The virulent tsunami of COVID-19 has left industry scrambling to adapt their practices and deal with the fallout from catastrophic business disruption. Because 76% of higher education finance leaders say their institutions lag other industries in adopting modern financial planning practices and tools, higher education may have a harder time charting these unknown waters.
Institutional finance leaders are taking a hard look at how their business models will be affected by COVID-19 through the end of the semester and beyond — and how to position their institution for the new normal.
I’ve spoken to several higher education finance leaders to understand the challenges they face and what they’re doing to adapt. Here are select insights from five leading colleges and universities that are demonstrating remarkable leadership and agility in unprecedented times.
Q: How is the COVID-19 crisis affecting your institution? How have your priorities shifted?
Megan Lasso, Director, University Budget Office, Montana State University-Bozeman: As a public institution, we must continue to serve our students and our constituents while navigating unchartered waters. Much of our bandwidth right now is centered on evaluating our options and making decisions thoughtfully and collectively based on the direction of Governor Bullock and the Office of the Commissioner of Higher Education for the state of Montana. We spend a lot of time talking with our executive and leadership teams to make sure everyone has the information they need to make the right decisions. We then communicate these decisions early and often with our students, faculty, and staff and continually seek their feedback.
Angela Martin, VP Financial Planning and Chief Budget Officer, University of Kentucky: Our top concern is protecting the health, safety and well-being of our entire community. Our faculty and staff, clinicians and caregivers, have risen to every challenge this unprecedented crisis has presented. But we’re not sure what this crisis is going to mean for the summer term and longer. We are exploring difficult questions. What will be the impact of the economic losses on returning students? Are they going to continue their education at the University of Kentucky? How will the virus and the economic losses impact the recruitment of the fall 2020 class?
Sal Tripoli, Director of Budget Services, Tufts University: We are pushing classes online, developing the infrastructure for more remote work by various staff, calculating refunds, modeling financial impacts on operations for summer and fall. The Axiom budgeting software helps all of this, and in part because of that my office is at the center of the conversation and partnering with schools and administrators across units.
Q: What are some of the changes you expect to see regarding shifts in enrollment?
Megan Lasso: The economy certainly has an impact on enrollment. Some students who had planned to attend Montana State University-Bozeman prior to COVID-19 may be experiencing changes to their financial resources to do so after the pandemic. For example, if a parent is no longer employed or has suffered stock market losses as a result of the pandemic, a student may no longer have the funding to attend an out-of-state college or university.
At Montana State University-Bozeman, we’re modeling scenarios with fewer out-of-state students during the 2020-2021 academic year. That may mean that we’ll see more in-state students. However, as a land-grant institution, the difference in tuition between resident and non-resident students is very large — about $18,500 during the 2019-2020 academic year. As a result, even a small percentage decline in our non-resident population will have a big impact on our total revenue. In that scenario, even at full enrollment, our revenue stream could look quite different in the year ahead.
Q: What are your institution’s finance professionals doing now to address the financial challenges associated with the COVID-19 outbreak?
Kevin Toso, Associate Director – Tampa Budget Liaison/Systems, Resource Management and Analysis, University of South Florida: We’re rolling out in-year forecasting, so we can get projections on where we think we’re going to finish the year. As part of doing that, we are trying to identify the additional charges that we’re incurring to address COVID-19. We created a tracking characteristic that we’re putting on expenditures so we can get a handle on them and see the financial impact.
We want to see whether we have any budget that we can shift around to address all the needs that we’re having. That’s our primary focus right now, trying to determine financially where are we going to be at year-end.
Angela Martin: Typically, at this time, the Kentucky legislature and Governor would adopt a two-year state budget, which contains funding support for all Kentucky’s public universities. Given the uncertainties we are facing, the legislature decided to move forward with only a one-year, largely continuation budget. The state budget is a critical piece of our institutional budget. Our finance and budget professionals continue to craft our FY 2020-21 budget while analyzing liquidity, monitoring and reporting expenses related to COVID-19, and working with our Office of Institutional Research, Analytics and Decision Support and Center for Economic and Business Research on revenue forecasts.
Megan Lasso: The most pressing financial challenge is managing cash flow. Our finance professionals are looking across fund types to determine where cash might be available and whether we could create internal loan processes that enable funds with greater liquidity to provide necessary support in the immediate.
As we perform scenario analyses to project the impact of changes to specific student populations on revenue and on state appropriations, we’re also considering questions such as, “How many courses will be necessary to offer during the next academic year?” This requires us to estimate not just the number of new students who will enroll in our institution, but also the percentage of existing students who will continue their education at Montana State University-Bozeman. We’re also exploring incentives we could offer current and future students to encourage them to study here.
Q: Are you using any technology or data to help determine next steps in your coronavirus response?
Beth Boatwright, CFO, Emory School of Medicine: We are all home and working harder than ever to deploy processes needed to navigate the impact of this virus. We just got off a call where we are going to use the helpful reports we developed from Axiom to help us determine our financial impact due to the virus. The work we’ve done in Axiom has positioned us well to support these efforts.
Megan Lasso: We use Axiom Software solutions to model the financial impact of various scenarios, which informs our decision making. For example, we use Axiom Tuition Planning software to model rates and fees and apply them at the cohort or program level. We’ll likely analyze our student data — such as the majors of existing students — to determine where we could reduce expenses, if necessary, without affecting the quality of education our students receive.
We’re also reviewing fund balances to better understand the differences in expenditure types. This will better position our institution to renegotiate contracts based on what we believe our needs will be in the year ahead. There are certain fixed costs that are not likely to budge, but certain variable costs could provide opportunities for savings.
Q: What advice would you share with your peers on how to navigate financial planning in the “new normal,” now and after the pandemic?
Angela Martin: Communication and working collaboratively is key. We are facing difficult financial times and we will likely have to make unpopular decisions for our future. We must carefully plan during this heightened economic uncertainty. We must act in a thoughtful, timely manner. For example, we recently implemented a hiring ‘pause’ to provide the time, space, and flexibility to assess current and future work needs.
Megan Lasso: Use all of the data that you have available — and make sure you build understanding around that data with all key stakeholders. You also need to be strategic in how you invest money now to see a return in the future. Right now, it’s hard to think about spending money, but you have to make investments in your future. Those institutions that do not prepare for their future by making investments during times of crisis will be less likely to weather the storm over the long term.
Finally, understand that higher education is more adaptable than we’ve been taught to believe. It’s often said that higher education is like an aircraft carrier: It takes us forever to turn around, and we don’t change course easily. But during this crisis, our faculty have really jumped on board and come up with unique ideas to solve complex challenges. Now, we know we can move quickly when needed, and this gives us the confidence we need to pivot with agility in any circumstance.