Colleges Shedding Non-Core Operations

April 9, 2012

As states face tight budget constraints with lower tax revenues and reduced federal assistance, support for public universities has taken a significant hit.  In order to cover this difference, universities across the country have resorted to a number of financial means in order to stay running and continue to compete for students, says the Wall Street Journal.

  • Over the past decade, state appropriations per full-time student fell more than 20 percent across the country.
  • Some schools used standard tuition increases in order to maintain their standard revenue level -- according to College Board, tuition and student fees at four-year public universities rose more than 70 percent during the last decade.
  • However, a more unique solution embraced by a number of large institutions is to auction off non-core components of the university and return to the business of what schools do best: education.

The experience of Ohio State University is instructional in understanding this approach to maintaining financial solvency.

  • The Ohio state government cut funding for instruction at Ohio State last year by 15 percent, or nearly $63 million, as part of efforts to plug a multibillion-dollar state budget hole.
  • The university's overall instructional budget climbed 4 percent nonetheless, to $5 billion, buoyed by a 3.5 percent tuition increase.
  • To supplement tuition increases in supporting the school's budget, the university elected to sell off several of its non-core services.

In addition to considering the privatization of two 18-hole golf courses, a small airport and a power grid, the school is currently seeking investors who might pay hundreds of millions of dollars to lease its parking system.

  • The school consists of 57,000 students on its main campus in Columbus; the location is endowed with 36,000 parking spaces for those students.
  • Ohio State estimates it could get at least $375 million up front for a lease of up to 50 years of its parking facilities.
  • The school says that it already has seven private buyers, whose bids will be due in May.

The University of Kentucky and Portland State University in Portland, Oregon, have followed similar strategies -- both have at least partially privatized their campus housing services.

Source: Bob Sechler, "Colleges Shedding Non-Core Operations," Wall Street Journal, April 1, 2012.

For text:

http://online.wsj.com/article/SB10001424052702303717304577279440681096800.html

 

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