The Heavy Cost of an Empty Campus

Well before Covid-19, Ed Walton, a top finance official at the University of South Carolina, would convene colleagues to plan for the future. Pressured by lower state appropriations, the university needed to expand enrollment and reduce costs. But over the years, the conversations would sometimes spin out to extreme hypotheticals. What if students didn’t show up?

Walton tried to urge his colleagues to focus on more realistic possibilities — not, as he called it, the Zombie Apocalypse.

That particular scenario was especially scary. By 2018, tuition and fees accounted for almost half of the university’s annual revenue. South Carolina had fanned recruiters across the country and had increased enrollment by thousands of students in just five years. These students didn’t just pay tuition. They spent money on housing, food, annual fees, and parking. An empty campus was not only antithetical to the academic and cultural life of a public research university. It was a financially devastating prospect.

On a March afternoon in 2020, Walton was in his office when the campus’s police chief and chief health officer entered the room. They shared what they knew about Covid-19. The virus was extremely contagious. It was almost certainly going to pulse through a densely populated university, with tens of thousands of students moving through the grounds and facilities. Walton and his colleagues went straight to the president’s office.

South Carolina, like campuses across the country, soon closed. The Zombie Apocalypse had arrived.

By the summer, however, universities had to contend with not just a public-health crisis but an economic one. After an interrupted spring semester that ended remotely, President Robert L. Caslen Jr. told professors in June, he saw projections of enrollment declines at residential universities — as steep as an estimated 3,500 lost freshmen at South Carolina. How committed would they be to staying enrolled if they had to study remotely for even longer?

Nearly a year has passed since Covid-19 tore up higher education’s playbook, and the ghosts of past decisions are haunting its leaders. Just as the pandemic laid bare longstanding health and economic disparities in the United States, it has exposed the ramifications of choices made by flagship universities like South Carolina as they responded to years of state disinvestment.

They had built up the student body and changed its composition. They had made big commitments to new construction. They had supercharged athletics. Covid-19 threatened each of those levers, long coveted by regional public colleges and many private universities.

Chris Neal, The Topeka Capital-Journal, AP

It is this very change in circumstances in recent years — the shift, as the saying goes, from state supported to state located — that has hemmed in public research universities as they respond to the pandemic. Now, their reliance on enrollment is on full display. The consequences of the long-fretted-about privatization of public education have caught up with them.

“Think of the university budget like a balloon,” said Jason Owen-Smith, a sociology professor at the University of Michigan at Ann Arbor and the author of Research Universities and the Public Good. “In good times, if you squeeze one part of the balloon, it can bulge somewhere else. Right now, there’s no elasticity in the balloon at all.”

To make an on-campus experience possible this fall, many large universities spent millions to enable social distancing, test for the virus, and conduct contact tracing. But the return of students hastened the spread of the disease locally, turning many college towns into viral hot spots. Now the spring semester is beginning as the virus rages through many parts of America.

In June, Caslen compared the risks of reopening with driving on a national highway. Driving 35 miles per hour would save lives. But drivers don’t do that. We go 65 miles per hour, or 70, he said. There are rules of the road. “And we accept that risk.”

Public research universities like South Carolina, which avoided steep enrollment losses in the fall and brought back more than 25,000 students for face-to-face instruction that semester, haven’t always been so reliant on enrollment. State disinvestment and the power of big donors laid the groundwork for a dependence on tuition that is now ingrained in how these campuses work.

One of those donors was a Texas energy executive named Robert McNair. Back in the late 1990s, South Carolina’s president at the time invited McNair, who had attended the university as an out-of-state student, to campus.

It was an opportunity to lock down a major investment as the then-president, John M. Palms, sought to make the university a top research institution. The timing couldn’t have been better. South Carolina was poised to announce a new capital campaign, and it had just secured its largest donation in history, $25 million from a Wall Street financier.

