You are here

Budget Crises Create Opportunity

Embracing a chance for change during difficult times
University Business, Aug 2008

ONE OF THE MOST VALUABLE opportunities created by budget problems is the chance to put in motion some long-awaited changes for your college or university. These types of changes-even positive ones-can be difficult at any time, but they are often easier to accomplish in times of financial crisis because everyone recognizes that sacrifices must be made.

Still, it's important to be focused and selective, by first increasing revenue, then making the unavoidable cuts.

Surprisingly, most students would rather pay higher fees than see cuts made that directly affect them. So instead of simply reducing expenditures, first focus on revenue. Some potential sources of revenue include:

Across-the-board cuts are politically easier, but are not reasoned reductions.

--Fee increases. Such an increase can be considered if it is clearly relevant to the student and is not a general, across-the-board increase.

--Sponsorships. These usually take the form of targeted advertising and can be done in a tasteful manner that also creates a new partnership with possible future benefits.

--New enterprises. A variety of new college enterprises exist as possible sources of income. These vary depending on the specific programs and situations at each higher ed institution. The most important idea is to explore the variety of public-private partnerships, ranging from joint training programs to energy sources to joint-use enterprises.

--Real estate. Consider developing real estate assets-either by selling unused college land or by utilizing it to facilitate a public-private partnership or other enterprise, as mentioned above.

After fully exploring revenue possibilities, it is time to consider expenditure reductions. Be sure they are done in a manner that maximizes revenue. Too often cuts are made that do very little to improve the college's financial position because the resulting reduction of revenue is nearly as great as the reduction of expenditures.

Be a surgeon, not a butcher. Take your time in deciding where to cut, and how. Consider previously set priorities, and don't act in the heat of the moment. Making across-the-board cuts is politically easier, but unilateral cuts are not reasoned reductions. Try to reduce expenditures in a manner that makes the most sense for students and the institution based on recent experiences and data.

While considering which changes to make, keep in mind that the most effective changes result when student demands drive the decision-making process.

For instance, when cutting course offerings the goal is to keep enrollment as high as possible by simultaneously increasing the average class size. How might that be accomplished? By preserving-or even increasing-the number of general education introductory sections and decreasing the number of specialized classes.

This option is not without potential conflict. At most IHEs, the student demand is for more introductory classes. On the other hand, faculty typically want to teach more specialized classes in order to broaden the curriculum. While this argument has merit, it cannot be maintained on a large scale during tough financial times.

Instead, the introductory courses need to be preserved and the specialized courses either placed on hiatus or offered on a rotational basis (once per year or once every other year). This is reasonable as long as the dates of the offering are published so that students can plan accordingly and any transitional problems are handled.

--Align the timing of course offerings with maximum student demand. Take into account the time and day a course is offered and the coordination of that course with companion courses. Just as discrimination must be used within a discipline, the same level of critical analysis must be used between disciplines. Not all disciplines should receive the same level of cuts.

--Make smaller cuts to disciplines with greater demand and larger average class sizes. A discipline that doesn't have adequate student demand to sustain it may need to be cut altogether.

--Keep in mind that budget problems are temporary. Carefully consider the ability to resurrect any cuts made now. Focus on cuts with effects that can easily be reversed. For example, it is much easier to resurrect summer and winter intersession enrollments than it is to reinstate enrollments in the primary terms. Why? One reason is that intersession is frequently attended by students from other institutions who do not plan to attend a primary term. Therefore, their loss has no carryover effect. In addition, while primary-term students may be disappointed about intersession reductions or cancellations, they will be back for the next primary term and, in fact, are the base for the next primary term. If primary term enrollments decline, the college is already "in the hole" for the next term, and it can snowball into an enrollment decline.

--Be most careful when cutting positions. Midyear cuts of full-time personnel and the layoff of permanent employees should be done with extreme caution. It is possible to decrease part-time and hourly personnel immediately and then plan to secure larger reductions as the upcoming annual budget is prepared. If the following year's budget reduction is significant enough, full-time positions can be reduced through a planning process. Laying off permanent employees destroys morale. In addition, the institution will never be able to rehire the best employees because they will have found jobs elsewhere. In other words, while the budget problem may be temporary, the loss of some of your very best employees may be permanent. In lieu of laying off employees, consider a hiring freeze and/or hiring deferrals instead.

Rocky Young is the chief consultant of the California Collegiate Brain Trust (CCBT) and the recently retired chancellor of the Los Angeles Community College District. To learn more about the CCBT, visit