Hard Times Require Better Planning and More Online Offerings, Speakers Tell Public-University Leaders

November 15, 2010

The recession's impacts are far from over for public universities, most of which have not done enough to test and improve their budgets. And online learning needs to become a larger part of the solution to maintaining academic quality and student access amid dwindling state contributions.

Those themes were part of the tough-love message delivered here by speakers at the annual meeting of the Association of Public and Land-Grant Universities. For example, John R. Curry, managing director of the Huron Consulting Group, said most public-university leaders have clung to worn-out myths about campus strengths rather than rolling up their sleeves to "repurpose" budget priorities.

"We like our stories more than the truth," said Mr. Curry, a former executive vice president at the Massachusetts Institute of Technology.

And the financial challenge is daunting. He said tax revenue is flat in most states, which face soaring health-care and pension liabilities.

"State debts and municipal debts are very, very serious," said Mr. Curry. "We will see a few states fail."

Yet strategic financial planning remains weak at many public universities, Mr. Curry said. Plans often don't move money toward priorities and away from other academic programs.

"A strategic plan isn't strategic unless something goes and something grows," he said.

Many universities also fail to have long-range planning models that test assumptions. For example, Mr. Curry said an institution might determine that it has cash on hand for new software, but fail to factor in costs for maintenance, updates, and staff training.

A more sophisticated approach, said Mr. Curry, involves a "relentless incrementalism" to budget planning. That means questioning the viability of goals like making a leap in national rankings and research grants, or building a new student fitness center. He said universities need to ask what matters most and how to get there.

"The facts can liberate you in ways you don't know. But the first wave of liberation will hurt," Mr. Curry said.

The recession taught much of higher education hard lessons about the value of liquidity and having enough cash on hand to make quick financial decisions. Going forward, Mr. Curry said, university planners should conduct multiyear forecasts of balance sheets and be willing to consider and even "play with" risk and volatility.

"The crisis you prepare for probably won't be the one that happens," he said. "But you'll be better off for testing hypotheses."

Trying an Online Solution

The University of California is testing its approach to online learning. And the pilot program, which will enroll approximately 5,000 undergraduates in high-demand courses next year, has already drawn heated criticism from faculty members.

The ambitious project's most prominent advocate, Christopher Edley Jr., dean of Berkeley's law school, spoke at a session here. He was joined by William E. Kirwan, chancellor of the University System of Maryland, who talked about Maryland's broad distance-education efforts, and Candace Thille, who leads Carnegie Mellon University's Open Learning Initiative, which is an industry leader in developing online courses.

Mr. Edley said California's dire finances and the system's long commitment to educating middle- and lower-income students are the impetus for finding a way to incorporate more online classes.

"It's abundantly clear that the bricks-and-mortar model is unsustainable if we want to preserve our mission," he said.

He used sobering numbers to bolster his case. The system faces a budget gap over the next decade of at least $4.7-billion in its projected expenses on instruction, meaning costs related to educating students, as opposed to administrative or student-services expenditures.

If the pilot program succeeds, he said, it could grow into larger-scale efforts that could generate revenue for the cash-starved system. Those might include offering courses, or maybe even degrees, to qualified students the 10 campuses might otherwise turn away, which could be a boon for both students and the university's coffers.

For example, he said it would cost the university $50-million to serve 25,000 new students online. But that would generate $180-million in net revenue each year. That amount would be the equivalent of the annual payout from a $4.5-billion endowment, and it mirrors the system's instructional budget gap.

Many professors won't go for the online push, Mr. Edley acknowledged, saying that it's a tough transition for some to go from the traditional "sage on the stage" teaching model to the "guide on the side" approach. But he said most faculty members wouldn't have to make that move.

Some further migration to distance learning is inevitable, said Mr. Edley, even at the most selective of public universities. And for California, it might be the key to staying "excellent without becoming exclusionary."