Wednesday, March 18, 2015

On a Sinking Ship and Its Captain

One of the biggest stories in higher education is that Sweet Briar College is closing its doors at the end of the academic year. It is a very sad tale. A couple of points in some of the stories are of some interest.

This story points to a number of signs that an institution of higher education is about to go belly-up:
What is the college’s tuition discount rate? Has it been increasing?
For those who do not know what it is, the tuition discount rate needs an explanation. Colleges charge a certain amount of tuition; it is one of their sources of revenue. Students offered scholarships or other financial packages pay a discounted tuition in comparison to those who pay full price. The tuition discount rate is the percentage of students whose tuition is discounted.
Has the college made its enrollment target the past few years?
Can the institution reach its basic goals? Does it do what it was set up to do?
Is the revenue the college receives from tuition after it awards financial aid (net tuition) going up, holding steady, or dropping? 
This is just basic economics. Institutions (higher-ed or not) whose expenses exceed their income are in trouble. When income streams close down, an institution is in trouble. Period.
How much debt has the college taken on in the past 10 years? What has that paid for? 
Where does the money go? Is it spent on luxury items or basic expenses? What sort of fancy remodeling has been done? Does the college fund junkets to hold conferences in an exotic locale as opposed to holding them on site? These can often be tricky judgment calls because some of these activities can be warranted under the proper circumstances but they can also be abused.

These questions are all the more pertinent as another article points out that the college's president had previously been involved in the misuse of university funds. So according to yet another article, while president of Trinity College, James F. Jones, Jr., tried to appropriate funds from one of Trinity's endowments, an endowed chair held by Gerald Gunderson, to fund other projects:
when James F. Jones, Jr. became president of Trinity College in 2004. Jones made no attempt to touch the portion of the endowment used to fund Gunderson’s chair, although at one point he threatened not to renew Gunderson’s contract (he does not have tenure). Jones tried to divert the assets of the Davis Endowment to other purposes, including funding scholarships for foreign students. In October 2008, according to a 2009 article in the Wall Street Journal, Jones had a particularly angry meeting with Gunderson where he called Gunderson “a liar and a bully” and said that he would, in the future, personally approve all expenditures “down to a box of paperclips.”

By this time, Gunderson had reported Jones to the Connecticut Attorney General’s Office, which regulates charities in that state. In February 2009, the attorney general’s office issued a ruling that declared that there was no evidence that Shelby Cullom Davis wanted either the college or his family to use the endowment’s income for any purpose “other than the study and promotion of the economic theories of the free enterprise system.”

In addition, the attorney general’s office found that Trinity College had illegally diverted $191,337 from the Davis Endowment to pay for an internship program. The regulators ordered Trinity College to restore the money to the endowment.

For the next four years, according to Gunderson, the battle over the Davis Endowment was “a stalemate,” with Jones proposing various schemes for diverting the endowment’s assets and the Connecticut attorney general’s office vetoing them. Gunderson praises the attorney general’s office—and in particular, Karen Gano, a career civil servant overseeing charities—for upholding the law and respecting donor intent.
Jones also managed to earn a red light for Trinity College from the Foundation for Individual Rights in Education and was forced to retire and thus move to his current position over Sweet Briar's $90 million endowment (or $84 million depending on the source). During Jones's time at Trinity, alumni donations plummeted; but fortunately they have rebounded after his departure, in part because the administration enacted changes to prevent Jones's abuses in the future:
The victory for donor intent at Trinity College has also spurred alumni giving. For their 25th anniversary, the Trinity College Class of 1990 is establishing “The Alumni Fund for Trinity College,” a donor-advised fund independent of the college. The fund is established in honor of Gerald Gunderson, who the class says, “has labored tirelessly—and at personal expense—to ensure that the donor’s intent of the Shelby Cullom Davis Endowment was respected at Trinity College.”

Given the track record that Jones had at Trinity by some accounts, it is surprising that Sweet Briar would put him in charge of anything. Now Jones has a track record for destroying or nearly destroying two institutions of higher education. The spin that Sweet Briar put on his selection was that:
the search committee was impressed with Jones’ professional accomplishments, his commitment to collaboration and transparency at every level, and his understanding of the College.
According to the news release Jones was the "retiring president of Trinity College in Hartford, Conn."

According to Paul Rice, chair of the Sweet Briar College Board of Directors:
Jimmy’s twenty years of experience as a highly effective president of two distinguished liberal arts colleges, his academic credentials, his boundless energy, and his knowledge of Sweet Briar uniquely qualify him for this appointment. He will be a solid leader as we navigate the College’s immediate future and complete the research and planning already underway for long-term sustainability.”
Sweet Briar depicted Jones as a tremendously successful fund raiser while at Trinity:
During Jones’ decade as president, Trinity saw more than 30 percent growth in its overall College endowment and achieved significant annual fund growth. Today, annual fund contributions represent between 8 and 9 percent of the college’s operating budget — almost double the contribution 10 years ago.
The two accounts of Jones's tenure at Trinity do not sound the same at all. Sweet Briar omits all the red flags that appear in the other account.

I also find it interesting that Jones was appointed only as an interim president. Sweet Briar's previous president, Ellen Parker, claimed as she left:
Sweet Briar could not have found a more ideal interim president.
This was, of course, last year. Much has changed in the intervening time. For Sweet Briar the interim president would seem to be its last.

Sweet Briar seems to have had some problems before Jones came along and that nine months was not sufficient time for Jones to destroy the college by himself. If Sweet Briar has had a 60 percent discount rate on $47,000 tuition, then Jones simply has not had time to change anything in that regard; all those students were admitted under the previous administration. It may just be coincidence that Jones came on board in time to sink the ship, but his history as captain does not exactly inspire confidence.

Ronald Ehrenberg, director of the Cornell University Higher Education Research Institute, praised the decision of Sweet Briar's board, saying:
It seems like a very principled decision. If we can’t maintain our fundamental mission, we should get out of the business.
Apparently there were a number of proposals that would have required Sweet Briar to alter its mission but these were legally problematic.

So it appears as though Jones was brought in as an interim president because Sweet Briar thought he could work some sort of fund-raising magic at their college. The problems of his previous administration are unmentioned in the press announcement. Whatever Sweet Briar hoped he would accomplish, closing the doors was probably not on the list.