Monday, February 27, 2012

Guardedly Optimistic

At last week’s breakfast meeting with all the department chairs and deans, I talked about the enrollment situation for this semester and this year. A substantial increase in the freshmen class, strong quality indicators, and some of the best retention numbers in our history make for a very positive picture. And a Presidential Debate on our campus next fall, further helps enhance the forecast for next year’s entering class. After finishing these comments, I moved on to discuss Moody’s higher education forecast of January 20, 2012. Moody’s is not always upbeat but their forecasts provide a well grounded assessment of what is and what is likely to be. In this forecast, Moody’s notes that for higher education, there will be greater political scrutiny, more sophisticated consumers and donors, increased price sensitivity on the part of consumers, increasing need for institutions to differentiate themselves, and also an increased need to become more efficient. Moody’s notes the “ongoing bifurcation” of higher education with very strong undergraduate demand occurring at the lowest cost, most affordable, extreme and at the highest prestige, highest quality, extreme. They also point out that there is a notable softening in demand for graduate education. We are all aware of the lack of job opportunities in much of teacher education but there is also a softening of demand for legal education and for graduate business education. Add to this the growth of online education and the weakness of the less selective sector of private higher education plus the fact that increased tuition discounting is not sustainable and you have key points in the picture that Moody’s sees and is reporting on. What does it all mean? Is the glass half or more than half empty? Or with a reviving economy, is the picture more positive than it appears. The answer is yes. We have our challenges but we have an opportunity. As an industry, many of us work very hard to differentiate our products. Many of us work very hard to provide a quality education. Many of us are very sophisticated at recruiting, and we also strive to limit tuition increases to the smallest possible increase. On the other hand, tuition discounting is still becoming more pervasive. It may be unsustainable in the long run but in the short run many of us have no choice but to compete. The increasing consumer focus on the tuition rate in the competition between much of private higher education and much of public higher education especially challenges the private sector going forward. And online education clearly challenges all of us by bringing much more competition just a click away. My generation and others in close proximity in age can be sure that higher education as we know it will continue throughout our professional lives. For future generations of administrators and faculty, the challenges, however, are great. If those of us in influential administrative positions try to coast, much of higher education as we know it will be placed at risk. If we continue to differentiate and make changes that reflect changing times, if we continue to respect core values, if we limit tuition increases and maximize efficiencies, if we can operate in an increasingly online environment, we should be OK. My choice is to not be complacent; if you do the same, we can all be guardedly optimistic.

Monday, February 13, 2012

News Overshadowing News

On Friday, February 3rd, I was waiting for the economic update. The jobs picture is a key indicator (even though it is considered a lagging indicator) of economic recovery, and I was looking to see if there were tangible signs that a real and perhaps more robust recovery was underway. But even though I was tuned into the economy, my greatest attention was focused on the decision by the Susan G. Komen for the Cure Foundation decision to cut off funding for Planned Parenthood. There could not have been a worse decision. It was wrong on all levels. First why would an organization focused on a cure for breast cancer cut off funding to a highly regarded organization’s breast screening program? In a nation where we know there is a significant divide between pro-choice and pro-life advocates, why would an organization committed to the cure interject politics into our war against cancer? Did Susan Komen’s hiring of a known pro-life person (and recent anti-abortion candidate for Georgia’s governor) translate into an intolerant policy toward those with a different political ideology but at least as strong a commitment to eradicating breast cancer? I greatly admire how quickly New York Mayor Michael Bloomberg stepped forward to pledge a matching donation to Planned Parenthood of up to $250,000. The total that would be raised of up to $500,000 would almost make up for the reduction from Susan Komen. Our economy is showing signs of life. There were 243,000 new jobs in January and the unemployment rate has dipped from 8.5% to 8.3%. Not terrific but nevertheless a world better than the 9.1% unemployment rate we had in August. And the stock market has also rallied with the DJIA now resting comfortably above the 12,000 level. There are great divides in our country. Our recovery is proceeding but almost certainly, with political cooperation, it would proceed faster. On the issue of abortion, the differences are equally great but can’t we agree that women have a right to choice when the decision involves their own body? Isn’t there still room in our society for people agreeing to disagree? And when it comes to cancer research and cancer care, how dare any organization play politics? February 3rd was a good day. First the economic news and later in the day Susan Komen reversed their position and announced that funding would be restored to Planned Parenthood. If our country is to continue to succeed and if our efforts regarding breast cancer are also to succeed, we need to be both more united and more respectful of individual differences.

Monday, February 6, 2012

Important Role of Government

I am today philosophically close to where I was when I was in graduate school. I am a middle of the road economist. I recognize the importance of government fiscal and monetary policy and yet government needs to make sure it doesn’t micromanage where it isn’t necessary, and government needs to make sure that the laws are constructed in the fairest way possible. I’m not sure at this moment that government—all levels of government—are doing all they can do to be fair and to not micromanage. For example, when a major presidential candidate can earn over $20 million dollars per year and not pay more than a 15% tax rate, I question the fairness of the system. I don’t fault Mitt Romney—there is no reason that he should pay more than is required. Nor should he be ashamed either of his earning power and his level of taxation. He is an American success story. I do, however, fault our federal government for creating a tax structure where the wealthiest Americans are so clearly paying a lesser percentage than millions of Americans whose earnings are a fraction of Governor Romney’s earnings. I would never suggest we impose an onerous tax rate for individuals in this bracket and perhaps we should all pay the same percentage, but no one should believe that the system that presently exists meets the fairness test. I’ve written before about defined benefit pension plans. There is no question that they are very beneficial for the recipients but there is also no question that substituting certainty for risk on the part of the pension recipients is made possible at the expense of tax payers. These are the same tax payers who, for the most part, save what they can for retirement without the ability to shelter these monies from the winds of economic uncertainty. What a nice system it is when you win if the stock market rises and you can’t lose if the stock market falls. I would never diminish the defined benefit pension plans for those who already have them. But can we really justify their continuation in the same form going forward? And to prop up these pensions, what are we now not able to do which meet important needs. Are we cutting back, for example, on our support for public K-12 education? Bad decision and bad news for the competitive future of our country. The few times in my life that I have seen momentary price controls, the end results have been serious market disruptions. In a market economy, it doesn’t really work to bypass the market. And now there is mention of government efforts to limit tuition increases. The market already is an effective brake on excessive tuition increases. If the value equation isn’t there for a particular college or university, there are multiple other universities—private as well as public, senior as well as community – to chose from. A dynamic institution striving to make greater use of full-time faculty, or greater merit-based or need-based scholarships, or smaller class size, or new majors in more costly areas, may need a larger than average tuition rate increase. Should institutions making initiatives like this be dissuaded from doing so or penalized for doing so? It makes no sense. And I do understand the high cost of education and the strains that it puts on many families. Competition from lower priced alternatives including on-line degree programs or for profit colleges and universities are better alternatives than price controls. Here is my dilemma and the dilemma for so many of us. Government is a lifeline we all need but when government undermines a level playing field, we are all hurt.