BY DIVERSE STAFF

WASHINGTON - Despite a nascent economic recovery, education advocates, policymakcrs and other leaders continue to sound concerns over U.S. higher education's long-term viability and productivity. Foremost among current worries is the financial stability of colleges and universities, particularly now that federal stimulus support has dried up. Even while President Obama talks about boosting U.S. college completion rates to increase the nation's global competitiveness, private and public institutions continue to struggle economically.

On March 18, Diverse: Issues In Higher Education convened an expert panel to answer the question "How Can Higher Education Solve its Financial Problems?" Diverse co-founder Frank Matthews and Diverse editor Toni Coleman moderated a nearly two-hour roundtable discussion among seven panelists held at the headquarters of the Association of Public and Land-grant Universities (APLU) in downtown Washington, D. C.

While its theme centered on higher education's financial health, the wideranging conversation touched upon issues as varied as the institution accountability movement, federal involvement in higher education and the future of minorityserving institutions. Participants were Lezli Baskerville, president and CEO, National Association for Equal Opportunity in Higher Education; Kevin Carey, policy director, Education Sector; Dr. Lorenzo Esters, vice president, Office for Access and the Advancement of Public Black Universities, APLU; Steve Graubart, managing director of finance, University of the District of Columbia; Dr. Marshall Grigsby, president, Grigsby and Associates, LLC; Cheryl Hitchcock, vice president of institutional advancement, Morgan State University; and lane Wellman, executive director, Delta Project on Postsecondary Costs, Productivity and Accountability.

The following are highlights from the discussion:

Diverse: What are some of the more innovative strategies that you have seen college leaders develop and implement in response to the recession?

LORENZO ESTERS: I would just say two things. 1 think the one thing we've learned from the economic downturn is that entrepreneurial leadership is extremely important, perhaps more important today than any time in recent history. Particularly as we see the decrease in state funding, it is important that institutions should be working with foundations more, be more competitive with grants and some of the nontraditional sources of funding.

The other thing we have to do is ensure that our institutions are being responsive to the workforce needs. It is important for institutions to review institutional and academic programs to ensure that we are providing programs that are in high demand.

IANE WELLMAN: I think we are seeing much more attention to the need to restructure academic programs than we've ever seen before. The evidence of how bad it is hasn't yet bubbled up as much as it needs to. I think this is serious. The work that's being done on the administrative side - like purchasing, like how we're dealing with energy costs - is pretty deep. There is a lot of money that's being found in improvements in services and efficiencies.

Academic program restructuring is pretty serious. It's not just about cutting budgets. It's about reinvesting and finding ways to generate resources to put into those places that are going to make a difference in academic performance.

MARSHALL GRIGSBY: These are challenging times for higher education in general, certainly for institutions that are under-resourced and institutions that began so far behind in terms of the funding from state, federal, and private sources. But even in the midst of all of those challenges, our institutions have been resilient. They are, they have been, and I suspect, will continue to be resilient because they've continued to have people with tremendous capacity and vision at the helm, So I'm down about some of the current things we face but not in terms of the long term because of the track record.

Diverse: Describe the impact of state budget cuts to public institutions?

JANE WELLMAN: [There will be] less money in the near term for almost all public institutions. The magnitude of funding reductions affecting public institutions across the country this year is unlike anything we've seen before. We have a double or triple whammy going on.

One of them is the continuing decline of state resources for higher education. States are directing more of their resources to corrections, health care and to other areas that don't pay off in social investments. That's made worse because of the depth of this recession and the slow recovery. State budgets typically recover two or three years after national recovery.

Revenues are barely flat, if not continuing to decline, in the majority of states. Added to that, of course, is the disappearance of federal stimulus funds. And then on top of that, unprecedented levels of enrollment demand by students. So I guess that's a quadruple whammy: student demand, disappearing federal subsidies, a very tough recession and eroding state funds.

I don't think anyone who looks at public funding for higher education concludes that the situation is likely to turn around anytime soon.

KEVIN CAREY: I think Jane is very frank in saying that this economic crisis is very different than the last couple. The 1991 recession and the 2000-2001 recessions were very mild. There was a lot of hue and ciy at the time about budget cuts, and higher education took a hit as it tends to; but if you just look at the raw numbers, the money came back. Campuses hadn't really had to make very painful decisions.

