We, at the Association know what is going to happen to most of US colleges many years ago.  In particular, to those who have not applied data-driven in their decision making process.  We have tried hard to share this new knowledge to the college administrators. It pretty sad, that for whatever reasons, decision makers are less eager to make changes in their organization.  Making a change (singular) is hard.  Therefore, more likely making changes (plural) are even impossible.  Especially, if the changes will touch sensitive issues such as the campus culture.  In the free-market world, there are rewards and unfortunately the opposite of them as well.  As the resources get squeezed, then one will expect there will be more unfavorable impacts will occur on higher institutions such as what has just happened at Chicago State University.  The first step that these institutions can do in the new sea of competitions and limited resources is to have a team of IRI analytics, data scientist, data miners or big data experts. The traditionalists may look at the past, but the IRI analytics enables one to see the future and beyond.

We recently learned that on Friday (04/29/2016) Chicago State University has laid off 1/3 of its staff due to a budget shortfall.  About three years ago, the Association has shared its research finding which shows the potential financial risk facing higher education institutions in the US.  Below is the CSU’s financial performance as measured by institutional revenue V. expenditure metrics.  The dotted blue line shows the closure risk facing the institution over time.

When resources are getting smaller, one will expect many changes will happen in an industry or an organization.  This is exactly what has happened in the US higher education industry.  Three years ago, the Association has reminded all players to be prepared for what are coming their ways.  Perhaps only a handful is listening or even believe what the Association has tried to convey.  An obvious adjustment that has been taken place on college funding at the state level is the new state funding model known by many as Performance Based Funding.  In this model the pie will be divided based on college rankings.  More and more states in the country have applied such an approach to allocate the budget among state colleges.  Most states will use several measures and then use these yardsticks to rank colleges or universities in the state.  Institution with higher rank will be awarded more money than those in the lower one. The impacts are significant, especially on institutions which are ranked lower and got their budget cut.  Staff layout or salary freeze are the most common impacts of such application of this new funding.  How can an institution survive the new game of state funding?

A couple of years and restated again about a month ago, the Association has mentioned the culprits behind the college cost skyrocketed.  One of the factors is the adoption of out-dated tenure system.  This system has kept driving the college operational cost up.  Among so many policy changes that the US colleges can do to reduce the financial burden of American public and tax payers is to move away from this unbreakable labor contract which does not fit in the new economy.  Tonight we learn that Wisconsin has chosen to move away from the old mindset.  In the long-run residents in that state will expect to see the college tuition to go down as what has happened in the state of Washington.

It is truly funny to read the news that an administrator is trying to convince the regulator to agree on her or his budget proposal.  Even though there are evidences which show that colleges have to streamline or downsize.  However, some college administrators are still did not see it.  Of course the easy ways are to beg the state to increase the funding and if that does not work then pass the budget increase to the students.  But folks have to realize that there are many other ways than begging to deal with the new reality.  Unfortunately, this administrator is still using the old paradigm, instead of the new mindset in managing colleges in the US.  If one still has time, why not start downsizing by applying the LEAN and ABC costing.  Unfortunately, others as AAEA has predicted do not have time, but closing their campuses.

Please let us know what do you guys think on college education cost increases by clicking the following link to participate: Survey

Survey results will be shared to members of both US Senate Committee on Education and Workforce.

By now the American public is convinced that US higher education system is broken, except those who are at the Brookings Institute. The question that one has is what next?  If we know something is not right, how then we can fix it or make it better?

One needs to look at the history how long the system has been built.  It may well over 375 years (Harvard was founded in 1636).  So, the current system that we all know has evolved over a long period of time.   Perhaps, one may need at least as long as the same length of time to rebuild the whole system and keep it on the right path again.  Can the US wait over 375 years to get the entire system fixed?  Or can the country take drastic changes to accelerate such corrections?  The answer is yes.  This is exactly what the regulator is trying to accomplish through the CAR and a more aggressive financial audit toward for-profit colleges which has been conducted in more recent months.  As results of the policy shift, American public learned one after another which of these institutions are facing liquidity problems and potentially will be diluted and wiped-out from the competitive map.  There is a great chance that this financial and compliance audit will be expanded to any Title IV institutions (that have received the federal funding) non-profit private or state owned.

Whatever the remedies are, one basic principle that can be used to achieve such goals is to apply the core-competence paradigms.  For extreme example is that it probably rather odd to have an institution in Arizona or Utah to run an Oceanography program.   Even though it could, the question is how efficient and effective that program will be?  US colleges need to ask themselves, what are their strengths and how can they sustain in the long-run based on their own strength, and not from other unsustainable sources such as alumni contribution.  State regulators need to relocate the budget and funding based on the current reality!  Since resources are getting more limited, they should not be stretched across different institutions.  For example, Community Colleges (CC) can concentrate to offer the General Education (GenEd) and trade classes, while the four-year institutions within the state might be able to offer junior and senior classes as well as more specialize courses, but not to repeat offering the same GenEd classes.  Eliminating the same courses will surely cut unnecessary expenses which otherwise could be spent to support the two-year institutions.  The cost saving from implementing such a policy can be allocated to fund CC program so that the tuition can be reduced and if possible with no cost.

The public needs to be aware that what is happening currently is just the tip of the iceberg.  Therefore, appropriate actions need to be done.  As the industry undergone this important stage, there will be unintended short-run consequences that go along with it on many areas such as employment, college culture, required skill sets, new ways how to manage higher institutions, type of offered courses, payment scale and other infrastructures.  Most higher education institutions are caught by surprise on the magnitude and speed of current changes that are happening.  However, some institutions may not even realize such changes are occurring and if they are, they still do not know what and how to react.