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Declining student numbers, funding reductions, rising personnel costs and policy changes at the state and federal level pose the biggest financial risks to institutions, according to Inside Higher Ed<\/em>\u2019s recent annual survey of chief business officers with Hanover Research. Those issues are consistent with an overall threat to higher education: that federal policy and economic uncertainty are stressing a sector already teetering on enrollment and demand cliffs.<\/p>\n Yet underneath those challenges lies another, less headline-grabbing danger: delayed upkeep and repairs to infrastructure and assets. <\/p>\n Inside Higher Ed<\/em>\u2019s 15th annual Survey of College and University Chief Business Officers was conducted by Hanover Research. The survey included 169 chief business officers, mostly from public and private nonprofit institutions, for a margin of error of 7\u00a0percent. The response rate was 7\u00a0percent. A copy of the free report can be downloaded here.<\/p>\n On Wednesday, Aug.\u00a020, at 2\u00a0p.m. Eastern, Inside Higher Ed<\/em> will present a free webcast to discuss the results of the survey, with experts who can answer your most pressing questions about higher education finance\u2014including how to plan effectively amid the current financial and policy uncertainty. Register here.<\/p>\n One in three surveyed CBOs (36\u00a0percent) identified infrastructure\/deferred maintenance costs as a top financial risk to their institution, just behind state and\/or federal policy changes\u2014and ahead of options such as technology investment requirements, increased market competition (including from alternative credential providers), potential changes to international student enrollment and changes in student athletics revenue and name, image and likeness deals.<\/p>\n Most CBOs also say they\u2019re at least moderately concerned about their institution\u2019s ability to fund deferred maintenance and facility needs, with 11\u00a0percent extremely concerned and another quarter (25\u00a0percent) very concerned.<\/p>\n How bad is the problem? Just 1\u00a0percent of institutions represented were on track to fund no deferred maintenance in the then-current fiscal year (the survey was live in April and May). But another 63\u00a0percent were only poised to fund up to a quarter of identified needs. This is consistent across public and private nonprofit institutions. <\/p>\n By institution type, public doctoral university CBOs were most likely to report funding a quarter or less, at 89\u00a0percent. Community college CBOs were least likely to report this, at 44\u00a0percent. Still, just about a third of community college CBOs expected their institution to fund more than half of identified needs.<\/p>\n<\/p>\n Across higher education, deferred maintenance needs span aging HVAC systems, roofs and dorms; buildings in need of rewiring; and more. Technical deferred maintenance, such as addressing choppy Wi-Fi, is another concern. These aren\u2019t the flashy projects that attract donors or drive capital campaigns (exceptions notwithstanding). But they matter in terms of curb appeal and functionality. Prospective students notice the state of facilities. Dingy classrooms and buildings are current students\u2019 learning and living conditions, and employees\u2019 working conditions. Deferred maintenance may translate to safety or accessibility issues (think sidewalks and elevators). And problems only compound over time, meaning deferred maintenance can\u2014and does\u2014escalate to larger, costlier repairs.<\/p>\n Richard G. Mills Jr., president and CEO of United Educators, a liability insurance and risk management services provider, said that underfunding depreciation has \u201clong been in the bag of tools that institutions will turn to in times of financial stress.\u201d It\u2019s never been a \u201cgreat practice,\u201d he continued, \u201cbut I understand why it happens, and there is even an argument that in the past era of growth\u2014in endowments, tuition, philanthropy and student population\u2014it wasn\u2019t an outlandish way to approach what were largely temporary downturns.\u201d<\/p>\n Now all that has changed, said Mills, a former college chief administrative, business and operating officer: \u201cThe forward environment is unlikely to be one of growth,\u201d with philanthropy, tuition revenue and student populations \u201ccertain to remain flat or decline for some time.\u201d <\/p>\n In this light, using deferred maintenance as a tool is simply delaying an expense whose cost is likely to compound at a significant rate, he added.