Palms invited McNair and his wife to stay at the president’s house over a football weekend in the fall of 1997. Joining them was the developer Charles S. Way Jr., McNair’s friend and fraternity brother. One morning, Way recalled, he walked into the president’s kitchen to find McNair scribbling on a yellow legal pad. He was making plans for a hefty donation that would back annual scholarships for out-of-state students. The University of Virginia and the University of North Carolina at Chapel Hill were recruiting nationally with prestigious scholarships. Now South Carolina would join them.

They announced the donation in the spring. The president himself called 10 student recipients to share the good news, expecting half to turn it down, the Times and Democrat reported. All accepted — so the campus had to ask McNair to speed up the gift transfer, according to the newspaper. South Carolina expanded its recruiting nationally, aiming to bring to campus “the cream of the crop” from out of state, said Kristi S. Cooper, the Robert and Janice McNair Foundation’s executive director.

Out-of-state recruiting accelerated after the 2008 financial crisis, when the university’s new president, Harris Pastides, saw a nearly 15-percent appropriations cut from the state, a reduction so impossibly large that he says he thought the fax that announced it was missing a decimal point. First the university laid off adjunct and part-time faculty, warned students to expect bigger classes, and even cut the grass less frequently. State appropriations at Columbia fell from $165.5 million in the 2008 fiscal year to $82.9 million in the 2012 fiscal year.

Increasing student revenue was the natural next place to turn. How big could the University of South Carolina get?

University leaders focused on the out-of-state recruiting network built over the past decade. They placed alumni and other staff around the country and had student employees telephone potentially interested high-schoolers, trying to turn them into applicants, and then students.

Between the fall of 2010 and the fall of 2013, the percentage of out-of-state freshmen grew from 43 percent to 49.6 percent. It would spike even higher — to 54.4 percent by 2016. Though the percentage of out-of-state students fell to below 50 percent in the years before the pandemic, the sheer number remained high, at more than 3,000 in the fall of 2019.

Drawing a direct causal link from enrollment pressures to decisions to resume on-campus courses during the pandemic is too simplistic, says David H. Feldman, a professor of economics at the College of William & Mary who studies college costs and higher-education policy.

Other drivers were in play, such as public-health conditions, academic mission, and state regulations. Campus leaders in Republican-led states were also less likely to plan for online instruction in the fall of 2020, the College Crisis Initiative at Davidson College found. The party and its torchbearers, especially former President Donald Trump, pushed for the reopening of schools, colleges, and businesses.

But it’s clear that reliance on enrollment revenue was a key factor in decision making. “What you see with Covid is what happens when you build a model around the presence of students, around the presence of students as consumers,” said Kevin R. McClure, an associate professor of higher education at the University of North Carolina at Wilmington.

The dynamic, he said, has “boxed institutions in, in terms of the choices they could take.” College leaders debated not whether to have students on campus, but how.

The University of Kansas also went all-in on student recruitment, but it did not just look across state borders. In 2014, it set its sights on attracting large numbers of students from outside the country.

At that time, investing in international-student recruitment seemed like a good bet. The number of them coming to the United States was increasing at a never-before-seen pace, with enrollments surpassing one million students a year. Nearly three in four of those students chose doctoral-granting institutions like Kansas, a member of the elite Association of American Universities.

Kansas’ goal was ambitious. It hoped to double its international-student population, which then stood at 2,283. The university hired an outside company to recruit students from around the globe and invested in programming to provide them with cultural immersion and to improve their English skills.

Administrators also hoped a sweeping campus renovation, including a state-of-the-art science building, modern student apartments, and a new student union, would boost the university’s appeal. The two efforts, in fact, were mutually dependent — college officials were counting on international students to help fund the Central District, as the multimillion-dollar construction project was known. They would borrow to erect the buildings and use foreign-student revenues to pay their creditors.

Kansas had gone for years without a campus master plan, and administrators suggested they were playing catch-up. “Our science facilities were built before we put a man on the moon,“ Bernadette Gray-Little, Kansas’ chancellor at the time the Central District was conceived, pointed out at the time.

