Effective communication of financial and budget information is a necessary and critical skill for today’s higher education business officers. However, it’s not enough to simply convey to the campus community the story the numbers tell. Finance and administration leaders must also be prepared to respond to other questions, comments, and critiques related to higher education, such as public concerns about college costs or proposals floated by lawmakers that would negatively affect the business office—and could ultimately result in fewer, or diminished, services and educational offerings for students.
In recent years, national news outlets have increased their coverage of higher education matters, while Washington think tanks—both liberal and conservative—have invested in staff to conduct research and offer policy ideas covering access, affordability, and accountability at colleges and universities. Combine these developments with the explosive growth of social media, and the result is a bright public spotlight on postsecondary education.
A number of issues have intensified interest in higher education:
Economic trends are fueling public concerns. The Federal Reserve Bank of New York recently reported that at the end of 2016, student loan debt had reached $1.31 trillion. While some point to the fact that this is a reflection of a growing population and an educated citizenry, others have suggested that there is a student loan “bubble” and that the nation has an upcoming crisis on its hands.
U.S. Census Bureau data show that median family income in the United States rose at an average rate of only 0.4 percent per year from 2005 to 2015 (after adjusting for inflation). The stubborn growth in household income has not kept pace with increases in average published tuition and fees in either the public or private sector. According to the College Board, between 2011–12 and 2016–17, published tuition and fee prices rose by 9 percent in the public four-year sector, by 11 percent at public two-year colleges, and by 13 percent at private nonprofit four-year institutions, after adjusting for inflation. The College Board also found, for 2016–17, average estimated room and board to be $10, 207, not including books and supplies, transportation, and other miscellaneous expenses.
Consequently, university administrators cannot afford to ignore the overall cost of attendance for their students (room, board, and other expenses). Lawmakers certainly are not doing so. On Feb. 23, U.S. Sens. Elizabeth Warren (D-MA), Patty Murray (D-WA), and Debbie Stabenow (D-MI) asked the Government Accountability Office to conduct a study on food insecurity at American colleges and universities. “Sacrificing food for education can undermine student’s educational goals and create barriers on their path to obtaining a certificate, degree, or credential,” the senators wrote.
A number of other politicians in Washington are also bringing increased scrutiny to higher education. Some invoke the so-called “Bennett Hypothesis,” which claims that federal financial aid is a driver of tuition increases; this theory stubbornly persists despite no clear evidence of such causality. Others question whether institutions are adequately using endowments to lower the cost of college.
Such high profile publicity puts pressure on institution leaders—including the CBO—to step up and defend the value of higher education, and explain costs, with data and determination.
The Pricing Issue
The cost of higher education is of top concern. Consequently, college tuition has moved from a kitchen table conversation topic to fodder for political candidates at all levels. In the early months of 2016, as a candidate on the campaign trail, President Trump said little on higher education, but during a speech in late September, he unveiled an idea on how to make colleges more affordable—he would work with Congress to pressure institutions with large endowments to spend more on students; those that failed to do so would face a loss of their tax-exempt status.
Hillary Clinton, as part of her bid for the White House, unveiled a college plan calling for free public college tuition for those with incomes up to $125,000, dubbing her higher education agenda the “New College Compact.”
Politicians in some states have been proposing, and in other states implementing, free college initiatives for certain public or community colleges. While colleges and universities point out that increases in the net prices that students actually pay have been smaller over the long term than increases in published prices, it is the sticker price that captures public attention and fuels the angst of students and families.
Potential Targets for Legislation
In the crosshairs of legislators’ scrutiny are endowments (the point of which is greatly misunderstood); charitable deductions; and tax-exempt bonds.
Endowments. In December, Rep. Tom Reed (R-NY) issued a white paper calling for college endowments to dedicate gains specifically to students from middle- and working-class families. Reed’s white paper proposes mandatory minimum payout requirements, specifically targeted at financial aid, for endowments above certain thresholds. In 2014, a draft tax reform bill introduced by then Ways and Means Chairman Dave Camp (R-MI) proposed an endowment excise tax based on student full-time equivalents.