<\/p>\n Ruth Johnston, vice president of consulting for the National Association of College and University Business Officers, agreed that deferred maintenance \u201cis a very big and growing issue for universities and colleges and has been for many years.\u201d<\/p>\n Public colleges and universities are often hardest hit, Johnston said, as state legislators \u201cprefer to fund new capital projects over providing funds for the less glamorous options of deferred maintenance.\u201d And unless universities and colleges \u201cintentionally create budgets, and consistently add funds to them, they don\u2019t prioritize deferred maintenance and often only pay for emergency needs.\u201d<\/p>\n The shiny-object phenomenon isn\u2019t exclusive to public institutions. Mills recalled, for example, how a dean at a private institution once said he wasn\u2019t worried about underfunding because when major renewal was required, \u201che would simply run a capital campaign to build a new building.\u201d<\/p>\n In addition to the findings on deferred maintenance, the survey also suggests that some institutions are rethinking their physical campuses amid shifting enrollment and study trends. About two in five respondents (41\u00a0percent) report that their institution is retaining its current physical campus footprint but investing in renovations. Another 34\u00a0percent report targeted expansion, or moderate growth in specific areas. But relatively few CBOs report either strategic downsizing or significant expansion.<\/p>\n<\/p>\n Deferred maintenance expenses can sometimes be bundled into other project budgets. But uncertainty and other factors are slowing or halting even capital spending on many campuses\u2014even if strategic downsizing isn\u2019t yet a major trend.<\/p>\n Seth Odell, founder of Kanahoma, an education marketing agency, underscored the gravity of the deferred maintenance backlog, saying it \u201cfeels like it\u2019s a part of a broader death spiral many institutions have found themselves in.\u201d<\/p>\n \u201cWe often treat deferred maintenance as a facilities or finance issue, but it\u2019s increasingly a strategic enrollment risk\u2014and one that\u2019s compounding year over year,\u201d he said. \u201cI\u2019ve worked with institutions where students are literally walking past shuttered buildings on campus tours, or sweating through admitted-student events due to outdated HVAC systems. In a competitive enrollment environment, these realities are no longer just aesthetic. They’re affecting yield.\u201d<\/p>\n Even before it downgraded its higher education outlook in March due to federal policy uncertainty, Moody\u2019s Ratings had warned that a \u201clarge and growing backlog of capital needs posed a significant credit risk for the higher education sector.\u201d In a report last summer, Moody\u2019s said that $750\u00a0billion to $950\u00a0billion of spending would be needed over the next decade for just its approximately 500\u00a0rated colleges and universities to make \u201csignificant headway toward reducing deferred maintenance, upgrading facilities and building the new projects that are critical to strategic positioning.\u201d<\/p>\n \u201cColleges and universities that are unable to offer updated facilities, advanced technology and an attractive physical environment risk losing competitive standing,\u201d Moody\u2019s said at the time.<\/p>\n Construction cost data firm Gordian documented in its most recent \u201cState of Facilities in Higher Education\u201d report \u201congoing curtailment of campus expansions as institutions take stock of what they will really need to own and operate,\u201d plus shortfalls in the funding of needed campus renewal investments of more than 32\u00a0percent. It valued the backlog of capital renewal needs at over $140 per gross square foot. <\/p>\n The situation isn\u2019t likely to improve anytime soon. Emily Raimes, associate managing director at Moody\u2019s, told Inside Higher Ed<\/em> that amid growing economic and policy uncertainty, \u201cmany institutions are adopting a more cautious approach to financial planning. This shift in strategy may lead to a deceleration or postponement of capital investment initiatives.\u201d<\/p>\n Shrinking the footprint of a college campus is a real opportunity for colleges and universities to move forward and save money.\u201d<\/p>\n \u2014Consultant John Woell <\/p>\n F. King Alexander, who served as president of Louisiana State University from 2013 to 2020, said that deferred maintenance needs increased $30\u00a0million per year at the Baton Rouge campus alone during his tenure. The university \u201ccobbled\u201d together only about $8 to $10\u00a0million annually to address emergency issues, he said, so the problem still grew by about $20\u00a0million annually \u201cdespite what we were able to do.