Shared services: Consolidate or close?
Faced once again with state and federal funding cuts, Connecticut State Colleges & Universities system President Mark Ojakian has had to make some tough decisions to keep the 17-school system functioning.
His strategy of consolidation and shared services, called Students First, should save at least $41 million annually and bring much-needed fiscal discipline to a group of institutions that have remained autonomous since they became part of the Connecticut State system in 2011.
Students First proposals aim to address budget cuts without reducing the quality of education at the state’s 12 community colleges, four regional state universities and the online college, Charter Oak.
“We have asked students to bear a portion of the cost of their education through tuition and fee increases, but we cannot charge them the double-digit increases required to balance the budget without compromising affordability,” Ojakian says.
What is Students First and how will it help solve the economic crisis in Connecticut higher ed?
The whole purpose behind Students First was to take a look at our system, to take a look at our financial position within the system and the structural deficit, which has been accumulating over years.
We tried to come up with two strategies that would put us on a more sustainable and resilient path into the future so we wouldn’t have to continue to have conversations around significant tuition increases.
What are the two strategies?
I’m a big believer in putting everything on the table and then removing things as they don’t make sense. We discussed every option and came up with what I believe is a responsible way to move forward in the fiscal climate.
The first strategy is looking at consolidating the administrative functions around 17 institutions to provide more of a shared service model to all universities and colleges. Could we consolidate what is commonly referred to as back-office functions—information technology, purchasing and facilities management—to really try to save some long-term dollars?
The second strategy was consolidating the administration at our 12 community colleges. In a state the size of Connecticut, do we really need 12 separate administrations on 12 different campuses, especially when state funding is being reduced year after year? Our community colleges rely more on state funding than do our universities.
When their funding decreases, so does their ability to continue to operate in the same manner. If we just let budget cuts be passed through to institutions, then I’m afraid that over time we would dramatically reduce those student service functions that are already on life support in some areas.
You face a $35 million cut in funding this year, a projected $57 million cut the following year, and perhaps as much as $70 million in two years. Even with this strategy, won’t you always be playing catch up?
I believe that with the savings targets and with a much more sustainable and resilient system, you would see that structural deficit within the first three years disappear. You would have savings into the long term. What this also assumes across the two strategies is a workforce reduction of between 400 and 450 people.
Our system is very personnel dependent. Eighty percent of our system costs are personnel, and 95 percent of those personnel are represented by collective bargaining units.
By reducing the number of personnel you have in a system, you would reduce not only those personnel costs but the associated fringe-benefit costs, which increase every year as the cost of healthcare also rises. If things get worse and budgets are cut more dramatically, we are going to have to consider closing campuses.
Do you see closures as a real threat at this point?
I think I have a responsibility to look at every option and every scenario. If our budget deficit rises to $90 million in the first or second year, then clearly that needs to be a very realistic conversation. You cannot just close a campus and eliminate personnel.
You have to give a year’s notice in our system, so you would not achieve any savings in the first year. We have to look at other ways of closing a first-year budget gap, including the use of reserves, which are now very thin to begin with. We have to be responsible and look at every single scenario.
You’ve had a lot of support in the media for this strategy, but there has been some pushback from the faculty senate at one school. How do you respond to that?
Honestly, I was surprised by the faculty being unhappy with a plan that didn’t affect them and wasn’t looking to reduce their workforce at all. I respond by saying this is a strategy, not a plan.
The strategy has a savings target associated with it. We are putting together planning teams of all campus constituencies that will come up with recommendations on how this could be implemented across 17 institutions in the six functional administrative areas. Somebody needed to start the conversation and it has to start now.
We don’t have the luxury of time. As the CEO of this organization, I felt a responsibility to start the conversation. We fully intend to have people as part of these teams. The actual on-the-ground work will begin soon. I look forward to having everybody at the table as we move this forward.
In your Student First presentation to the regents you mentioned leveraging subject matter expertise across the system. What did you mean?
We have a lot of expertise at different institutions in different areas. For example, human resources. There are some campuses that do a better job of labor relations. There are some campuses that have better expertise in purchasing. We should be leveraging that expertise to be helpful to 17 institutions.
I like to periodically talk about the fact that our institutions purchase our goods and services in 17 different places.
Each institution had its own agreement?
I was shocked to learn that when I first came here. I said, “Why aren’t we using our bulk purchasing power to get the best pricing we can get?” Even with food service, why aren’t we putting out one RFP for all of our institutions, differentiating between residential and non-residential campuses?
We could get a vendor that would give us a much better price if we did things that way. It’s not to eliminate functions or personnel from campuses. We need to really do more to be a system and to achieve those economies of scale and cost savings that come with having 85,000 students, 17 institutions and 11,000 employees.
A big part of your strategy is boosting enrollment by changing perceptions about community colleges. What do you have in mind there?
We have to do a better job of marketing both the four-year and the two-year institutions. Besides the community college, there still remains this perception that going to a state university provides a lesser education than going to, for example, a private school. A lot of that is driven at the high school level.
There’s competition between high schools in terms of where they place their graduates in colleges. And, of course, there’s competition among parents about where their kids go to school. We’re going to embark on a totally different marketing plan.
We will be talking to superintendents and guidance counselor groups to try to get them to understand that not only is it a high-quality education but you can save a significant amount of money. With our Transfer and Articulation Pathway Program in place, you can start at a community college in 26 major areas of study, and move seamlessly to a state university.
That’s far less expensive than if you started at a state university and went all the way through, or if you went somewhere else and then transferred in. We have to do a better job of talking to our high school folks about this.
Tim Goral is senior editor of UB.