Universities must shift to a profit seeking business model in order to survive

by Nick Reich (section 1, Spring 2011)

In a recent article posted on our school’s website entitled “A message to our students,” President Armenti expressed his growing concern towards Tom Corbett’s proposed budget. It seems our state’s government is rapidly losing interest in supporting public higher education as the funding provided by state appropriations has fallen from 63% to 30% over the past thirty years. (CalU Article) This creates an interesting circumstance for our university, as well as other colleges across the country. Typically universities such as ours have relied on state granted commonwealth money to bring quality facilities, teachers, and equipment to our students at a reasonably affordable tuition. However this “free money” is coming to an end and our board is forced to weigh their options, re-strategize, and ultimately find a way to generate sufficient revenue to keep the doors open.

Here are a few options that I see schools considering. The first and most appealing choice is to simply raise the student’s tuition. A university’s sale of knowledge can generally be viewed as an inelastic good as students typically do not withdraw because of a slight increase in tuition, they just take out more loans and accept the fact they a little deeper in the hole. College financial boards know this, and generally try to implement this with small increases over a several years; however this is not a permanent solution. As the university continues to raise their tuition they will in doing so destroy their appeal of being more affordable than state schools or other competitors, which in turn means fewer students to supply revenue.
The next option is not a solution, however can defiantly ease the pain. Investing in innovative energy saving technologies can dramatically reduce costs and provide essential tax breaks. For example, William Patterson University in New Jersey is making an effort to kill two birds with one stone as they near completion of their solar energy project. WPU has decided to provide shade and shelter to all of their existing parking lots with solar panel canopies. These canopies are providing the university with up to 20% of their entire energy consumption, as well as making everyday life for students a little cushier. On top of that the state has acknowledged the universities strong effort to green energy with an additional one million to upgrade heating, air condition, and ventilation. (WPU article) Unfortunately as mentioned before this is not a solution because you need to spend money in order to save money, and our goal at the moment is to generate sustainable revenue.

This leaves us with one last option, advertising. The day has come where our institutions of higher education are forced to give up the preservation of a pristine education and start slapping Esurance and DirectTV stickers on our textbooks and cafeteria trays. As annoying as it is seeing some sort of ad placement everywhere you look, it’s just how the world works these days. No longer can companies be profitable by simply being good at what they do, but instead they must distribute shares over the NY stock exchange and hope other larger companies what to put their name on them. Although not the most admirable solution, it seems the most viable as it will save our students from paying out of their own pocket, and still provide immediate financial relief. Some might consider it selling out; however I think it’s about time our universities stop relying on the state to heat our class rooms and start relying on Comcast, after all it is the American way. Who knows, if a few years we might see “calc 4 final exam brought to you by Enzyte” on the top of our test or even “Red Bull presents California University” on our welcome sign.

Work Cited
http://www.calu.edu/news/press-releases/2011/03/presidents-message.htm
http://www.wpunj.edu/news/detail.dot?id=223088