Surviving Temporary Campus Closures & Reduced Enrollment in Light of COVID-19

COVID-19 Resources for Higher Education Institutions

A team of campus leaders gathered around a large table in a spacious conference room to conduct a series of tabletop exercises. The goal was to walk through campus emergency responses to a dorm fire, an active shooter during graduation and a pandemic. The discussion revolved around action steps and communication plans. The team, bogged down with the first two events, never walked through the third scenario—a pandemic and its long-term effect on campus life.  

Despite their best intentions to revisit the pandemic tabletop exercise, they never got around to it. It never seemed like a real threat. Unfortunately, as we’ve learned by now, this unusual event is real. And just like the tabletop conversation, the institution’s financial implications were never anticipated. 

It’s too late to wonder if your campus is prepared operationally or financially. In the wake of COVID-19, more than 200 colleges and universities have either canceled classes for the remainder of the semester, extended spring break to reassess the situation or are in the process of converting face-to-face education to online format. Professional conferences and athletic and other large-scale events have been canceled to create social distancing and slow this pandemic’s effect.
 
Goldie Blumenstyk, senior writer with The Chronicle of Higher Education and author of the book American Higher Education in Crisis? What Everyone Needs to Know, argued that this black swan event “should be a call to action.” The financial and operational implications of this event will reverberate beyond the 2020 spring semester. Campuses equipped to deliver online education on short notice may fare better than those unable to make that transition. Campuses that struggle to deliver a reasonable educational experience may struggle with retention in the fall as students seek value for the high costs being paid. 

Campuses that close residence halls and dining services during this time will undoubtedly be asked to refund unused meal plans and dorm rental for the semester. Students and parents also may seek reimbursement for other student activity fees. While finances aren’t a top concern related to the decision to close (and they shouldn’t be), finances will have a role in the aftermath. Auxiliary revenues are integral to operating budgets and cash flow needs. Institutions looking to file insurance claims may be disappointed. Most college insurance policies don’t cover biohazards like viruses.

In addition, investment market volatility could leave a campus with a sharp decline in endowment and other investment balances. Lowered interest rates also could spike pension and debt swap agreement liabilities, creating accounting losses. The combined financial effect could negatively affect bank covenants and the composite score with the Department of Education. 

Longer-term financial effects also could include recruiting efforts for the incoming freshman classes, as college savings plans no longer stretch as far as they needed to stretch. Admission leaders are already considering virtual tours and online interaction with advisors to maintain contact with prospective students—but whether it will be enough to entice enrollment and deposit to institutions remains to be seen.

So, what are the major near-term decisions and issues—beyond the hundreds of practical decisions currently being made—that deserve additional thought? We suggest your team works to satisfy the concerns of prospective parents and students regarding the following:

  1. Student safety and health
  2. Academic program stability
  3. Long-term institutional financial viability
  4. Institutional speed to adapt to a rapidly changing environment

Demonstrating your ability to respond appropriately through careful planning now will play a key part in the ongoing assessment of the institution.

This event may have forced your campus to discuss other ways to conduct business. Have you considered the financial implication of summer tuition, summer camps and activities, the retention of current students and alumni and graduation events?

One thing is certain—the future remains uncertain. Institutions need to consider the long-term effect of decisions and how these scenarios affect both financial and operational risks. Modeling the institution’s financial future is an important part of a critical path forward. The ability to forecast various likely scenarios provides leadership with the financial stress testing needed to understand financial health. Boards, banks and accreditors are expecting university leadership to know the financial implications of various strategic directions that may be indicated. Although there’s no way to predict them with any degree of precision, having examined options is better than wondering what to do when the worst-case scenario unfolds in the fall (which hopefully won’t get to that point).

It also will be important to relay to your constituencies that certain scenarios could have different levels of financial effect. Communicating that ahead of time will help pave the way for easier communication when it comes time to make the hard decisions that may be needed. 

The recent events of the COVID-19 pandemic caught everyone off guard. It may be your responsibility to help ensure the effect on future financial health doesn’t do the same. To discuss your institution’s financial future, reach out to your BKD Trusted Advisor or use the Contact Us form below.
 

Kate & Ben — How can we help you? Contact Us!

How can we help you?