The co-chairs of the Knight Commission on Intercollegiate Athletics - William E. Kirwan, chancellor of the University System of Maryland and R. Gerald Turner, president of Southern Methodist University, frame that report for boards of trustees in this article from Trusteeship. Their approach in this article is to examine what is known in the context of the recession and other college and university funding stresses.

[R]ising expenses—and the pursuit of more revenue to support college sports—have become a destabilizing force for many institutions, regardless of athletic mission or program size. According to the National Collegiate Athletic Association (NCAA), over the past decade, spending on athletics has been rising at a rate three to four times faster than the rate of increase of academic budgets among institutions competing in the NCAA’s Division I.

Moreover, most programs rely on institutional resources--in the form of student fees, general-fund transfers, and, in a few cases, state appropriations--to balance their budgets. such transfers are also rising much faster than other educational expenses. According to a recent analysis in USA Today, only seven universities generated enough outside revenue from athletics to cover their athletic costs in each of the past five years.

This is particularly concerning given the challenging financial conditions facing institutions. Universities are dealing with double-digit cuts in state appropriations and sharply reduced endowments in the face of rising costs across the boar--not to mention the loss of federal stimulus money meant to address the current recession. With employee furloughs, program reductions, and increased tuition and fees, spending on college sports can seem questionable or even counterproductive.

An upturn for commercial construction is expected in 2012, but institutional construction is projected to be steady, according to AIAarchitect:

The nonresidential construction market is expected to recover this year, but late enough in the year that 2011 spending levels are unlikely to see any growth over 2010 levels. A consensus 2 percent construction spending decline in 2011 will hopefully indicate the bottom of the recession trough and set the stage for a recovery in 2012. After falling around 30% on an inflation-adjusted basis last year, commercial construction is expected to see a modest decline this year, while the downturn for manufacturing should be greater. Institutional building activity is projected to stay near 2010 levels.

As the nonresidential recovery strengthens, 2012 is expected to produce stronger gains. Overall building construction should rise around 5 percent, with growth twice that rate for the more cyclical commercial sector. Spending on institutional buildings is projected to increase a more modest 1.6 percent.

 

The state of Arizona proposes to cut community college funding by 50%. Texas is cutting also, and closing four campuses.

No, this is not a larger-scale Walnut College Case Study; it's real-world 2011.

"Dean Dad" asks you, what would you cut if you were a community college CFO in Arizona?

To get a sense of just how bad this is, you could reduce every salary at the college by 25 percent, and still not make up the gap. (That's because labor isn't the only cost.) Alternately, you could lay off 25 percent of the employees and still not make up the gap.

The 'squishy' things would be the first to go. That means travel, professional development, and food for college functions. This adds up to well under 1 percent.

Obviously, any new full-time hiring for non-unique positions is out of the question. Normal attrition, unreplaced on the staff side and adjuncted-out on the faculty side, might get you another percentage or two.

Using information from Cornell (committee recently suggested moving to more centralized), Boston University (centralized), Harvard (decentralized) and Vanderbilt (recently centralized), Inside Higher Ed's Jack Stripling does a good job of covering the ground on the constant tension between centralized and decentralized budgeting. 

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The two primary camps of higher education budgetary strategy have for years been wrestling over whether it’s better to dole out revenues from a central administration or allow individual colleges to control their own financial destinies. With an economic crisis now draining dollars from college coffers across the country, that question is yet again top of mind on several campuses.

The debate over the two models essentially boils down to whether colleges or academic units within a university should bear their own expenses and keep their share of tuition, grants and gifts – “Each Tub On Its Own Bottom,” it’s often said – or be given a share of resources from the central administration based on established institutional priorities.

For some scholars of higher education, it’s predictable that several institutions have moved toward or considered centralized models amid the economic downturn. Cases in point include Vanderbilt University, which adopted greater budgetary centralization in the 2009-10 academic year, and Cornell University, where a task force’s recommendations this year were widely viewed as a move toward more central budgetary control.