It wasn’t alone among its neighboring institutions. The Kansas Board of Regents estimated in 2018 that the state’s six public colleges had a deferred-maintenance backlog of nearly $1 billion. Just keeping the buildings from deteriorating further costs $100 million a year, the board said in that report.

Like many universities, Kansas looked to outside funding because state support, particularly for campus infrastructure projects, was insufficient. Extra state dollars were especially hard to come by because of severe tax cuts imposed in 2012 by then-Gov. Sam Brownback.

The lack of money coming in meant that the state government had to repeatedly make midyear budget cuts — nine times in the five years the Brownback tax cuts were in place, according to the Kansas Center for Economic Growth. That left the state’s public colleges uncertain about whether they could count on spending levels from year to year, never mind invest in bold new building projects.

Instead, Kansas planned to issue nearly $330 million in bonds to pay for the construction through an affiliated nonprofit, the KU Campus Development Corporation. Such arrangements, known as public-private partnerships, or P3s, have become increasingly common vehicles for financially strapped colleges to obtain cash.

Still, the approach alarmed faculty members. The university would have to make payments of $21.5 million a year, for the next three decades. They questioned whether Kansas should lock itself into such a lengthy financial commitment based on students who had yet to be recruited.

Kirk McClure taught in KU’s urban-planning program for 40 years before retiring last May. Before his academic career, he worked in real-estate underwriting. Borrowing $327 million to construct the Central District made no sense, he said. “I wouldn’t loan $27 on a completely unproven revenue stream.”

“It was a gamble, all of it was on spec,” said Joseph Harrington, an English professor who, like McClure, is a former president of the Faculty Senate. “I remember thinking at the time, maybe I’m a more cautious investor, but I wouldn’t invest in those bonds.”

Lawmakers, too, raised questions about the Central District and its funding, worried that taxpayers could be on the hook if Kansas couldn’t pay its debt. Still, in the spring of 2016, the university was free to move forward with construction.

But even as it did, a core source of financing began to look shakier. That same year, new international-student enrollment across the United States began to contract, and the declines worsened after the election of President Trump, whose isolationist rhetoric and restrictive visa policies scared off foreign students. Rather than doubling, the number of foreign students at Kansas actually declined slightly. Moody’s Investors Service downgraded KU’s outlook, citing overly optimistic international-enrollment targets. (Its stable rating has since been restored.)

In 2018, Kansas posted a $20 million shortfall, prompting faculty buyouts and early-retirement incentives. Positions were left unfilled, and salaries were frozen. Kansas now ranks lowest among all AAU institutions in financial compensation. Carl W. Lejuez, then the interim provost, pointed a finger at the construction boom. “A lot of it is the buildings,” Lejuez said in a town-hall meeting. “These are wonderful buildings, but they cost quite a bit of money.”

A university spokesman later told the Lawrence Journal-World that Lejuez was not referring specifically to the Central District project. Still, the episode gets at a central tension in modern university budgeting: Colleges are increasingly reliant on money paid by students, beyond just tuition, to underwrite and maintain campus infrastructure. They need international students to pay room and board for residence halls, commuters’ parking fees to cover the bonds for parking garages, student-recreation surcharges to build new athletic facilities. Quite literally, student revenue — revenue frequently tied to students’ physical presence on campus — keeps the lights on.

This reality hasn’t gone unnoticed by students during the pandemic. A recent survey by the think tanks Third Way and New America found that 50 percent of students agree with the statement that “my institution only cares about the money it can get from me.”

What happens if students don’t come? The obligation to pay for those buildings doesn’t disappear, even if the students who are meant to use them aren’t there. “You can’t lay off a building or put it on furlough,” said Ben Chappell, an associate professor of American studies at Kansas.

Even so, colleges may continue to borrow through the pandemic, or to refinance existing debt, because of rock-bottom interest rates. In its 2021 outlook for higher education, Moody’s predicted that the practice would persist as institutions seek financial flexibility, but the service warned that borrowing could come to a halt if lenders deem colleges too big a risk.

