Giving College Administrators a Business Education
When state funding at the University of Colorado began drying up, we quickly found cuts that saved millions.By Bruce D. Benson
Aug. 26, 2015 6:35 p.m. ET
The days of flush state funding for higher education are gone, and public universities are slowly recognizing that they must do better than approach state legislatures each year with hats in hand, asking for more.
At the University of Colorado, we have been dealing with steep drops in state support for eight years, from $229 million in 2008 to $184 million today, with a low of $146 million in 2011. When I took over as president of the university in March 2008, the storm clouds of recession were beginning to gather. I knew our four-campus system of nearly 60,000 students was headed for a downturn, but, like most people, I didn't anticipate its severity.
Nearly 50 years in business, beginning in oil and gas exploration, taught me that tough economic times force measures you should be taking anyway. The recession's silver lining was the opportunity to introduce a more fiscally responsible institutional mind-set. We took a three-pronged approach: find efficiencies, build collaboration and generate new revenue.
Universities aren't known for economic efficiency, and prerecession CU was no different - which meant there were plenty of cost savings to be found throughout the system. In fiscal 2010-11, we streamlined bureaucracy and let go of 148 administrative staff - a painful down-sizing for some, yes, but a right-sizing for the school that helped preserve many other jobs. After hearing about CU's dire financial situation, about a quarter of the faculty volunteered to teach one additional course for modest compensation increases of about $4,000 each.
We cut red tape, trimming the school's administrative policies to 86 from 210 - or to 260 pages from 650. For instance, we raised the cost threshold at which an official event requires paperwork approval to $500 from $100, eliminating 8,000 forms - and the work of processing them - annually.
CU persuaded Colorado legislators to let the university opt out of the state procurement system and rely on our more efficient internal system, saving $8.3 million since fall 2010. Another piece of legislation has saved millions by allowing volunteer real-estate experts (mostly alumni) to guide the university system's property evaluations and negotiations, so we don't have to pay the state for that service. We sold more than $50 million in unnecessary assets, such as a conference center in Aspen and CU's former medical campus in Denver.
With an audit of our insurance-plan participation, we found dependents on CU plans who weren't eligible for coverage. Total savings: $2.3 million annually. We moved to a system of self-insurance and kept a lid on premiums. Revamping the prescription-drug benefit by leveraging CU's buying power to get better rebates and reduced wholesale prices saved $7 million annually. We aggressively refinanced our bonds, freeing up $60 million in cash over the next 25 years.
The result of these changes is that the university system's administrative overhead is 37% below that of national peers, according to data from the U.S. Education Department.
At the same time, we sought new revenue. Marketing online education - now at 42,000 annual enrollments, up from 34,000 six years ago - expanded CU's reach. We convinced state legislators to remove the cap on international students (without limiting the number of Coloradans) and doubled enrollment from abroad to 2,140 in 2014 from 1,005 in 2010, which has increased revenue by more than $30 million to date at the Boulder campus alone.
Most on our campuses realized that financial straits made change necessary, which smoothed the turnaround, but that's not to say there wasn't pushback. We closed a popular newspaper for faculty and staff, with 11 employees and a $600,000 annual budget, and replaced it with an electronic weekly, saving a half a million dollars annually. We didn't need to be in the newspaper business, but there were protests. Moving fundraising from the separate CU Foundation to the university was a bit rocky, given the culture shock of integrating 175 fundraisers from a different organization. Yet the result speaks volumes: 20% increases in money raised in each of the past two years. The increased emphasis on online education offends some teachers, who want classrooms with 20 students and a blackboard, nothing more. The key to overcoming dissent was communicating intent, listening to protests to separate serious concerns from plain old grumbling, and taking heat but hanging tough.
There is always more work to do. A school-wide change in CU management has made it more likely that finding fresh ways to pare costs and improve efficiency will be possible: Nearly 90% of those in top leadership positions are new to their jobs or to the university in the past eight years. If public institutions want to remain a viable option for all students, they must learn to operate more like businesses - because easy state money is not coming back.
Mr. Benson is the president of the University of Colorado.
[ Note: the original web location for this commentary is at Giving College Administrators a Business Education ]