This is different. This recession is much worse. The reaction from states is much different. I feel like this time it's serious, and so campuses will have to tackle faculty productivity in a way that they were able to avoid previously. The most successful campuses will take the opportunity created by this crisis to restructure their personnel costs in smart, constructive ways - not in a 'just let the number of tenured faculty continue to shrink and hire more adjuncts for no money' kind of way. I think a better structure is probably one where you have a more stable cadre of well-compensated scholars, and then around that, depending on the needs of the students and the dictates of their classrooms, a combination of contingent faculty and, increasingly, technology. But you do that in a deliberate way. You don't do it in a response-to-crisis way.

CHERYL HITCHCOCK: First of all, as you can imagine, ail eyes turn to the development office when the state cuts budgets. With a lot of the public universities, such as my own, fundraising is still relatively new for most of us because for years we didn't have to. Private universities had been doing it all along.

We had our first capital campaign in 2007. And as tar as our peer institutions, we were on the leading edge on that. More than 90 percent of our students are on some type of financial assistance. Most of our fundraising has been for scholarships and need-based financial aid. As tuitions go up, our students have to work to supplement their funds; and then by working, of course, that impacts their success in the classroom. Some of mem drop out. Some of them stop out for a period of time to get more money.

Diverse: How do you see the struggles over public employee benefits in Wisconsin, Ohio and Indiana relating to higher education?

JANE WELLMAN: Well, let's make sure I understand what you're asking about. What's happening in a number of states - Wisconsin, Ohio, Indiana - there's been a significant attack, which I think is the right word, on public employees' bargaining rights. But there's also been significarli steps taken to address one of the longtime funding problems in higher education, which is the growth in spending on benefits. I think that, as hard as it's been, the consequences of action on employee benefits this year will be helpful to higher education. [It will be] painful, not fun. Nobody asked for it, but from a money perspective it had to happen.

If you look at money in higher education, the single biggest area of growth has been in employee benefits. We either are going to have to cut if we're going to maintain the benefit structures we have, or we're going to pay for the next generation of students. There's not enough money to do both.

KEVIN CAREY: I think Gov. (Scott) Walker overstepped in Wisconsin. He tried to push too far too fast and he's actually created a political consolidation around certain kinds of employee rights that people have taken for granted for a long time.

Six months from now, public employees might be in a stronger position because the public may have awakened to the idea that injustice was being served up to them. Personally, politically, I can share those feelings pretty strongly, but, at the same time, I'm also an education analyst. There is a need to rethink some of these old-held labor arrangements. Tenure is tricky, particularly in higher education with the very real and increasing influence of politics and corporations over academic freedom.

Diverse: What are some of the major areas of waste, or areas for cost savings, that exist in higher education?

STEVE GRAUBART: Well, I can focus mostly on UDC. I'm relatively new to the higher education sector, having spent most of my work in entrepreneurial ventures or technology companies, managing and consulting, so it's kind of interesting coming to this environment from a very different world and coming into UDC, which is going through a rapid transformation.

We looked at all the studies, then we created a database of 150 potential ideas of things that we could improve in every area: academic affairs, procurement, student affairs. Coming from the private world, where you have a $350 million, $160 million business, you'd have three to four product lines. At the university, it's 50 product lines. So we're trying to work through efficiencies of that.

LEZLI BASKERVILI.E: There are a large number of areas in which universities can engage in collaborative purchases that would reduce significantly their costs. Most HCBUs are smaller institutions, and so by aggregating their (buying power) we're able to purchase more books at a lower cost and purchase only those sections of a book that the student will use. We've got collaborative purchasing in technology, in food services, in health and retirement benefits.

CHERYL HITCHCOCK: It seems like every recommendation that I make involves spending money, but you've got to spend money to raise money. You've got to spend money to try to save money. We have to invest in technology. We're trying to go where our potential students are, and they're on their phones and on their computers. We're looking lo do a number of things through social networking, through apps. We're proud to say we have an iPhone/iPad app, and an Android one soon to come. It's allowing us to contact more of our younger alumni who actually respond to electronic communications more so than writing a letter or picking up the phone. It's a way to reach more alumni, to reach more potential students, to market the university in a more positive light, and tell our story.

