Dive Brief:
- College leaders are largely eschewing cuts in favor of strategies intended to raise revenue or bolster class sizes, even in the face of enrollment declines across the higher ed sector, shows a survey from consultancy BDO.
- Asked about their largest challenge — aside from budget limits — more than half of respondents, 53%, pointed to declining enrollment and retention. That far outpaced 6% who said meeting increased demand topped concerns.
- College leaders also give their top three priorities for the next year. They overwhelmingly said improving student retention and enrollment, with 81% of respondents giving this answer. The next most popular priority was seeking new revenue or funding, at 74%, followed by improving staff retention and recruitment, at 55%.
Dive Insight:
BDO broke out responses from colleges and universities that took part in a broader annual Nonprofit Standards survey it conducts. The findings cover 47 responses from colleges and universities. The survey was in the field this summer.
Survey respondents worked at institutions that generally skewed toward the middle of the market. Roughly half generate between $25 million and $75 million in annual revenue. About 53% reported assets of between $51 million and $200 million.
Other data points in recent months have shown a higher education sector experiencing continued enrollment declines, as well as revenue headwinds and inflation challenges that could pressure colleges’ budgets. The BDO survey, released Oct. 27, provides a look at how college leaders are perceiving the market — and how they’re responding.
The 81% of respondents who named increasing enrollment and retention as a top priority far outpaced some other areas under public scrutiny. Just 15% of respondents said their top priority is increasing board or staff diversity, and only 4% said it is to increase the diversity of the student body.
Both of those goals trailed the priority of expanding programs, which 32% of respondents called a top priority.
Leaders frequently said they planned to encourage enrollment in four different ways: 68% of respondents said they are introducing campaigns to encourage prospective students to reenroll, 55% said they are discounting tuition, 55% said they are adding new degree offerings or courses, and 47% said they are increasing remote or online learning offerings.
Spending on such efforts could put budget-constrained colleges in a bind.
“How do you do that?” said David Clark, managing director at BDO. “A lot of the changes require investments. But we talk about all this revenue loss they’re facing.”
Meanwhile, 28% of respondents said they are starting campaigns to prompt stopped-out students to reenroll.
“The missed opportunity that not as many people talk about is, ‘How do we retain the students we do have?'” Clark said. “If you can keep your retention levels as high as possible, that, sometimes, is the easiest and cheapest investment to make.”
Asked about their spending priorities, leaders indicated decreasing expenditures was not a popular strategy. Finance and accounting was the most popular area for decreasing spending, with just 11% of respondents suggesting cuts there.
On the other hand, 81% said they are spending slightly more on existing employees’ wages, plus another 4% said they are significantly increasing this spending. Two-thirds of respondents said they are slightly increasing spending on new hiring, with another 2% raising it significantly.
Perhaps unsurprisingly, pay was the most commonly cited strategy for attracting and retaining employees, with 72% of respondents indicating they were increasing compensation. The next most popular answer was updating or introducing remote work policies at 57%, followed closely by flexible working hours at 55%
In the next year, 74% of colleges said they planned to tap new donors to diversify revenue streams. It was by far the most-given answer for diversifying revenue, coming ahead of expanding program areas at 53%, diversifying investment portfolios at 21% and partnering with corporate giving programs at 15%.
But donations were a relatively small portion of institutions’ revenue in the last 12 months, according to survey responses. Individual contributions were about 11% of their revenue, on average. Fundraising and special events were about 5.5%, corporate contributions were about 5.4%, and foundation grants were about 4.7%.
Tuition, on the other hand, averaged nearly 60% of revenue. Auxiliary revenue for campus housing, meal plans and facility rentals averaged 16.7%.
Almost a third of respondents, 30%, said they keep more than 12 months of liquid reserves not needed for current operations on hand. Another 13% said they keep between seven and 12 months of reserves on hand, and 32% said they keep between four and six months on hand.
It remains to be seen whether institutions can keep up their commitments to strong balance sheets in the face of continued pressures like inflation, said LaShaun King, assurance partner at BDO.
“I would be very curious about how those institutions are faring,” King said. “Whether they are still maintaining those reserves.”
Rick Seltzer
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