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Growing number of higher ed institutions under financial stress

The Hechinger Report is issuing new concerns over the nation’s higher education institutions. According to the group, more than 500 US colleges and universities are exhibiting signs of financial stress. The report used data collected before the pandemic to assess each institution’s relative financial picture.

The report identified areas of potential financial stress, including State Appropriations, enrollment, average tuition, and student enrollment. The tracker, which can be found here, did not identify WCC as being under financial stress.

Clearly, however the tracker doesn’t take an institution’s full financial history into account. In WCC’s case, fall enrollment is not stable, yet. In addition, there’s been no consensus on higher education funding for the upcoming fiscal year. The Legislature is informally telling institutions to prepare for cuts in state appropriations of between 10%-30%. Michigan institutions must start the fall semester before the State begins its fiscal year in October.

The report cited several practices that could result in financial stress, including mismanagement of funds and carrying too much construction loan debt. In 2016, Time Magazine reported that construction loans at the nation’s community colleges increased by 76% between 2003 and 2012. Most community colleges that borrowed money did so to finance new construction.

Borrowing can have a significant, destabilizing effect on an institution’s finance, especially when there’s little clear need for the project. WCC’s loans to build the Health and Fitness Center were part of the borrowing boom Time Magazine referred to. The loans have resulted in enormous diversions from WCC’s operating budget, even though the College has a mechanism to seek a separate tax stream to finance construction. In WCC’s case, the diversions are not just to pay the loan debts, but also to address the building’s enormous maintenance costs.

Stay tuned.

Photo Credit: Radcliffe Dacanay , via Flickr