Financial Health at Baccalaureate-Granting Community Colleges in the United States

• In Event: Examining Community College Baccalaureates (CCBs) as Tools for Social Mobility and Equity

Abstract

Community colleges have been historically underfunded. As they strive to meet the myriad needs of their students and communities, including broadening access to bachelor’s degrees, those resources may be strained. Indeed, research suggests CCB adoption can significantly alter institutions’ financial contexts (Wright-Kim, 2022, 2023). The purpose of this study is to leverage newly collected metrics to describe the fiscal health of U.S. community colleges and the potential influence of CCB adoption thereon.

We situate our analyses in the broader context of colleges’ fiscal stability (e.g., McClure & Friar, 2020). One key metric of institutional fiscal health is the Composite Financial Index or CFI (Wekullo & Musoba, 2020). The Composite Financial Index (CFI) is a weighted index comprised of four separate ratios: the primary reserve ratio, viability ratio, return on net asset ratio, and the net operating ratio (Tahey et al., 2016). As a whole, they measure an institution’s relative financial status, including their flexibility, ability to cover outstanding debts, and whether the school is operating within its financial means.

Similar to prior research (e.g., Hearn & Burns, 2020), we leverage descriptive and fixed-effects regression-based methods to estimate the association between CCB adoption and various measures of fiscal health, controlling for a range of other factors (e.g., institutional size, relative state support). We include lagged models to account for documented delays in financial shifts at colleges and universities. Expanded analyses are currently underway to examine additional metrics of fiscal health over a longer time horizon (2011 to 2021) for the community college sector due to data limitations on CFI variables (i.e., collection during pandemic years).

This study relies primarily on fiscal metrics pulled from the Integrated Postsecondary Education Data System (IPEDS). We utilize prior research and the Community College Baccalaureate Association’s Inventory to identify baccalaureate-granting community colleges (CCBA, n.d.). Utilizing new IPEDS financial health variables for FY 2020 and 2021, we examine the health of 927 community colleges, including 135 CCB-granting institutions.

Results suggest that, on average, CCB-granting institutions score lower on the CFI than their peers, though both groups meet the minimum standard for fiscal stability (>3, Table 1). However, preliminary regression modeling suggests no significant negative associations between fiscal health and CCB adoption (Table 2). Alternatively, the 1-year lagged model identifies an increase of 0.880 in an adoptive institution’s CFI, due in part to the institution’s ability to cover expenses and long-term debt with current assets (PRR and VR, respectively).

This study presents the first attempt at using newly collected metrics of institutional fiscal health to explore the financial stability of the community college sector, with a focus on baccalaureate-granting institutions. Despite identified impacts on institutional pricing and spending, these results suggest CCB adoption is not necessarily associated with a decrease in institutions’ overall fiscal health. Though preliminary, this suggests concerns on the ability of community colleges to weather the financial strains of baccalaureate education are less warranted.

Author

• Jeremy Wright-Kim, University of Michigan