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Private higher ed in WNC facing ups, downs
In the wake of Brevard College being put on probation by its accrediting association, the question arises: How financially sound are the private colleges in Western North Carolina?
Brevard College is on its way to recovery, Lees-McRae College is getting stronger, and Warren Wilson College and Mars Hill University are solid, their administrators said.
In July, Montreat College announced plans to merge with Point University. Repeated efforts by Carolina Public Press to reach administrators at the college, located in Buncombe County, were unsuccessful. But the Asheville Citizen-Times recently reported that some Montreat alumni are objecting to the merger and have called for a change in college leadership.
Most small colleges get the majority of their revenue from tuition, fees, room and board they charge students, making enrollment a key determiner of their financial viability.
On June 20, the Southern Association of Colleges and Schools Commission on Colleges, the regional accrediting body of degree-granting higher education institutions in the Southeast, placed Brevard College on probation because of financial concerns. Moved by previous concerns, SACS (as it is known in the higher education industry) had been monitoring the college’s finances for the previous 24 months. In June, it gave Brevard College 12 months to improve its numbers.
A SACS review committee will assess the college’s progress in the spring, after which it will lift the probation, continue it or revoke college’s SACS membership. Brevard College President David Joyce, hired in summer 2011, expects a full recovery. The college has balanced its budget by reducing benefits, instituting some layoffs and freezing some positions, he said. It has also increased enrollment from 619 students in 2011 — its lowest enrollment in 10 years — to more than 690 students expected this year. It receives 78 percent of its revenue from tuition and fees, room and board.
Brevard College, which is in Transylvania County, has budgeted $16 million in revenue and $15.3 in expenses for the academic year. Its $13.6 million debt is less than half of its endowment fund, said Deborah Hall, chief financial officer.
Eighty-one percent of Brevard College’s students live on campus. Full tuition, fees, room and board cost $34,180 this year. But “maybe one or two” students pay that, Joyce said. The rest receive discounts or scholarships.
Hall said SACS placed Brevard on probation based on the college’s financial position on May 31, 2012, a day the stock market fell 6 percent from the beginning of that month. Brevard College’s endowment funds lost about $1.5 million, a paper loss only, but it — and the review — occurred at a time of year when the college had depleted much of the year’s tuition revenue. Otherwise, the college was in the black — as it had been for the past two years — covering all its costs, Hall said.
Joyce said he is certain SACS will lift the probation next year.
“I’m confident,” he said. “I tell people I sleep well at night.”
Warren Wilson College
Despite decreased enrollment, Warren Wilson College is on solid financial ground, said Alan Russell, interim vice president of administration and finance. Warren Wilson gets 84 percent of its revenue from student tuition and fees. Full price is about $34,000 a year, depending on what dormitory a student selects. Eighty-nine percent receive financial aid.
Two years ago, 930 students were enrolled. This year Warren Wilson was expecting 854 students, 223 of them freshmen. That’s a “modest” drop for a college whose revenue is driven by enrollment but one the college has the resources to weather through its savings, Russell said.
Warren Wilson, located in Buncombe County, has a “very strong” balance sheet and niche in the market for the type of education it offers, he said. Balance sheet and market niche are two criteria by which a college’s financial health should be measured, said Russell, who has served as interim finance officer at a number of colleges.
Warren Wilson College’s emphasis on work, service and academics — its so-called “triad” — appeals to a narrow but enthusiastic range of students, helping the college fill a well-defined sector in the higher education market, Russell said.
“It is not trying to be all things to all people. That is an important characteristic in higher education today,” he said.
Expected revenue this year of $30.5 million will slightly exceed expenses, he said, and will come not only from tuition and fees, but also from its annual contributions campaign and the Swannanoa Gathering, an annual series of week-long workshops in folk arts.
Warren Wilson’s $59 million endowment portfolio is doing “rather nicely,” Russell said, after having lost 2.7 percent of market value in 2009. The college has been able to set enough money aside in savings to continue to invest in its academic programs, he said.
Mars Hill University
Mars Hill University, a tuition-driven institution named Mars Hill College until Aug. 15, is “very financially viable,” President Dan Lunsford said.
Working to increase enrollment for three years, it projects it will have 1,225 students this fall, up from 948 in fall 2010. It receives more than 90 percent of its revenue from student tuition and fees, and 82 percent of its students live on campus, Lunsford said. The average full price is $34,800, but only about 2 percent pay that, the president said. The rest receive financial aid through the college, he added.
Its $44 million “break-even” budget this school year means that expenses won’t exceed revenue, which also comes in through summer events and the college’s endowment fund. The Madison County university has a “modest” cash reserve, Lunsford said. Its “appropriate” ratio of debts to assets allows it to continue to draw upon its $1 million line of credit when needed, but the college has “rarely” used it in the past six years, he said.
Mars Hill University’s endowment fund is about $42 million, which is significantly higher than for colleges its size, Lunsford said.
He added that the change from a college to a university will not necessarily mean students will pay more for their education there.
“In fact, our rate of increase may go down, as increased enrollment gives us more students over whom to spread costs,” Lunsford said in an email.
Four years ago, Lees-McRae College was in a continued crisis mode. The college, which is in Avery County, had a sizable debt compared to savings, and enrollment was thin. Barry Buxton, its current president, interviewed with the board of trustees for the first time nine years ago, and remembers the board talking about shutting down or merging with another school. Things had improved little when he was hired, he said.
Nearly all of Lees-McRae’s revenue comes from tuition and fees, but what the college received in 2009 wasn’t enough to cover operations, Buxton said. The school had been raising, or attempting to raise, the gap money through contributions.
“You can’t have a business model like that,” Buxton said.
Before he took the job, he studied seven major college turnarounds, “and of all those I studied, I felt Lees-McRae was in the worst shape of all,” he said.
Buxton, who came from the Savannah College of Art and Design, balanced expenses with revenues and has done so for three years now. Debt has been paid down, from $15 million to $10 million. Enrollment this fall is 891 students — about 6 percent more than last fall. The board, at Buxton’s suggestion, has hired a new manager for its endowment fund, which now stands at $18 million. The college expects to receive revenues about $100,000 over $14 million in operating expenses.
Boosting the bottom line, about 95 percent of students now live on campus or in campus-affiliated housing, a 30-point increase from three years ago (safety and campus cohesion were the reasons for the consolidation, Buxton said). Full price for tuition, fees, room and board is $34,000.
Lees-McRae is building a new school of nursing and allied health that should add 200 students to its enrollment, Buxton said. A venture in China could bring another 100.
“We’re making good progress, but we’re not out of the woods yet,” Buxton said. “We need to be about 1,500 students to be truly healthy. But we’re growing.”