\u201d<\/p>\n \u201cWe used a lot of duct tape,\u201d he said.<\/p>\n Louisiana last year passed legislation designed to fund deferred maintenance and capital improvements at state institutions. It will take years and consistent support to tackle the state\u2019s $2 billion backlog.<\/p>\n Alexander, now a professor of educational leadership at Florida Gulf Coast University, is currently involved in an ongoing national study that draws on the insights of chief community college financial officers. Based on that research, completed with colleagues at the University of Alabama\u2019s Education Policy Center, only \u201cmarginal\u201d progress has been made in facilities since 2007, as institutions \u201cstill have the same needs, the same backlogs, the same increases in maintenance and the same lack of planning,\u201d he said. In 2024, the largest areas of deferred maintenance and facility problems for community colleges included science labs, classroom spaces and computer labs.<\/p>\n \u201cStates have consistently shifted their deferred maintenance costs from state government to the public colleges and universities over the last three decades,\u201d Alexander said. \u201cIn other words, to student tuition and fees.\u201d \u00a0 <\/p>\n Odell described deferred maintenance as \u201cboth a symptom and an accelerant of the bigger financial reckoning\u201d now facing higher education. <\/p>\n For tuition-dependent institutions especially, he added, \u201cit\u2019s a vicious cycle. Declining enrollment leads to reduced revenue, which leads to deferred investments, which in turn erode the very experience that drives enrollment.\u201d<\/p>\n Odell did note some \u201csuccess stories,\u201d including Southern New Hampshire University, which has been able to work somewhat in reverse, \u201cusing surplus generated from online enrollment growth to completely revamp and reimagine their campus experience.\u201d<\/p>\n Among other strategies, the consultancy EAB recommends that campus leaders create maintenance endowments that will support a building\u2019s \u201ctrue needs\u201d across its life cycle\u2014not just construction.<\/p>\n John Woell, principal at Manitou Passage Consultancy, offered his own suite of suggestions\u2014some of them unconventional: replacing faculty and staff offices with more flexible workspace arrangements, known as \u201choteling\u201d; being clear about needs, including how each campus space supports the college\u2019s mission; and ending gifts in perpetuity by pivoting to \u201csponsorships.\u201d\u00a0<\/p>\n \u201cIf a gift pays to build a space that has a likely useful life span of 50 years, allow renaming at the end of the 50 years.\u201d<\/p>\n Bigger picture, Woell said, \u201cShrinking the footprint of a college campus is a real opportunity for colleges and universities to move forward and save money.\u201d<\/p>\n Alexander agreed that campus-based solutions such as rethinking physical spaces and even downsizing make sense where enrollment is not growing. But he stressed the importance of public investment in higher education\u2014including more reliable state funding for deferred maintenance expenses at public institutions. <\/p>\n \u201cThis is a huge issue that presidents have to deal with that nobody\u2019s talking about.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" Declining student numbers, funding reductions, rising personnel costs and policy changes at the state and federal level pose the biggest financial risks to institutions, according to Inside Higher Ed\u2019s recent annual survey of chief business officers with Hanover Research. Those issues are consistent with an overall threat to higher education: that federal policy and economic<\/p>\n","protected":false},"author":1,"featured_media":14453,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[57],"tags":[535,8091,2266,8092,736],"class_list":{"0":"post-14452","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-education","8":"tag-college","9":"tag-deferred","10":"tag-growing","11":"tag-maintenance","12":"tag-risk"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/14452","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14452"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/14452\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/14453"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14452"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14452"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14452"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}More on the Survey<\/h4>\n
Compounding Problems, (Radical) Solutions <\/h2>\n