by Michael K. Townsley | Aug 2, 2025 | News 2025
Over the weekend, Duke University reported than they had cut more than 660 positions due to changes in Federal Funding. They were not clear if this was due to federal grants or federal grants plus indirect cost recovery funds. Whatever the reason, this is a large change in staffing. The takeaway on this news is that wealth and research is no longer a protection against the uncertainties that confront higher education.
Over the weekend, Duke University reported than they had cut more than 660 positions due to changes in Federal Funding. They were not clear if this was due to federal grants or federal grants plus indirect cost recovery funds. Whatever the reason, this is a large change in staffing. The takeaway on this news is that wealth and research is no longer a protection against the uncertainties that confront higher education.
Over the weekend, Duke University reported than they had cut more than 660 positions due to changes in Federal Funding. They were not clear if this was due to federal grants or federal grants plus indirect cost recovery funds. Whatever the reason, this is a large change in staffing. The takeaway on this news is that wealth and research is no longer a protection against the uncertainties that confront higher education.
Over the weekend, Duke University reported than they had cut more than 660 positions due to changes in Federal Funding. They were not clear if this was due to federal grants or federal grants plus indirect cost recovery funds. Whatever the reason, this is a large change in staffing. The takeaway on this news is that wealth and research is no longer a protection against the uncertainties that confront higher education.
by Michael K. Townsley | Jul 26, 2025 | Financial Strategy and Operations
Trump’s ‘Big Beautiful Bill’ includes a provision that the federal government will not provide federal aid for bachelor degree programs that fail to produce incomes for graduates that do not exceed the income of a high school graduate. When students in an academic majors lose their federal financial aid, a college may only be able to keep these students by using unfunded institutional aid to match the lost federal aid. However, the trade-off of unfunded aid for lost federal financial aid has a negative effect on cash reserves. Federal aid provided cash, but unfunded aid does not provide any cash, which will result in the depletion of cash reserves. Under this circumstance, colleges could be forced to drop majors that lose federal financial aid. The new federal provisions on the loss of financial aid are compounded in those states that are forcing public universities to terminate majors when enrollment falls below a specific level.
Only time will time will tell whether this provision of Trump’s B3 will push colleges to terminate programs. As usual colleges will have to wait for federal bureaucrats to write and distribute the regulations before colleges learn the full impact of this provision on their academic programs.
by Michael K. Townsley | Jul 26, 2025 | News 2025
Every college needs a financial strategy and performance report format that clearly describes how the college moved from the end of the previous fiscal year to the end of the current fiscal year and how the current state of the college will shape the strategy for the next fiscal year. This template provides such a format that can tell the board of trustees, the president, and chief administrators about the financial condition of the college and where it intends to go. Any college can change any section of the report to fit the financial condition, performance and strategy for the college. The following template should not be taken as a strait jacket.
Template
Financial State of the College, Previous Fiscal Year:
- Operational Deficit
- Total Net
- Enrollment Loss During Fiscal Year 2023-24
- Debt Load
- Cash Position: Precarious
Financial Strategy for the Current Fiscal Year:
- First Priority – Build a multi-month cash reserve.
- Continue Reduction in Force (RIF) of Faculty and Staff Begun during the Prior Fiscal Year
- Freeze Discretionary Expenses
- Sell Unused Buildings
- Cut Debt Service
- Grow Enrollment
- Pay Down Unpaid Vendor Billings
- Rebuild Image by Restarting Renovation of the Library
Financial Strategy – Performance for the Current Fiscal Year
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Action
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Start of Fiscal Year
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End of Fiscal Year
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Change
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Cash Reserves
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Faculty & Staff Costs
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Savings Discretionary Buildings
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Cash from Sale of Buildings
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Reduction in Debt Service
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Enrollment
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Payoff in Vendor Payables
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Progress on Library
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Major Financial Conditions at the End of Fiscal Year
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Start of Fiscal Year
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End of Fiscal Year
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Change
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Operational Net
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Total Net
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Cash Reserves
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Debt-Service
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Enrollment
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How We Produced the Financial Performance for the Current Fiscal Year
- Describe how each strategy was accomplished
- Continue list
Opportunities for Next Fiscal Year
- Describe major opportunities
- Continue list
Financial Weaknesses to Address in the Next Fiscal Year
- Describe major weaknesses
- Continue list
Financial Strategy for Next Fiscal Year
- Operational Net
- Total Net
- Cash Reserves
- Enrollment
- Complete Library
Operational Plans to Achieve Objectives for Next Fiscal Year (Explanations)
- Operational Net
- Total Net
- Cash Reserves
- Enrollment
- Complete Library
by Michael K. Townsley | Jul 26, 2025 | Financial Strategy and Operations
During a period of deep financial distress, a president has many options to reduce the gap between revenue and expenses, while increasing cash reserves. The problem is that revenue options take too long to take effect to help the college. The quickest way to slow the rate financial decay is to cut expenses. Although it may take several months to put large scale expense strategies into operation, once they start, the college will see quick results in cutting the gap between revenue and expenses and the continued erosion of cash reserves.
Of course, any president is well aware of the turmoil that comes with cutting expenses, especially, when cuts involve terminating positions, reducing pay rates, and eliminating or slashing benefits. While presidents may recognize that cutting expenses is the fastest way to attack financial distress, many presidents, who have passed through the academic crucible of becoming a president, have been conditioned to avoid risk associated with making employees unhappy.
Nevertheless, presidents may be surprised to find that employees are already well acquainted with the parlous state of the college. As a result, while many grumble about the possible loss of employment and benefits, enough employees may recognize that given the financial state of the college, some will survive if substantial expense cuts are made, but all will lose their employment if the college closes.
by Michael K. Townsley | Jul 26, 2025 | News 2025
According to the Higher Ed Dive report of July 17, 2025, Fitch, one of the leading bond rating agencies, sees major operating margin declines in three of its A bond ratings for fifty-six of their rated private colleges. Their report found:
- Triple A rated colleges, their operating margins declined to 8.4% from prior double-digit margins.
- Double A rated colleges, their operating margin was 2.3%, which continued a trend of declining margins.
- Single A rated colleges, their operating margins were negative that also followed trend of declining margins.
As the Fitch report noted, less selective colleges face the greatest threat to financial stability. They did say that tuition revenue increased for the double and single A rated colleges, while it declined for the triple A rated colleges. However, they did not report the effect of larger tuition discount rates that lowers the amount of cash flowing from tuition revenue.
The Fitch findings are confirmed by IPEDS data for a broad spectrum of private colleges and universities. Contracting and negative operating margins mean that the underlying financial resources of these colleges are being eroded to the point where their current expense structure is untenable.
The major implication of the continuing slide of enrollment down the demographic cliff coupled with lost indirect cost recovery funds and fewer opportunities for federal grants is that bond rankings will fall down the credit ratings scale. As that happens, colleges and universities will discover that the cost of new long-term debt will be more expensive, covenants will become more stringent, and short-term debt will be more difficult to arrange.
In order to forestall ever greater financial distress, private colleges and universities must immediately take strategic steps by cutting their expense structure that puts the college at risk and find new sources of revenue or prepare to merge with institutions with better prospects.