Wednesday, July 22, 2009

Rediscovering Financial Sustainability: Innovate or Decline

In our blogs on “Will Higher Education Be the Next Bubble to Burst?” we introduced the notion that two forces had collided: 1) the continually rising relative cost of American higher education and 2) the diminishing capacity of learners and families to afford higher education.

In this blog we shall further explore ways in which elements of US higher education’s funding models and performance are unsustainable. What are the various facets of unsustainability?

• McKinsey reports that the persistent gap in academic achievement between children in the US and their counterparts in other countries deprives the US economy of as much as $2.3 trillion dollars in economic output in 2008. This is a tremendous drain on our international competitiveness and cannot be sustained in the face of global competition.

• The high attrition, failure, and remediation rates in American high schools and colleges are wasteful and unsustainable; in many American community colleges, even those being fed by “high performing” school districts, it is not uncommon to see rates of students requiring remediation in the range of 60-75%. This wasteful “redoing” of what should have been achieved in high school is unsustainable.

• Retention rates at American colleges and universities vary dramatically, but are very high in many institutions, representing a waste of effort and resources; institutions with serious retention improvement programs have demonstrated these rates can be improved substantially.

• Public universities have gone through a roller coaster ride of budgetary ups and downs, achieving new funding during good economic times, then experiencing mid-year rescissions, cutbacks, and retrenchment during periodic recessions. This repeating cycle has completely disrupted consistent funding and the nurturing of innovations and initiatives that might change institutional practices and performance. These cycles also have diminished enterprise capacity and sapped the energy of institutional leadership. This model is unsustainable.

• Public financing of higher education continues to decline as a percentage of state budgets; public institutions’ support from state appropriations as a percentage of their total budgets has declined to 10-15% for many flagship universities. Many of these institutions have accepted lesser funding to achieve greater flexibility in setting tuitions and other measures that would establish for them greater sustainability and predictability in budgets.

• On an enterprise level, higher education and health care institutions have used technology in ways that often raise the overall cost of service. Even successful innovations, like the efforts of Carol Twigg at the National Center for Academic Transformation (NCAT) to reinvent course practices using technology, resulting in dramatically reduced cost and enhanced performance, have not been replicated at scale across institutions. This sort of failure to elevate innovate to the enterprise level is unsustainable.

Financial sustainability requires innovations that improve and eliminate exist disparities in access, affordability, and success. This will requires significant changes in practices across PK-20.

Lifting out of recession is fundamentally about two things: 1) building competitiveness for the post-recession world and economy and 2)rediscovering and maintaining financial sustainability. These two factors are intertwined.

Tomorrow's blog will present insights gleaned at the Annual Conference of the Society for College an d University Planning.

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