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"Dean Dad" says you can—maybe—use reserves to fix shortfalls (after some caveats): "The relevant question is whether the shortfall is fleeting or structural. If it’s fleeting, then spend away. If it’s structural, then make the changes that need to be made."

The starter for this blog post is a specific situation at SUNY New Paltz, but that's just the excuse to examine what reserves really are, whether they are useable or not in the first place, and when it might be okay to use them to patch up budgetary shortfalls:

I’ve written before on public college reserves, and how they differ from ‘endowments’ as usually understood. The short version is that endowments are supposed to produce income which can be used for various reasons, but reserves are supposed to be liquid and available either for capital projects (buildings) or short-term budget gaps. Reserves aren’t about generating income, even though it’s nice when they do; they’re there for emergencies and opportunities. Of course, that refers only to general college reserves.

Iza Wojciechowska, writing in Inside Higher Ed, does a comprehensive review of state governor races and the potential impact on public institutions of challenges like the continuing financial impact of the recession and campaigning on illegal immigration:

Four years ago, higher education was one of the top issues in several gubernatorial races. But the economy crashed 13 months after the election, and the recession descended across most of the country, forcing governors to slash funding -- much of it from higher education. According to the most recent State Higher Education Finance report, state funding for higher education fell $2.8 billion in the 2009 fiscal year as a result of the recession. Federal stimulus funds worth $2.3 billion partially offset the costs, but state funding fell another $2.7 billion in 2010 and is likely to continue to fall.

The pressing need to deal with these fiscal problems is likely to force many of the new governors to continue reining in higher education spending. At the same time, however, their states will be feeling pressure to improve college completion, which President Obama has emphasized and which the National Governors Association is championing as its priority this year. The federal government has poured tens of billions of dollars into Pell Grants to do its part, but most of the heavy lifting in the college completion agenda will be left to the states, since the vast majority of American students attend public two- and four-year colleges.

Must-read: Get it while it's hot.

The Institute for Effective Governance of the American Council of Trustees and Alumni (ACTA) has published a new, 20-page guide for trustees on how to strategically consider cost-cutting measures. Planners need to download and read this free PDF document so they know what it is their boards may be reading and learning from. This is a really a nice, compact overview of many planning issues which interrelate and should be integrated.

BE EMPOWERED. Remember that trustees are fiduciaries. Students, parents, stakeholders, and—for public universities—taxpayers depend on your vigi- lance and firmness. Trustees mustn’t be pressured by the invocation of “board discipline” or “board unity” into voting against their principles or conscience. It is not an act of courage to raise tuition. Trustees should be willing to close or consolidate programs, when appropriate. They should demand approval authority for significant expenditures, insisting on information in the planning stages and in time for rigorous review.

Beware of building and maintenance projects broken into multiple small units, masking large expenditures beneath seemingly routine activity. Think long and hard before entering into a contract—as some boards have—with a search firm that provides liberal expense allowances, and compensation that might approach the first-year salary of the CEO.

 

Dickeson insists that this type of honest communication and streamlined process takes a strong alliance of leadership and buy-in from the campus community. “As I’ve indicated, the CAO, CBO, and CEO have to be aligned for this process to work—each is a principal stakeholder in both the process and the outcome. … By reallocating resources from weaker to stronger programs, the CAO can see the possibilities for strengthening the overall institution, a concept that should motivate us all.”

Read about three institutions that have undertaken academic program review. These case studies detail how one campus initiated ongoing academic review and has reaped the collaborative benefits for a decade, how another handled inevitable personnel issues, and how a third found that following a community’s vision can serve as a navigation tool through state budget shortfalls.

An interesting new University of Michigan Web site uses graphics "to provide a concise online tutorial for people seeking information about the basic workings of the university’s budget, focusing in particular on the General Fund, which is the source of support for U-M’s educational enterprise.

The tutorial, University of Michigan Funding: A Snapshot, was created in response to questions from students and others about how the university is funded. It also has information about state support for higher education, financial aid, donor support and links to more in-depth resources."