Qilai Shen for The Chronicle

Last spring, when Covid emptied campus, Kansas posted losses of $35 million, mainly hits to housing, dining, and parking fees. Administrators were able to tap reserve funds, but as the fall semester approached, they had no such cushion. They forecast a financial blow of $120 million, including a $19-million drop in revenue from those auxiliary sources.

Faculty members and administrators making more than $50,000 were asked to take temporary, graduated pay cuts. But the real solution, it seemed, was to get as many students as possible back to campus. “It’s a simple and powerful formula: The more students we have in classes this fall, the less we will need to cut to recover,” Barbara A. Bichelmeyer, KU’s current provost, wrote in a June email to the faculty. “It’s our best strategy for recovery now.” The university would offer about half of its fall-semester credit hours primarily in person.

In the end, Kansas took a financial hit of about $75 million. The university’s enrollment declines were not as deep as administrators had feared, decreasing less than 3 percent from the previous fall. Half of that drop, however, was attributed to the very students Kansas had banked on attracting a few years earlier. With borders closed and visa processing halted, it enrolled 18 percent fewer international students this past fall than before the pandemic.

Despite misgivings about borrowing, Kirk McClure, the retired planning professor, is quick to praise some parts of KU’s Central District. Rebuilding the aging power plant? Long overdue. Expanding the campus day care where his own daughter went decades ago? Wonderful.

But other parts of the project, like a parking garage that sits half-empty when the Jayhawks aren’t playing basketball at Allen Fieldhouse, reflect previous administrators’ “edifice complex,” he said.

Across the country, it’s a common critique: That the college building boom begun nearly 10 years ago has been driven not by necessities but amenities, not by the must-haves but by the want-to-haves. To be competitive for full-paying students, colleges must meet their elevated expectations — posh dorms, luxurious football stadiums, lazy rivers, rock-climbing structures. South Carolina’s top leadership toured other universities in the Southeastern Conference to make sure they were keeping pace, said Pastides, the former president. It added Chick-fil-A, a Mediterranean restaurant, and a build-your-own pizza spot in the student center.

“When I went to college, we slept in a cinderblock room, in bunk beds,” said Kevin Kinser, head of education policy studies at Pennsylvania State University. Today, “that wouldn’t cut it.”

In Lexington, Ky., the architect Michael Smith saw the building boom play out firsthand. By 2012, the University of Kentucky was taking steps toward turning over its entire housing stock to a private developer through public-private partnerships, a landmark step in privatization.

Smith’s firm was brought on to design the new dorms. He had enrolled at the University of Kentucky in 1978, the natural next step after high school. Years later, his sons applied to more than nine campuses each, all over the country, reflecting the more competitive market for applicants and colleges. The new residence halls at Kentucky had suites with single bedrooms and a shared kitchenette — a reflection of what students were used to, Smith said.

A big priority, he said, was to create community spaces for students to study and socialize. “The university,” Smith said, “always had the students as the first priority.”

Some colleges have turned on-campus amenities into year-round revenue streams, running camps, summer programs, and executive education sessions that keep the campus bustling even during lulls in the academic calendar. Penn State has two hotels, one with a conference center, putting it in the hospitality business.

Institutions have built their budgets on this broader base of support, and like airlines and hotels, they have been hit hard by the grounding of most travel and the halt to in-person programming. Twenty-five flagship and land-grant universities surveyed by the Association of Public and Land-Grant Universities reported a median of $35 million in losses from auxiliary revenues, including dining halls and athletics — higher than the reported losses for two other major categories, tuition and fees and room and board.

“The diversified revenue streams were a way of hedging their bets,” Kinser said. “But no one ever really considered what would happen to major universities if no one could come to campus.”

