Trustees, time to act is now!

Calling all Board of Trustees into action today, not tomorrow and definitely not the day after. In all probability Trustees approved the 2020-21 academic year budget back in February. The budget was based on reasonable assumptions that at the time appeared appropriate. Afterall, the unemployment rate was 3.5%; the stock and bond markets were robust; the cost for goods and services were reasonably stable; the dollar was strong; and state government revenue was increasing. It was reasonable to conclude that revenue from all sources (tuition, fees, room and board, alumni, auxiliary services, foundations, business and industry, grants) would continue to increase and expenses would hold steady at a modest increase.

Well, as we now know, the budget assumptions are likely no longer reasonable. Some economist is predicting an unemployment rate of 20% due to the coronavirus and the world’s economy will lead to a recession. Now is the time for Trustees to develop contingency budget plans.

I suspect some institutions will enroll less students for fall 2020; there will be less tuition revenue; the stock market decline could result in a decrease in alumni giving and in some cases a delay in fulfilling pledges; institutions may tap their endowment interest at a higher rate;  higher education could see an increase in student poaching, especially with some students electing to stay closer to home due to the coronavirus; States will generate less revenue as a consequence to the pandemic that could result in less funding for public higher education; States might reevaluate how to fund the free community college model; there will be a dramatic increase in student/parent request for need based aid; anticipate an overall increase in appeals for additional financial aid; and institutions will need to prioritize searches for open or new positions for administrators, faculty and Deans.

It is wise for Trustees to convene now to reconsider their 2020-21 budget and make the appropriate adjustments for a fluid and flexible budget.