By Allison Fitzgerald, Product Marketing Manager, Oracle
The ninth annual Inside Higher Education survey of college and university chief business officers (CBOs), conducted by Gallup, reveals good news and less-than-good news: CBOs are cautiously optimistic about the financial health of their institutions, but they’re concerned they lack the data and other information they need to make informed decisions about an uncertain future.
Among the survey’s 416 respondents, 62% expressed confidence about their institutions’ financial outlook over the next five years, similar to previous years. But the picture becomes cloudier the further out they look; just half of CBOs are confident their institution will be financially stable over the next 10 years—a decline from 2016’s peak of 54%. The uncertainty has several sources.
First, a plurality (45%) agree with economists who predict an economic downturn will occur in the United States over the next 18 months, and nearly 60% worry about the effect such a downturn would have on their institutions. In addition, tight budgets and shifting revenue prospects leave CBOs seeking additional revenue streams and expecting disruption in terms of mergers, closures, and consolidations—all of which add to the complexity of financial models and forecasts.
Although the situation appears to have improved over last year, many CBOs (38% vs. 48%) remain concerned that their institutions’ tuition discounts aren’t sustainable. With tuition revenue stagnant, 1 in 6 colleges with endowments withdrew funds from them beyond levels called for in their normal spending policy last year. At the same time, CBOs of public institutions don’t see their state governments chipping in to help; instead, they estimate that the percentage of their budgets funded by state appropriations will stay flat through fiscal 2020.
Colleges and universities realize they must pursue new revenue streams. Among four potential revenue sources the survey asked about, CBOs feel that alternative credentials (such as certificates or noncredit certifications) offer the most promise. About half say the same about creating programs for new audiences, such as senior citizens.
The other major source of uncertainty—mergers, closures, and consolidations—still looms large for CBOs. Most believe that additional institutions will close this year, and nearly all expect there will be more mergers of private colleges and universities. In fact, 12% say senior officials at their institutions have had serious talks about merging with another, while 28% say their institutions have discussed consolidating programs or operations with another college or university. This approach is popular with CBOs, as about 60% believe their institutions would benefit from it.
With uncertainty on the rise, CBOs seek to make their institutions more agile and their decision-making more informed. Nearly half feel their institutions lack the data and other information they need to make sound decisions about a number of performance-related areas. Meanwhile, those who believe their institutions have the right tools, processes, and mindset to respond quickly to change make up a bare majority.
This indicates a clear technology gap that CBOs need to close as quickly as possible. While more than 90% of CBOs run periodic financial reports with projections to year-end and share them with the president’s cabinet and the governing board or finance committee, institutions need more transparency into measures for assessing an institution’s financial health—particularly net operating revenues ratio, increase or decrease in unrestricted net assets, and rate of growth of net tuition per student.
For CBOs to maintain the financial health of their schools, they need modern, cloud-based tools and technology to gain visibility across their institutions and have clarity into their current and future financial standing. With cloud-based systems (such as Oracle Student Cloud, Oracle ERP Cloud and other higher ed solutions), leaders can forge a new path toward operational transformation, achieve institutional excellence, and make informed decisions to shape the future of their institutions.