Attracting new students was a primary goal for the University of Oregon back in the early 1990s. It was a challenging time. While the country as a whole had dipped into recession, Oregon’s budget problems were compounded when anti-tax activists won a victory at the ballot box, persuading voters to amend the state constitution to limit local property taxes. Although the tax restrictions didn’t affect colleges directly, there was a spill-over effect: Lower local taxes meant less money for public schools, forcing the state government to pick up some of the funding slack and squeezing other spending priorities. Within a decade, the share of the state budget going to higher education would fall from 14 percent to 7 percent.

At the same time, college enrollments were flat. Some lawmakers openly mused about whether the state still needed two large research universities within an hour’s drive from each other.

The University of Oregon had hired a senior vice provost, Gerald R. Kissler, who had previously worked in California. That state’s master plan for higher education was beginning to strain at the seams. There were too few places for all the students clamoring — and qualified — for admission, particularly at the prestigious University of California campuses. If Oregon could recruit just a percentage of that population, the university could reap the benefits of higher-paying out-of-state students, Kissler proposed.

The question was, how? One piece of the answer turned out to be football.

That solution wasn’t as obvious as it might seem today, now that Oregon is widely known as “Nike U.” It was the “doormat” of what was then the Pac-10, said George P. Pernsteiner, who was the state’s associate vice chancellor for higher education at the time.

But the Ducks had recently appeared in their first bowl game in a quarter century, beating the University of Tulsa Golden Hurricane in the Independence Bowl. Oregon’s gridiron success had excited students and alumni alike, and Bill Byrne, the athletic director, was pushing the university to invest in a new workout facility to attract top recruits. If Oregon could field competitive sports teams, maybe it could attract Californians looking for both academic excellence and tailgating every Saturday in the fall.

Michael H. Schill, Oregon’s current president, has called athletics the university’s “front porch,” the welcome mat for prospective applicants. Even for students for whom sports is not a major reason for attending the university, the Ducks are frequently their introduction.

“Being flashy at sports,” said Chris Sinclair, an associate professor of math who is president of Oregon’s faculty union, “is a mechanism for attracting out-of-state students.”

Oregon isn’t alone in this approach. Other institutions, like the Universities of Alabama and of Florida, have also attracted a national student body in part by promoting a college experience with sports at its core, said Willis A. Jones, an associate professor of higher education at the University of South Florida who studies college athletics. “Colleges justify paying $5 million to a football coach,” he said, “by talking about the returns in prestige, in alumni giving, in attracting students.”

Drawing the line between cause and effect is tricky, but it’s clear Oregon’s student body changed. In a single year, 1992, the number of Californians enrolled there doubled. By the mid-1990s, four in 10 students were nonresidents, now nearly half are from out of state.

Jamie Lusch, Mail Tribune

Pernsteiner, who went on to become chancellor of the Oregon University system, was initially skeptical of the returns of investing in athletics. But he recalls attending the Holiday Bowl in 2000; by then, an Oregon bowl game was pretty much an annual event. Oregon lost, but the couple sitting next to him had a good time, he said. The next day, they pledged $1 million to endow academic scholarships for students. “People write checks,” he said, “when you engage with them through football.”

Phil Knight, Nike’s founder and an Oregon alumnus, has been a generous donor to the university’s academics and athletics alike.

The pandemic has threatened all of that. There could be no hobnobbing in skyboxes or tailgating outside the stadium. As the fall season approached, across the country university leaders wrestled with a difficult choice, weighing disappointing loyal fans (and players, many of whom lobbied to take the field) with the medical risks to student athletes.

There was also the matter of the revenues associated with major college sports from television contracts, apparel licensing, and other sources. The Pac-12, in which Oregon competes, had total revenues of $530 million in 2019. The wealthiest conference, the Big 10, brought in nearly $782 million.

Still, in late summer, alarmed by reports of cardiac problems developing in otherwise-healthy athletes who had contracted the coronavirus, both the Pac-12 and the Big 10 decided not to play, only to backtrack weeks later, citing improved access to rapid testing. Gov. Kate Brown of Oregon had to give the Ducks an exemption to state restrictions on playing or practicing contact sports.

