US warns colleges to cut losses; PAFA's excuse
The government's annual review of college finances shows more schools are running low on cash
149 U.S. colleges were rated "not financially responsible" by the U.S. Department of Education in its new survey of 2008-09 income, reserves and investments at schools whose students get federal subsidies. Those schools have to set aside extra money, submit to extra reporting and financial oversight, and agree to raise more cash, so they can stay in business if they want the taxpayer dollars to keep flowing.
That's up from 126 "failed" schools in 2007-08, and 88 that didn't make the grade the year before, says the Chronicle of Higher Education. Not to panic: "It does not mean that the school is in danger of closing," notes DofEd spokeswoman Jane Glickman.
A local example: At Pennsylvania Academy of the Fine Arts, the financial-responsibility score fell from an above-average 2.3 in 2007-8, to a borderline 1.0 last year. That's just above the "not financialy responsible" level; the department says schools like PAFA "require additional oversight."
The academy, under board chair Donald Caldwell, an investment manager whose clients include the state pension fund, had raised over $60 million from state and private funds for its expanded North Broad Street studios, classrooms and exhibit space over the past decade. What went wrong?
"What threw us out of their usual range is the dip in our endowment," which has paid 6 to 7 percent of the budget in recent years, president David R. Brigham told me. Endowment funds fell from $26.1 million in 2007-8, to just $19.5 million in 2008-9, a 25 percent drop - not so good as Penn, though better than Harvard, or Haverford, in that year's stock market crash (the market has since rebounded some).
Other than that, Brigham says PAFA boasts a balanced $14 million budget; it cut back on outside consultants and other expenses, but kept its 75 fullltime workers and 65 parttime teachers busy without furloughs or wage cuts during the worst of the cutbacks, and it's hiring this year.
"Formulas don't tell the whole story," Brigham told me. Still, he says, "we're in a yellow zone," and PAFA realizes it needs a 10-year plan for boosting its endowment.