Virtually every college in the U.S. is facing large revenue declines this year and next from the impact of COVID-19: lower tuition revenues, smaller subsidies from state governments and private donors, less investment income. Ted Mitchell of the American Council of Education guesses enrollment declines will average 15%; declines will probably range from zero at some elite selective admissions schools to 25% or more at others. I think 500-1000 institutions will be pushed into bankruptcy or face-saving mergers; many were already in troublecollege enrollments have been falling since 2011.
Here are six low-tech things schools can do to survive the pandemic. At most schools, a huge portion of budgets are for workers, and four of my suggestions reduce labor costs; the other two involve physical assets. The goal is to conserve funds through more efficient deployment of generally underutilized resources.
First, furlough faculty and staff. Although typically paid to work year-round (administrators) or nine months (faculty), many in fact are idle on some days when they are paid to work. Faculty, for example, may teach Monday, Wednesday and Friday, but not show up on campus on Tuesday and Thursday. Do what the University of Arizona is doing, furlough them for maybe one day a week for the academic year, implying perhaps a 15% pay reduction. Tell faculty: we have lowered research expectations from youone less annual article in the Journal of Last Resort is acceptable. But you may have more classes on teaching days.
Second, dismiss staff. There has been a huge increase in administrative bloat on campusesindividuals neither teaching nor doing research. Get rid of a lot of thempermanently. The same applies to a much lesser extent to faculty; the anticipated enrollment dip is probably not permanent, and many faculty have tenured appointments.
Third, cut pay. A lot of employees are collecting what economists call economic rentspayments beyond those necessary to secure their employment. Tell them, we cant afford to pay you X; you can either be dismissed or agree to work for a lesser amount, 80% of X. Unlike with furloughs, this is a permanent cost reduction.
Fourth, sell assets. Universities own vast physical assets having nothing to do with Job One, creating and disseminating knowledge: dormitories, dining halls, conference centers, athletic facilities, even aircraft. Sell them to private investors, or sell the revenue stream from them. Universities have no expertise or need to be in the food and lodging businesses. For universities with medical schools: should you sell your hospitals and largely get out of administering health care facilities, still allowing students to learn in clinical settings?
Fifth, downsize college athletics. Most schools lose sizable sums supporting ball throwing and other contestsmore than $20 million annually ($1,000 per student) at my university. Downsizego to less expensive forms of competition, like dropping to a lower NCAA division in football. Smaller teams, fewer and less expensive coaches, fewer games, no post-season contests. Kids can still have fun, competition can still be fierce between rivals, alumni can still enjoy themselves.
Sixth, cure the Edifice Complexstop constructing new buildings. Although colleges typically spend too little on deferred maintenance, they lavish funds on new buildings. Enrollments have been falling while square footage colleges maintain has been rising. At most schools, a building moratorium for multiple years is highly desirable.
There are many other things schools can do, specifics varying between institutions. Those with overseas study programs and facilities: should you outsource them more to others? Schools with branch campus facilities: can you eliminate some of them, relying on online instruction more and consolidating residential experiences to fewer campuses? With ultra-low interest rates, can you refinance campus indebtedness? Should you move to year round teaching to better utilize facilities? Can modestly paid student employees instead of expensive adults mow the grass, serve food, and paint buildings?
Many schools should closethey are losing their appeal and often offer mediocre quality. Creative destruction can be a good thing, as Joseph Schumpeter once told us. But for most schools, this crisis is an opportunity to do the previously politically impossible: reform educational delivery to make it more efficient, cheaper, and hopefully even better.