Vulnerable, Fragile, and Endangered? Examining the Financial Health and Survivability of Public Regional Comprehensive Universities

• In Event: Recasting the Study of Legitimacy, Equity, and Resilience Through Regional Comprehensive Universities

Abstract

The combination of rising costs and falling enrollments leads to questions about the financial health and survivability of public RCUs, and whether they should be closed or reorganized (Goldman et al., 2018). Observers have recently described RCUs as “vulnerable” (Taylor & Cantwell, 2019), “fragile” (Archibald & Feldman, 2018), and “endangered” (Gardner, 2017). A recent book asked, “can [the RCU] survive?” (Schneider & Dean, 2015). However, these recent assessments of the current state and long-term survivability of public RCUs are often based more on perceptions of these institutions than empirical evidence.

This paper has a two-part purpose. First, the paper collects and reviews available literature on institutional closures/mergers, financial health, and risk assessment to develop a novel framework for analyzing institutional survivability in higher education. In addition to literature, this framework draws upon several existing approaches to analyzing institutional financial health, including 1) the State Higher Education Executive Officers Association’s handbook for monitoring and assessing financial health and risk in higher education; 2) the U.S. Department of Education’s Financial Responsibility Composite Scores; and 3) credit ratings from Moody’s, Standard and Poor’s, and Fitch. Based on the literature, the framework includes more than just financial variables and considers state political partisanship and leadership turnover. The framework identifies the main factors and accompanying metrics for evaluating the financial health and survivability of a college or university.

Second, the paper applies this framework to examine the financial health and survivability of public RCUs. The first stage of this application requires calculation of several industry-standard metrics of institutions’ solvency, resources, and tuition dependency. These metrics, including the primary reserve ratio, net operating revenues ratio, return on net assets ratio, and viability ratio, are used to determine the Composite Financial Index for all public RCUs. The second stage of this application draws upon finance variables from the Integrated Postsecondary Education Data System and multiple existing analyses, including cost-efficiency indices (Titus, Vamosiu & McClure, 2016) and interviews with RCU executive leaders (McClure, 2018; McClure & Eppenstein-Anderson, 2018) from prior research. The result of this two-stage application is a sector-wide analysis of financial health and survivability.

This paper is significant because it offers empirical evidence of the financial health of public RCUs to ensure policy and scholarship are not driven by perceptions and anecdotes. Although recent assessments suggest public RCUs’ future is in question, the results of this paper can paint a more nuanced portrait, identifying both financial vulnerabilities as well as sources of resilience. This analysis may point to particular states and institutions that require attention more so than the entire sector, and it may help to craft appropriate policy interventions that support that long-term survivability of public RCUs.

Author

• Kevin R. McClure, University of North Carolina - Wilmington