Playing For Time

Buck Goldstein
Entrepreneur in Residence and Professor of the Practice UNC-Chapel Hill

It’s a strange time to be teaching. I am hundreds of miles from my campus in Chapel Hill, and it couldn’t matter less. The phenomenal guest speakers we’ve welcomed to class this semester have beamed in from all over the country, and the seminars are still rich and fascinating. In fact, it may be the golden age of guest speakers, since nobody has to get on a plane or grimace their way through a cocktail reception to make a campus visit. Hard to imagine any previous semester when we could have welcomed Michael Eric Dyson on equity in the academy; Sue Dynarski on fairness in admissions; Holden Thorp on science and democracy; and Angus Deaton on economic fairness, among many others. Technology really is magic sometimes.

Yet for all the Zooming novelty of this moment, there’s no escaping the reality that Rome is burning. Without federal intervention that is fiscally responsible and politically doable, major pieces of this country’s higher education infrastructure are about to be incinerated.

Universities everywhere are getting dressed for the apocalypse, gaming out budget scenarios that would have been doomsaying just a year ago. Whole departments and majors are at risk; furloughs, layoffs, and salary reductions are just the opening bid. My home institution managed to keep enrollment stable in the fall, but most of the sector wasn’t so lucky. Clearinghouse data so far suggests first-year declines on the order of 16 percent nationwide—a devastating blow to colleges, and a long-term gut punch to the national economy.

And that’s before the all-but-assured government funding squeeze takes hold in the semesters to come. Absent federal intervention, the public institutions that provide the bulk of higher education in this country are set for a blow that’ll make 2009 look like a fire drill.

For the time being, we should focus on short-term actions that help stabilize the environment and buy time to consider a more fundamental change. This is about creating a temporary bridge to fiscal stability, available to non-profit institutions in both the public and private sectors, so they have the room to make genuinely hard decisions about how to restructure for a post-Covid world.

Higher education remains the crown jewel of American society and, notwithstanding unprecedented political attacks, the science it provides has been central to the world’s response to Covid-19. Panicked cuts right now would be a disastrous self-inflicted blow; we need enough stop-gap measures to sculpt something new rather than just hack away.

Here’s how we might do it:

A new federal loan program. Between a third and a half of American colleges and universities may not survive COVID-19, felled by a combination of pre-existing conditions and horrible luck. Only the feds can provide the life support to head off that kind of mass casualty event, and it should be included in the next COVID relief package. At a time when the Fed is backstopping junk bonds and Congress is providing aid to everyone from the airlines to corner bistros, it shouldn’t be hard or controversial to provide favorable loans to both public and private institutions. They could even tie the aid to long-sought reforms, reducing principal if the borrowing college increases the number of Pell-eligible students admitted during the life of the loan.

Waiving gift conditions. A common response, especially among faculty, to the fiscal crisis facing most schools is to tap endowments. The problem is that endowments are not structured as rainy-day funds — most gifts are made pursuant to detailed agreements that limit the use of funds to very specific purposes. Moreover, since only income from endowed funds is expendable (typically 5%), even a large endowment doesn’t yield an enormous pile of cash to meet an immediate financial crisis. Universities should explore a simple opt-in program where donors would waive gift conditions for two years so that endowment income can be used for survival. There’s no sense in topping up a scholarship fund for left-handed softball players from Catawba County if the whole college goes bust, so let that money flow to more urgent priorities for the next 24 months.

Cutting salaries and retirement benefits. A number of schools have already reduced the salaries of top-earning employees and implemented a short-term moratorium on retirement contributions. Duke University achieved savings of between $150 and $200 million with that approach, and Georgetown saved $47 million with a temporary halt to retirement contributions for senior employees. Beyond the financial benefits, this flavor of cost-cutting demonstrates a willingness on the part of the academic community to shoulder some real financial pain, making it easier to appeal to donors and policymakers for much needed financial assistance.

Eliminating non-essential activities. The easiest and worst impulse in a financial crisis is to cut across the board — to make the whole institution 5 or 10 percent worse at everything it does. The harder route is to make real decisions, to focus on the activities that are core to the mission while reducing or eliminating those that are not. Almost all universities fund extensive non-academic capabilities in areas such as compliance, risk management, communications, development, and athletics. Some of those areas—notably athletics— have already implemented major cost reductions by temporarily suspending some programs or reducing salaries and furloughing personnel. For many schools that subsidize athletics, now might be the time to think hard about the value of those subsidies.

Every school has academic centers and other ancillary initiatives that have existed for decades and are only marginally productive. This is the moment to make choices that would have been politically unpalatable in happier times but are wholly necessary now. Eliminating whole arenas of work will have adverse long-term consequences, but in a situation where there are no good choices, you have to protect the things that are vital to successfully opening the campus in the spring and next fall.

Most of us who work in academia are here because teaching, life-changing research, and the chance to build a better society are more important than accumulating wealth. Achieving those goals gets harder when the resources for long-range thinking and discovering get thinner. Our predicament is disheartening but for now, we must take the hit to get a few semesters of breathing room. Then the really hard work begins, as we begin to imagine what it means to be a great American college or university in the 21st century, what role higher education will play in the uncharted waters of a post-corona world.


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