JANE WELLMAN: One has to look at bom efficiencies and effectiveness, and I think the standard needs to be whether the resources are going into those areas that pay off in teaching, learning, student access. We need to be thinking about academic performance and not just how we balance budgets. The budget balancing mentality has been part of the problem in fiscal management. We need to be spending probably more money in some areas to increase performance and taking some money out of other areas.

MARSHALL GRIGSBY: I strongly agree with Jane's and Steve's emphasis on looking at data and making decisions based on hard data. In a couple of years we are going to a whole new way of calculating student loan default rates. Based on the preliminary data, nearly 50 percent of all HCBUs are at 15 percent or higher; a full quarter of them are above 25 percent. They're right on the threshold of creating real problems because the new ricking clock is 30 percent, and 40 percent is the automatic trigger.

We also are looking at some hard data with respect to graduation rates. President Obama is talking about greatly expanding the college graduation rate, becoming number one again. And the reason for that is enhanced competitiveness in a global environment, enhanced strengthening of the economy by virtue of greater tax revenue and enhancing the strength of the military because we would have a more educated populace. Those are public benefits. Those aren't private benefits.

Diverse: If governments establish college graduation rates as an institution's accountability benchmark measure, can they do so in a way that's fair to the wide variety of U.S. higher education institutions? In other words, can governments be fair to minority-serving schools, which enroll disproportionately higher numbers oflow-income students?

KEVIN CAREY: I think it can. Graduation rates have to be accurate. They have to he looked at m context, and there are ways to do that. Every institution has a set of peer institutions that it competes with that it benchmarks itself against. We can look at change over time and look at how institutions are able to improve based on their own past performance.

I think a smart thing to do from a policy standpoint is to set goals for institutions to graduate a certain number of students who come in needing Pell Grants or from a place of economic diversity because that means you can't just raise your rate by not admitting students like that. We don't want to create incentives for the institutions to shut their doors to the students who most need that access.

JANE WELLMAN: I think presidents, leaders of governing boards - the people who are responsible for trying to set higher education policy - know that they've got to do things differently. Are we doing it differently? We're not.

The polls tell us that the public values higher education and actually has a fairly high degree of trust in the institutions. The public gets it. They get that higher education is increasingly required for a decent life. But they're increasingly critical of the values of the institutions. They see the institutions as being more willing to protect their own bottom lines than to pay attention to student access and success. They assume that the reason the tuitions are going up is because the institutions are spending a lot of money, and they don't see the value of that. We do a pretty bad job of being transparent about where the money comes, where the money goes, and what we buy with it. We've got to be much more evidentiary. We've got to be smarter about how we deal with legitimate public perceptions rather than say, 'The public doesn't get it.' The public gets it fine.

LORENZO ESTERS: APLU has been working with our member institutions and partnering with the Association of State Colleges and Universities to develop our own voluntary system of accountability. Institutions volunteer to be accountable for certain outcomes and to make those transparent to the public. One of the things we have to do is do a better job of telling our story.

Diverse: The possibility of HBCU mergers and closures seems to be an ongoing issue for these institutions. In this economy, are closures or mergers inevitable?

LORENZO FSTERS: Well, I think thai in this economic downturn the conversation centers on HCBUs when you talk about mergers. I believe that we have to protect the mission of historically Black colleges and universities as well as other minorityserving institutions because of the unique demographic that they continue to serve. We have seen continued attacks, in my opinion, on the mission of HCBUs, and I think that's primarily centered around underperformance. There is no reason why the conversation should be centered on HCBUs. We're not hearing about mergers of other types of institutions.

JANE WELLMAN: And on that point, I think that looking at mergers, looking at program closures, looking at consolidations is inevitable, and it shouldn't by any means be about underperformance as it's perceived to be only in one sector.

The Minnesota state college system is a perfect example of a place where there's a whole lot of colleges that have high-cost centers because they don't have critical mass. They're small, and they're never going to grow. So it's a legitimate conversation and an inevitable one. The issue should never be on academic performance only. It's got to be about institutional viability and whether or not the structure is there.

MARSHALL GRIGSBY: And as Jane points out, it's not new. There have been mergers. UDC is a merger. Clark-Atlanta University is a merger. There have been lots of mergers that have taken place and will take place in the future. The real question is how do the two, three, or whatever number that got merged in fact end up being a stronger institution and keep the focus on the mission of the institution. I think those are important factors. It's not just that merger is a bad word per se.