Report: Many Universities Could Face Financial Problems

An analysis of nearly 1,700 colleges and universities in the U.S. suggests more than one-third of them are on an unsustainable financial path. The report, issued this week by higher education consultants at Bain & Company and Sterling Partners, suggests many colleges and universities could run out of cash if they don't change their ways of doing business.  

Those conclusions were based on two key numbers: how expenses relative to revenues have changed during the past five years, and how assets have fluctuated during the same period, according to Goldie Blumenstyk, a senior writer at the Chronicle of Higher Education who got a preview of the report.

The time frame in question was tricky, she says, because many school endowments lost money between 2005 and 2010.

"So when you're looking at college assets, obviously that's going to skew some of the figures a little bit," Blumenstyk says. But the analysts still believe many campuses face a cash crunch.

"They found that more than a third of the institutions were on an unsustainable path, and another 28 percent were on the way," Blumenstyk says.

The study cited several factors contributing to shaky finances at places such as Cornell, Harvard and Princeton. Debt increased 11.7 percent on average, and spending to maintain property and equipment rose 6.6 percent.  

"Instructional costs were up less than 5 percent over the five year period, but the analysts say universities are spending too much on middle managers," Blumenstyk adds. 

Virginia's public universities fared well overall in the survey. The University of Virginia, Virginia Commonwealth, George Mason and Virginia Tech all saw declines in spending, although equity ratios were down 8 percent at Old Dominion  and 12 percent at George Mason.  

The survey also showed the University of Virginia has a hefty cushion  against future costs — an endowment per student of more than $157,000  compared with about $16,000 at Tech, $8,000 at VCU, $7,000 at ODU and $1,800 at George Mason.