Charitable deduction. The same draft legislation called for (1) a 2 percent “floor” on charitable deductions, meaning a taxpayer would have to contribute at least 2 percent of his or her income to charity in order to claim a deduction; and (2) a limit on the ratio of appreciated value to cost value of property gifts.
Municipal bonds. The 2014 Camp draft would have also repealed the tax-exemption for any new 501(c)3 bonds. Others have proposed replacement of tax-exempt bonds with taxable bonds and a tax credit. Altering the tax treatment of municipal bonds could result in significant revenue for the federal government, as legislators look for pathways to lower the deficit and pay for other priorities. On the campaign trail, President Donald Trump expressed a desire to limit a portion of the tax exemption of municipal bonds. His later tax proposals did not mention the municipal tax exemption, which has led to mixed signals about what is truly at risk in forthcoming tax reform measures.
Speaker Paul Ryan (R-WI) and Ways and Means Chairman Kevin Brady (R-TX), eager to pass a tax overhaul this year, released a tax reform blueprint last year aimed at simplifying the tax code. Ryan continues to be optimistic about passing tax reform legislation.
What begins as efforts to enact a sweeping tax package could result in legislation that contains only certain elements of Ryan’s plans. But colleges and universities must be ready to respond should they be impacted. And, it will be difficult to know what congressional leaders have in mind—comprehensive tax reform or a more simple tax cut—until the legislation is revealed.
Regardless, there is no shortage of vulnerabilities for colleges and universities. Proposed changes in the endowment, charitable giving, and tax-exempt bond areas are only a few examples of how “business as usual” could change dramatically during the Trump administration.
Advocacy by the Business Office
As students, families, lawmakers, and the general public raise these questions and offer their own solutions to both higher education and broader federal fiscal challenges, it has become increasingly important for business officers to take steps to be a part of the public discourse, from communicating the value of higher education to effectively conveying financial and budget information.
Communication of financial information to external constituency groups is an essential skill for today’s higher education financial leaders. Rather than playing defense, business officers should consider advocacy for higher education as part of their mainstream responsibilities. As a business officer, are you confident that your university president, government relations staff, and communications teams are adequately prepared to speak about the impact to your campus should lawmakers alter the treatment of charitable contributions and endowments, or limit access to capital via changes to the treatment of tax-exempt bonds?
University government relations and communications professionals often collaborate with the research office to highlight faculty achievements and notable studies, and many are familiar with the importance of state and federal appropriations to the institution. However, they are less often engaged with budget and finance officers. This represents a vulnerability in the current environment, in which so many are questioning the value of higher education.
In preparing for advocacy, business officers might consider:
- Meeting with the campus communications and government relations teams to discuss issues of concern.
- Working with the government relations team to invite a member of Congress, or his or her staff, to meet with the business office to discuss the campus budget, endowment, charitable giving trends, tax-exempt bond financing, regulatory and compliance needs, and other financial concerns and pressures.
- Writing an opinion piece for publication in your student, local, or regional newspaper.
- Providing talking points to the college president or university chancellor.
- Joining other campus leaders when visiting with the local editorial board or national news outlets.
- Developing a website, blog, or Twitter campaign that communicates your concerns.
Without proactively engaging, business officers leave open the opportunity for others to lead the conversation. For example, outsiders may view increasing nonfaculty salary expenses as “administrative bloat,” while college representatives can explain the needs for workforce growth—perhaps illustrating labor demands related to changes in the regulatory environment for higher education; or changing expectations of students, families, employers, and the public for enhanced non-academic programs in areas such as student health, financial literacy, and veterans’ services. This is a perspective that may seem obvious to some business officers, but is not so to others.
Business officers often see obvious stories in financial statements and spreadsheets. Students, community members, and policymakers may not be able to infer meaning from the numbers without further explanation and deeper engagement—and they are even less likely to see context or nuance. If college business officers do not help tell their organization’s story, others may well tell it from an ill-informed standpoint.
In an informal poll with chief business officers at last year’s annual meeting, 60 percent told NACUBO that communicating with the public about college cost is a growing part of their responsibilities; only 30 percent reported them to be a significant part of their responsibilities. As a part of its updated strategic plan, NACUBO will be working with member institutions and their representatives to encourage increased involvement in advocacy and to ensure that business officers have a heightened understanding and awareness of advocacy issues critical to higher education.