Regional public universities face challenges
Enrollment, funding, and competition all squeeze regional universities. From Lynn O'Shaughnessy, writing in CBS MoneyWatch.
Expenses are outpacing revenue growth at many public universities, an unsustainable trend, concludes a new report by Moody's Investors Service that focuses on the health of the nation's public universities.
During the 2012 fiscal year, revenue gains didn't surpass inflation at half of public universities, the credit rating agency found. Median revenue growth was 1.7 percent, while median expenses increased 3.3 percent.
As the Moody's report makes clear, there are winners and losers among these schools. The public flagship universities are better able to leverage their brand names and economies of scale to minimize their financial risks.
Unlike most state universities, prestigious institutions such as the University of Michigan, University of North Carolina, University of California-Berkeley and University of Virginia can attract out-of-state residents willing to pay high prices to attend the schools. The report noted that nonresidents typically pay more than twice the rate of in-state students. . . .
By contrast, the fiscal news isn't going to get better for many public universities as they face numerous challenges, including:
- Enrollment of full-time students has been essentially flat while some regional universities are experiencing declining enrollment. One reason for the weaker demand was a reduced interest in graduate-school programs.
- State universities are getting pressure from the growing popularity of online educational programs that are aiming to disrupt the higher-ed world just as the Internet disrupted the world of traditional media.
- Endowment returns were flat at a median 0.2 percent, well below the typical endowment withdrawal rate of five percent to support operations.