Using Quaker Principles to Budget in Tough Times

Most of us are involved in budget cutting exercises. We're looking for new revenues and we're looking for ways to cut expenses. Kent John Chabotar, president of Guilford College, writes about using heritage Quaker principles in budget planning and decision making processes:

In good times and bad over three decades, I have been involved in college financial decision-making as a faculty member and administrator. Whether it was at wealthy institutions like Harvard University or Bowdoin College, places of moderate means like Guilford College or public institutions like Michigan State or the University of Massachusetts, budgeting always involved not enough revenue and too many expenses. Frequently, trying to achieve a balanced budget was equivalent to trying to get 10 pounds of sugar in a 5-pound bag.

Those decisions have become far more difficult in the present economic maelstrom as revenues have deteriorated along with the stock market and tax base and expenses, especially for financial aid, threaten to skyrocket. The difficulty multiplies if the institution uses participatory budgeting processes in which the community from faculty to students gets involved.

Now I lead a college that uses principles from our Quaker heritage to make many decisions including the strategic plan, long range financial plan, and annual budget.

Amid a California Construction Freeze, L.A. Community Colleges Push Forward With Plans

It's one characteristic of the current financial crisis, that it is affecting different kinds of institutions, in different places, in different ways. And that's even before the stimulus package is available for our "shovel ready" projects:

The University of California and California State University systems have both suspended construction projects. The shutdown could affect some $1-billion in projects in the Cal State system alone, according to the San Francisco Chronicle.

But apparently the California suspension doesn’t affect plans at the Los Angeles Community College District. The Los Angeles Times reports that the community-college district is pushing ahead with $400-million in projects on its $5.7-billion plan, one of the largest higher-education expansion plans in the country.

NAICU Survey Finds Impact from Student Loan Crunch, but No Widespread Loan Crisis for Fall 2008 Semester

NAICU surveyed its 953 member institutions about the effect of the credit crunch on student loan availability for ths current semester. Good news: Not much of a strong impact, yet. Here's the press release and here's the full report. This quote is from the press release:

While there was no widespread student loan crisis this fall, there were multiple instances of students taking time off of school, switching to part-time status, and turning to alternative forms of financial support, according to the results of a survey conducted by the National Association of Independent Colleges and Universities. The survey, released today, also found a considerable amount of behind-the-scenes scrambling by private colleges to keep loan capital flowing to their students.

"In the main, the survey shows that independent higher education and our students weathered the student loan crunch through September," said NAICU President David L. Warren. "To varying degrees, individual students and institutions were impacted by the crunch, but no widespread access crisis materialized in the first half of the fall semester.

"However, the full-blown effects of the credit crunch and the nation's economic struggles are yet unknown," Warren said. "It is impossible to predict the possible future consequences of the nation's continuing economic struggles on students and colleges."

Planning for Contraction. Is Expansion in Higher Education Over?

Timothy Burke has long been seeing a problem with what he sees as an innate assumption in thinking by academic stakeholders— "the assumption of growth or plenitude is deeply ingrained."

Even before the economic news of the last year, I was increasingly convinced that all but perhaps four or five American universities with extraordinary wealth had come to the end of a long period of expansion. . . . So, the party’s over. However, I’m not hearing a lot of preparation for what higher education will look like if growth is over. Planning for minimal growth or even contraction in some cases might just require budgetary prudence and restraint, but I that’s not enough. There’s a different mindset involved. . . . Here are some of the shifts in thinking needed.

As Credit Crisis Freezes Colleges, Worries Mount

Many thanks to our friends at The Chronicle of Higher Education for allowing us to share this comprehensive report with SCUPers free of password protection.

When the stock market plunged 778 points this week, losing almost 9 percent of its value in one day, higher education responded in an uncharacteristic way: It began to buckle.

Colleges have often considered themselves recession-proof. But this week’s events compounded an already difficult year for many institutions, which have suffered from declining state support, tightening credit, and losses on endowment earnings. As a result, the financial meltdown—with its promise of a prolonged economic downturn—prompted some institutions to take radical steps and wreaked havoc on the way colleges do business.

What Are Some Potential Consequences for Campuses, of the Current Financial Crisis?

In a recent meeting between some SCUP volunteers and staff in Ann Arbor, it was noted that one of the consequences of the current financial crisis might be an especially difficult time for small private colleges without large amounts of very liquid capital. We hypothesized that, because of the financial crisis, campuses might have limited access to capital, in places where they had stored or invested it, and that might cause them cash flow problems. Now, the New York Times article quoted from below, Bank Limits Fund Access by Colleges, Inciting Fears, shows that at least in some places, this is happening. And this excellent piece, As Credit Crisis Freezes Colleges, Worries Mount, by several Chronicle of Higher Education reporters and editors is a useful scan of the external financial environment and possible effects on higher education.

In a move suggesting how the credit crisis could disrupt American higher education, Wachovia Bank has limited the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund, raising worries on some campuses about meeting payrolls and other obligations.

Wachovia, the North Carolina bank that agreed this week to sell its banking operations to Citigroup, has held the money in its role as trustee for a fund used by colleges and universities and managed by a Connecticut nonprofit, Commonfund.

On Monday, Wachovia announced that it would resign its role as trustee of the fund, and would limit access to the fund to 10 percent of each college’s account value. On Tuesday, Commonfund said that by selling some government bonds and other assets held in the fund, it had succeeded in raising its liquidity to 26 percent.

Still, Wachovia’s announcement sent shock waves through higher education, sending hundreds of college presidents rushing to check their financial vulnerability on every front.

Some smaller colleges that had not previously arranged lines of credit were feverishly seeking to negotiate those on Wednesday. And some large institutions said they were facing, at the least, a major financial inconvenience as a result of Wachovia’s action.

Budget Crises Create Opportunity

Subtitled, Embracing a chance for change during difficult times," this University Business article by Rocky Young, retired chancellor of the Los Angeles Community College District, comes in three sections: "Increasing Revenue," "Surgical Cuts," and "Other Considerations."

One of the most valuable opportunities created by budget problems is the chance to put in motion some long-awaited changes for your college or university. These types of changes-even positive ones-can be difficult at any time, but they are often easier to accomplish in times of financial crisis because everyone recognizes that sacrifices must be made.

Still, it's important to be focused and selective, by first increasing revenue, then making the unavoidable cuts.