External pressures are placing many higher education institutions in a precarious position. Demographic projections indicate that, in most states, there will be a decreasing number of high school graduates from which to recruit new college enrollees. Declining enrollment portends a decrease in tuition revenues, the primary source of institutional revenues in about half the states. The other major source of revenue for public institutions—appropriations from state and local tax receipts—is notoriously volatile and undependable. Stimulus payments from the federal government saved many institutions from disaster during the pandemic, but that source of funds will soon disappear. These environmental conditions will push numerous institutions closer to the brink of fiscal sustainability. States will be reluctant to pay more and more to serve fewer and fewer students at these struggling institutions. Students will be unwilling (or unable) to pay tuition at the higher rates that would be needed to make ends meet at these colleges and universities. Worth noting is that these conditions have few recent historic antecedents; the expected demographic changes come on the heels of nearly three decades of reliable growth in demand from traditional student populations. Higher education institutions and their leaders, as well as state policymakers, will be in largely uncharted territory, without a playbook of ready responses on which to draw.
Confronted with these realities, policymakers will be tempted to leap to one of two solutions—close the institution or merge it with another, more fiscally viable, institution. Both of these solutions have serious flaws. Closure may solve the short-term financial problem—although there are substantial, likely underappreciated, costs associated with closure—but the solution comes at the expense of opportunity for students and economic stability for affected communities. The institutions most likely to be vulnerable in this climate tend to enroll vulnerable populations; they almost always serve low-income, first generation, and minority or rural populations. For many of the students attending these institutions, closure translates into “not going to college.” And in spite of the fact that they are struggling, they often are the largest employers in their communities; closure is an economic dagger to the heart.
Mergers also come with negative features that must be astutely managed if the anticipated benefits are to be realized. While a merger means a greater likelihood that the physical presence of an institution in the community will be maintained and students will be served, there will also be substantial costs, both tangible and intangible. Experience indicates that it takes several (even many) years to integrate institutional policies and develop a common set of procedures. It takes even longer to develop a common institutional culture, one that allows decisions to be made on the basis of common understanding rather than formal processes. The institution that is essentially “taken over” will likely lose its identity and the goodwill attached to that identity. Alumni, in particular, will be affected by the merger and likely be reluctant to support an entity to which they have no strong and positive emotional ties with their time, their talent, or their wealth.
There are alternatives to these two extreme positions, alternatives that preserve the good features associated with sustaining a struggling institution while directly addressing the factors that created threats to its financial viability. Rather than a merger, it is possible that the students and communities served by a given institution would be better served by establishing “strategic alliances” with one or more other institutions. Such alliances allow institutions to work together to mutual benefit while maintaining their independence. Shared services arrangements are good examples of such alliances. They have the benefit of being adaptable to specific needs while protecting the autonomy of the participating institutions.
The most typical shared services arrangements involve collaboration on the operation of administrative functions—purchasing, risk management, payroll, accounts payable, legal services, etc. Centralized back-office operations are common in formal university systems, where functions are performed by the system office for all (or most) institutions in the system. In the absence of a formal system, there are emerging examples of such arrangements among institutions that are independently governed. The Collaborative for Higher Education Shared Services (CHESS), an arrangement among community colleges in New Mexico, and the University Shared Services Enterprise (USSE) that serves most of the public four-year universities in Oregon are among these voluntary arrangements.
There are similar arrangements involving institutions working together to share academic courses and programs. The Council of Independent Colleges (CIC) and the Associated Colleges of the Midwest (ACM) have long-standing arrangements that allow students at member institutions to access courses taught by other institutions in the consortium. A recent announcement by Antioch and Otterbein (with an invitation to other institutions to join) describes both the nature of their strategic alliance developed for purposes of sharing courses and the process they followed in selecting each other as partners. A consortium of HBCUs and other minority-serving institutions, both public and private and organized under SREB, have recently announced a partnership to share courses aimed at better ensuring students can complete programs in a timely manner.
The important message in these examples is that such alliances can be formed as grass-roots initiatives without the impetus of formal system structures. Other lessons learned from these arrangements are that:
Perhaps most important, these shared services arrangements point to solutions to problems that can be accomplished without resorting to mergers or closures and the complications that come with these all or nothing solutions. NCHEMS continues to refine the ideas included in this blog through both additional conceptual work and the application in development of policy recommendations in Virginia, Oregon, Texas, and elsewhere.
