Our Financial Situation
Posted on January 22, 2009
Over the break I’ve spoken with presidents of a number of private colleges. Everyone was talking about the same thing, the economic meltdown and its implications for our institutions. The large contextual highlights (obviously familiar to you) follow:
- These are unprecedented and turbulent times in our world and in our country unseen since 1929.
- The nation’s unemployment rate had bolted to 7.2% in December – the highest level in 16 years. Many believe it will move to double digits. NH hasn’t seen the full impact yet.
- The state faces a substantial budget shortfall.
- Across the country, home values have dropped, resulting in unprecedented foreclosures. Home equity is no longer a viable option to finance other expenditures, like college tuition. With the stock market losses for the year of 35% and more, families are feeling less confident about their ability to pay for higher education and many donors and foundations have less money for philanthropy.
In a survey of 900 colleges and universities, conducted by the Chronicle of Higher Education and Moody’s Investors Service, the following is reported:
- Slightly more than 10 percent of colleges laid off employees and another 26 percent were considering doing so.
- More than 40 percent had imposed partial freezes on faculty hiring and nearly 60 percent had done so for other staff positions.
- A vast majority of private colleges (83%) planned to keep their tuition increases for next year lower than the average of the past three years. This is a sign of concern about scaring off cost conscious families.
- Conversely, nearly half of all public institutions expected their tuition increase to be higher than the average of the past three years to make up for revenue they will lose because of cuts in state support. The Moody’s analyst noted that colleges probably won’t begin to feel the full impact of the downturn until Fall 2009 when they enroll the next incoming class. He also issued a reminder that the impact of next fall could be felt for years. Quote: Colleges need to realize that if they plan their expenses on the basis of a certain level of enrollment but fail to meet it, they must live with it for four years.
Many colleges are finding ways to offer extra aid to financially strapped students. This is especially important for current students the colleges wish to retain whose families have experienced a significant change in their financial status.
[My thanks to colleague and friend Dan Carey, President ofEdgewood College, for sharing the above data points.]
What are we seeing here at SNHU?
- UG Day – spring looks good; we look okay for fall (deposits are down because we shifted to the standard May 1st deadline – we will go later into the spring before we really know how we are doing with deposits).
- CE down at most centers.
- Online up and ahead of projections.
- Our multiple revenue streams provide genuine structural strength. While some areas are down, others offset them. Overall, we are below projections for non-traditional in total and up in UG Day.
As most others are reporting, we are lagging behind last year on YTD numbers.
Our bond was completed on excellent terms ($34m total with $17m in new money and the balance in refinanced old debt; 3% interest rate fixed for five years; saving $4.8m by refinancing). S&P upgraded our rating from BBB- to BBB.
Bottom-line. For this fiscal year we will be okay. The key is to prepare now for next year. What are we doing? Finding expense savings where we can. Looking hard at any open lines. Deferring some capital expense. As you’d certainly expect, we will develop a very conservative budget for FY10.
None of this is a surprise to you. I suspect that most of us in our family budgets are being more careful, deferring some purchases, and trying to be more careful planners. My goals for the next year’s budget are as follows:
1. To protect students and the quality of programs;
2. To protect employees wherever we can;
3. To look very hard at programs or operations that do not provide resources and/or raise our profile;
4. To move forward on our Strategic Plan;
5. To marshal as many resources as we can as a buffer against an uncertain future.
These tough times call for prudence and conservative budgeting, but may also yield strategic opportunities and SNHU is agile and healthy enough take advantage of them if and when they occur. Together we will weather the current storm and I am confident that we will emerge from the other side a stronger and better institution.