contingency plans
Business continuity should not depend on stimulus funding alone. Institutions have predominantly relied on state or federal funding along with endowments to finance capital energy and infrastructure projects, but there are many other avenues left unexplored. According to the University Business survey, only a third of respondents are leveraging the full spectrum of funding models for campus modernization, which includes Energy Savings Performance Contracting, Public-Private Partnerships, Power Purchasing Agreements, and Design-Bid-Build.
Now is the time to be prioritizing projects, finding your partners, and getting ready to hit the ground running. In the process, institutions have a renewed opportunity to capitalize on the financial benefits of infrastructure upgrades and using those gains to remain competitive in an increasingly crowded higher education market.
Read more on how energy infrastructure can be moved from bottom-line burden to strategic business lever.
Charlie Johnson, Schneider Electric’s national higher education market leader, advises higher ed institutions in the areas of energy and operational efficiency, critical infrastructure and capital investments for future business development.