Are Colleges Really on the Brink?

It has now been 10 years since the late Harvard professor Clayton Christensen made his first famous public prediction that at least a quarter — if not half — of all colleges would close within the next 10 to 15 years. It has certainly been a rough decade for higher education, which has seen a sizable decline in enrollment and a global pandemic that I opined at that time would result in a spike in closures. But the industry has avoided a mass extinction event thanks to the resiliency (or stubbornness) of many small private colleges and well-timed support from the federal government.

Yet there has been a notable change in colleges’ financial strategies over the last decade. Prior to the late 2010s, the default position of colleges was to try to grow their way out of financial challenges. This frequently involved starting new undergraduate and graduate programs, launching new athletics programs, and updating facilities in an attempt to recruit students who were willing to pay something closer to the full sticker price. This worked fairly well for a time and encouraged colleges to keep trying to grow their way into a stronger financial position.

Then 2018 arrived. At that time, 69 percent of high-school graduates immediately enrolled in postsecondary education and adult student enrollment appeared to be stabilizing following a boom during the Great Recession. That was the year in which the economist Nathan D. Grawe released a book titled Demographics and the Demand for Higher Education (Johns Hopkins University Press). In that book, he detailed a dire trend that soon became known as the “enrollment cliff” — a decline in the number of (especially white) high-school graduates.

That book sparked a cottage industry of consultants providing advice to colleges on how to prepare for a world with fewer prospective students. Since then, the scars of the pandemic and a further decline in college-enrollment rates (down to 62 percent in 2021) have only increased the willingness of governing boards and institutional leaders to think about retrenchment instead of growth. Christensen was still way off on his prediction, but college leaders are having to do some hard work to make sure that remains the case.

A recent book by two veteran college presidents, Charles M. Ambrose and Michael T. Nietzel, lays out a case for retrenchment. In the provocatively titled Colleges on the Brink: The Case for Financial Exigency (Rowman & Littlefield), the leaders make the case that more institutions should be using the tool to eliminate underperforming academic programs in an effort to better target resources to programs with a higher return on investment. Declaring financial exigency has traditionally been a last-ditch option for colleges that are on the brink of closure, but they argue that colleges should be declaring exigency proactively instead of reactively. This is particularly true for public colleges that legislators and governors will not allow to close.

As an academic administrator and faculty member who studies higher-education finance, I read this book with great interest knowing that it is likely to have a sizable influence on college presidents and trustees. Here are some of my key takeaways:

First, while this book is organized as a playbook for college leaders, nothing in it should be surprising to anyone who has experience as a president or works at the consulting firms that colleges often bring in to help manage the program-elimination process. The targeted audience for this book really seems to be trustees and policymakers, many of whom do not have experience with cutting programs and are seeking validation for this approach. The authors certainly make a compelling case to this business-savvy audience that it is essential to continuously reassess programs in order to free up funds.

The true value of the book is to faculty, staff, and students, who may have never thought about the possibility of their programs being eliminated. This is a call to action to these communities to become comfortable analyzing budgets and poring through data on the state of their programs. I may be a bit biased about the value of understanding higher-education finance given the course that I teach, so take it from The Chronicle’s most recent Trends Report: If people do not understand the types of conversations that are happening — and how to influence them — they may be in for a rude awakening.

Another key takeaway from this book is that faculty and administrators have different working definitions of the term “financial exigency.” The American Association of University Professors defines the term as “a severe financial crisis that fundamentally compromises the academic integrity of the institution as a whole and that cannot be alleviated by less drastic means.” The AAUP’s best practices also include language about faculty having access to detailed budgets and financial statements so they can make their own judgments about a program’s ability to continue.

As Ambrose and Nietzel note, colleges have different definitions for what constitutes financial exigency. Some colleges follow the AAUP’s definition, while others define exigency at the program level or in terms much more favorable to the institution. They note that the number of declared exigencies appears to have increased in the last several years, while other institutions have not hesitated to end programs without declaring an official exigency. The term exigency may be losing the shock factor that it once had, but colleges are going to the program-elimination toolbox more often than in the past.

Ambrose provides a look behind the curtain of the financial-exigency process at Henderson State University, where he was chancellor when exigency was declared in 2022. He engaged Huron Consulting, one of the largest financial-consulting firms in the industry and a key player in pivoting institutions to market-oriented budgeting models, to help develop metrics for programs to meet. The result was an elimination of 67 faculty lines and more than one-third of all undergraduate majors, as well as a no-confidence vote from the Faculty Senate. Ambrose stepped down one year later and joined a higher-education consulting firm. There is certainly a market for college presidents who are willing to make unpopular decisions and fall on their swords after doing so.

The discussion of tenure in this book is well worth reading. They note that the share of tenure-eligible faculty has decreased over time and that a majority of college presidents and provosts would prefer long-term contracts to tenure. They argue that “tenure, in its present form, is too blunt an instrument to accomplish the faculty protections that are needed without the excess baggage that’s sometimes encumbered.” This “excess baggage” includes the protection given to poor-performing faculty (a problem that can be dealt with in post-tenure review) and the increased burdens placed on the growing number of non-tenure-track faculty.

They suggest three solutions to tenure, none of which would thrill many current tenured faculty. The first is bringing back the pre-1994 mandatory retirement age of 70, while the second is limiting tenure to 35 years. Those would place a firm end date on colleges’ financial commitments, which can be sizable. (As a tenured millennial, I’m part of their problem.) The final, and most controversial, recommendation is to move to seven-year contracts. Outside of the wealthiest institutions or superstar faculty, I think that higher education is headed toward renewable contracts. There are plenty of faculty to fill most of those positions, and politicians even in blue states such as Hawaii often are not big fans of tenure.

As someone who straddles the line between faculty and administration as a department head, I think a lot about the strengths and weaknesses of shared governance. Most decisions about financial exigency or college closure are made in a fairly short time period, and it is really hard to make thoughtful decisions as a campus community about program eliminations, exigency, and resource allocation on short notice. The natural reaction of faculty, staff, and students is to push back against threats to their programs, while leaders often come to these discussions with their preferred solution already identified.

One issue that I would have liked to have seen addressed in the book is a fundamental challenge of shared governance that gets relatively little attention. Campus leaders are typically on 12-month contracts and have no issues whatsoever with making changes in the summer, while tenured and tenure-track faculty are primarily on nine-month contracts with no pay or formal service expectations during that time. This is one of the reasons why shared governance is a slow and often painful process, but ultimately it is on institutions to provide some modest support to faculty if they need important work done outside of the contract period.

Finally, the conclusion of the book discusses a range of strategies that colleges should pursue immediately after going through financial exigency. The list of solutions — from partnering with employers to better serving part-time students — are all the rage in higher-education-reform circles right now. But while some of these strategies are common sense, others (such as encouraging students to take 15 credits per semester in order to hopefully retain and graduate more students) have at most modest effects on students and have the risk of significant unintended consequences if not implemented carefully. An additional concern is that some strategies, such as college-completion scholarships and offering more services during evenings and on weekends, can be expensive for colleges that are under significant financial stress.

As higher education continues to struggle with enrollment and the future of state support appears murky, more colleges will pursue financial-exigency plans as laid out by Ambrose and Nietzel. If pursued carefully and in conjunction with shared governance, closing programs can be a much better outcome than closing colleges. This book will serve as a playbook for leaders and boards looking to make changes, as it is accessibly written and provides clear examples. This means that it is also important for faculty and staff to read this book so they have a sense of what may be coming and can prepare themselves as much as possible for the arguments in support of exigency.