In a news conference after the Pac-12’s about-face, President Schill, who is the chairman of the group’s board of presidents and chancellors, said money didn’t drive the decision, which was unanimous. In fact, he said, the issue of television and advertising revenue never once came up during the deliberations.

Sinclair, the faculty-union president, isn’t convinced: “I have no doubt it was an economic decision.”

Schill said student athletes had told him they wanted to play. “Covid-19 has taken so much away from these students,” he said. “I didn’t want to take this away from them. And so if I could feel comfortable with their health and their safety, that we weren’t jeopardizing it, then to give them this ability to fulfill their dream was something I thought I should vote in favor of.”

Even so, classes at Oregon remained primarily online except for a handful of laboratory and studio sections.

College leaders have said sports have helped students hold onto a sense of school spirit in an abnormal year. Kristina Johnson, president of Ohio State University, which lost to Alabama in the national championship, told The New York Times that during weekly video chats she held with students “there’s at least one who said, ‘Thank you for bringing back football.’ And then you saw everybody else nodding and clapping. So it’s a big deal.”

Oregon, meanwhile, played in the Pac-12 championship game, replacing the University of Washington when too many of its players tested positive for Covid.

Across major college sports, at least 6,600 players, coaches, and athletic-department staff members have contracted the virus, the Times reports.

Hokyoung Kim for The Chronicle

The health risks have not been confined to the playing field. While many colleges limited the number of fans in the stands or banned them altogether, football game days may have accelerated the virus’s spread as students gathered for off-campus watch parties and tailgates. Despite the small number of students in face-to-face classes, when the Ducks’s Covid-shortened season finally began in November, more than 200 students were said to have crowded into a house party that weekend.

The challenge of student football gatherings vexed other universities, too. On one football weekend, unmasked Penn State students congregated in off-campus apartment complexes — which Eric J. Barron, the president, wrote was “reckless and irresponsible.” Thousands of people flooded Tuscaloosa’s streets in January after Alabama’s football team trounced Ohio State in the national championship, drawing rebukes from the mayor and a union representing campus staff.

Such concerns continue as pandemic fatigue sets in. Behavioral shifts, particularly social ones, require a major change for students, who for years have been recruited to their colleges based on perceived fit and cultural connection, said Brendan Cantwell, an associate professor and coordinator of the Higher, Adult, and Lifelong Education program at Michigan State University.

“It’s become a part of people’s identity, that they’re going to behave the way they’re going to behave. You’re asking them to violate who they imagine themselves to be, and that’s hard,” he said.

The potential for a season-ending pandemic was unimaginable when institutions like Oregon decided to embrace college sports. Still, says Pernsteiner, who is now a higher-ed consultant, “Would they be playing football during a pandemic today if they hadn’t gotten on that treadmill 30 years ago? I wonder that.”

Colleges began the fall with uncertainty, and ended it that way, too. After early semester spikes, case counts fell off, then ticked upward again. In counties where large campuses reopened to in-person classes, cases of the virus increased 56 percent, a Centers for Disease Control and Prevention study found; numbers decreased in communities when college instruction was largely online. Now the United States is in a second Covid winter with deaths near record highs.

For most flagship institutions, the feared enrollment crash did not come to pass, but college officials began the spring semester taking little for granted. Campuses invested huge sums in public-health measures — a survey by the Association of Public and Land-Grant Universities of about 20 flagship and land-grant universities found that those campuses spent a median of $7.5 million on testing, $2.9 million on social distancing, and $1.6 million on dedicated residential space for quarantine. But that might just be a down payment. As state legislatures gavel back into session, the budgetary picture ranges from bleak to grim.

With the pandemic stretching on, risk has become the new normal. Planning fatigue looms as a real vulnerability. And widespread vaccination, especially for college students, is a long way off.

In charting a path through Covid-19, the decisions of universities have been narrowed by their pasts. For college leaders, the hard choices aren’t getting easier.