So is your university sustainable?

One aspect of higher education that is fundamentally different today from what it was historically is that nobody can be sure any more whether a university that is here today will still be there tomorrow. In part this is because various questions are now asked about the need to rationalise various higher education sectors; but universities are also now much less financially secure than at any other time over the past century or so. In England there are constant warnings, some rather apocalyptic, that several universities may be facing insolvency, and in other jurisdictions universities also appear hugely vulnerable when you look at their balance sheets.

In this climate a special group – the Financial Sustainability Strategy Group – was established in England, and it has now published a paper, Assessing the Sustainability of Higher Education Institutions. This document looks at a basket of indicators that will allow governing bodies and funding agencies to assess whether an institution is properly solvent and sustainable. But in the end the key determinant is money, and what the document reminds us is that no institution is financially safe unless it is able to record an operating surplus. Traditionally the minimum surplus for such purposes was thought to be between 3 and 5 per cent of revenues, a target that most UK universities failed to achieve in recent years. In Ireland the funding model until recently actually discouraged the achievement of any surplus (or even punished the universities by seeing it as a sign that funding was too generous), but as this assessment changed funding was also cut so dramatically that the recording of any surplus at all was totally beyond the capacity of the institutions (most of whom actually went into deficit). Right now I don’t believe that a single Irish university, assessed objectively, could be said to be financially sustainable.

It is tempting for universities to see sustainability as an output of funding, or indeed of public funding, but in governance terms that is not satisfactory. Financial models cannot in the end be built around income that an institution feels it should receive, as distinct from the one it actually gets. On the other hand, universities may need to get better at securing sustainability by diversifying sources of income. In short, a whole new financial model may need to be developed. Then again, governments should not undermine this by seeing sustainability as a product of tight regulation, which may in the end discourage innovation and reward excessive caution. This is a difficult balance to get right.

As for the general public, it should be disturbed that higher education institutions, across much of the developed world, are now increasingly at risk. The old view that governments, institutions and companies may come and go but universities last for ever may no longer be valid.

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One Comment on “So is your university sustainable?”

  1. Vincent Says:

    Such a pity then you cannot trade contracts like the football clubs. And anyway how the dickens can you trade if objectively you all are insolvent. Surely there are laws about such practices. Well, at least in the UK there are anyway. 🙂

    I like the new layout, but can you put in an expandable comment box as you’re on that job. This one and the last acted for all the world like one was trying to write to a bogroll core.

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