Adding Fuel to the Transformational Fire: Moody's Report and Trending Public University Operational Frameworks

One of the most interesting and well known trend for public universities has been the movement form academic program and faculty centered governance to one in which the center of operational gravity shifts toward the Vice President of Finance and the general counsel.  What once were viewed as issues of program and instructional advances driving university operations, subject to concerns of sustainability and economic viability has been turned upside down.  Today, public universities and especially publicly assisted universities,  start with the objective of revenue enhancement and then drive program and operations to achieve this objective,  

(Pix (c) Larry Catá Backer 2013)

This post suggests the role of credit agencies in disciplining universities toward an embrace of this model of operations. Eric Kelderman,  Moody’s Report Forecasts a Gloomy Future for Public Universities, Chronicle of Higher Education, Aug. 14, 2013.

 Kelderman reports

Things were supposed to get better after the 2012 fiscal year, the year that colleges fell off the “cliff” created as federal stimulus money for higher education ran out and state appropriations had yet to recover.

Instead, 2012 was just foreshadowing the difficult financial future that public colleges will continue to face, according to a new report from Moody’s Investors Service, a bond-rating company.

Moody’s analysis of median fiscal data from 2012 show that enrollment at public colleges was essentially flat, revenues grew less than 2 percent, and expenses increased more than 3 percent—nearly twice as fast as inflation.

While figures for the flagship institutions were more positive, the data over all put public colleges on a path to economic oblivion. “The developing trend of expense growth outpacing revenue growth is unsustainable,” said Emily Schwarz, an assistant vice president at Moody’s, in a statement touting the report (available to subscribers here).

In addition, political pressure to limit tuition increases and little expectation for big improvements in state spending mean that public colleges will have to continue to cut costs for the foreseeable future, the analysts conclude.

“While cash flow at most publics still remains ample, we expect universities will engage in deeper expense cuts to compensate for slower future revenue growth,” the report said.
(Eric Keldermann,  Moody’s Report Forecasts a Gloomy Future for Public Universities, Chronicle of Higher Education, Aug. 14, 2013).

If one takes Moody's seriously, and one must, it becomes important to think about university cultures of function in substantially different ways, that is, that to understand the emerging premises under which public universities operate it may be necessary to abandon the premises traditionally used to "understand" the normative values and structures within which universities were thought to operate. The "new" public university that is emerging, and that the approach of Moody's Report suggests, is substantially distinct from the mythology of public university operations that may continue to embrace. The principal change, subtle but fundamental is that there has been a shift in emphasis in the understanding of the "business" of "education,"  with the emphasis on business that now drives education. (e.g.,"Pigs Get Fat; Hogs Get Slaughtered"--On Strategies for Getting Money Out of MOOCs). As a consequence, the university's core "product" education,  is increasingly treated as an instrument of revenue generation, and institutional mechanics are increasingly bent to the objective.  The rest--the "how" of revenue generation becomes secondary to the primary objective.   A number of consequences follow inevitably:

1.  A focus on the creation of more flexible faculty structures (making it easier to hire and terminate  faculty as programs change) and a segmentation of faculty production (deep division of labor with its attendant hierarchy) (e.g., Godzilla Versus the Swamp Creature: MOOCs, the Control of Online Education and the Move From Education to Training for Labor Markets); 

2. A move to flexible made-to-market education with strong pressure to streamline and reduce faculty quality and coherence oversight; in the process general education will more openly understood as a means of revenue subsidization for humanities, social sciences and other, in effect, the distribution of education requirements will be as much about revenue generation and department subsidization as it will be about the value maximization for students (e.g., Made to Market Education and Professionalization in University Education);

3.  A leveraging of research faculty, which are used increasingly as reputation enhancers and whose value is substantially reduced to a commodity, that is the amount of additional revenue they may raise; that is, the same shift of focus is becoming the norm--the business of research increasingly focuses on the revenue generating potential of research (e.g.,Statement of Senate Chair Made at the March 12, 2013 Penn State University Faculty Senate Meeting: Restructuring the Way We Operate);

4.  A demonization of tenure, especially for faculty to fail to conform to the new "division of labor" and commodity models of job expectations (e.g., Non-Tenure Track (Contingent or Fixed Term) Faculty and Shared Governance, A Report From the AAUP);  Upcoming Forensic on Fixed Term Faculty Policy at Penn State);

5.  A shrinking of shared governance as issues usually at the center of faculty competence is re-focused as a revenue related issue that does not require faculty input; everything from campus closures to program evaluation, re-characterized as a matter of risk management and revenue production becomes a matter for the financial side of the academic house (e.g., The Law of Shared Governance--A Thin Reed Indeed Without a University's Human Resources and Policy Commitment;  Administrative Bloat by Deans and Other Unit Administrators--An Overlooked but Important Source of Direct Attack on Shared Governance);

6.   A move toward unionization as education "labor" becomes more closely associated with classical "craft" work; though resisted by the university it is likely to work to strengthen the move toward a revenue model of education production and as a means of further segmenting faculty between a unionized "teaching" faculty (nontenured) and an elite research faculty (tenured and marginally managerial) (e.g., Gwendolyn Bradley, New Faculty Union Under Attack, AAUP Aug. 2011);.

7.  A commodification of education itself--the current cover language includes "experiential learning/scholarship"and "student centered" learning; the idea is grounded in notions of traditional education as narcissistic (faculty focused) and in an ironic twist on Soviet Marxist notions of education and an objective to de-center education from faculty to students through learning objectives and constant assessment to specific goals based educational pedagogy and curricular content grounded int he needs of employers (e.g., Engaged Scholarship--De-Centering Faculty From Research and Teaching in a Relentless March Toward a Training Model for Middle Tier Universities?).