These are hard times for small liberal arts colleges. You do not have to embrace Harvard Business School Professor Clayton Christensen’s dark prediction that 50 percent of the 4,000 colleges and universities in the United States will close in the next 10 to 15 years to accept that only a very small number of colleges have endowments large enough that they can afford to work as they have done in decades past.
The Board of Visitors and Governors (BVG) of St. John’s College sees the challenges facing American higher education, and small liberal arts colleges in particular, as deep-rooted, multi-faceted and long-lasting. Most prominent are the decline in the number of students in the college-age demographic and their diminishing ability to pay a significant percentage of the cost of their education.
These trends are hitting small colleges very hard, particularly through a dramatic reduction in student-derived revenue. During the last decade, annual student-derived revenue at St. John’s has decreased by $9 million. While the college has taken the bold step of revising its tuition model, it is unclear if we will be able to stabilize student-derived revenue at current levels, increase it, or face further losses over the next decade. What is apparent is that a return to the boom years before 2008 is extremely unlikely and certainly cannot serve as the foundation for prudent planning.
There are differing, often strongly held, views on how to respond to these challenges. As we continue to grapple with the financial pressures that pose a threat to the college’s long-term future, we wish to explain the beliefs and commitments that drive our thinking.
First and foremost, we are deeply committed to ensuring that the college not only survives but prospers, not just in the short term, but for decades to come. We are thinking long-term. Our fiduciary duty as trustees and love of the college compels us to do so.
We are also fully committed to sustaining our distinctive Program of Instruction on both the Annapolis and Santa Fe campuses. We recognize that in the last decade the Santa Fe campus has had greater challenges in student recruitment, but we believe that supporting Santa Fe as it works to build a sustainable path forward is in the long-term interest of the entire St. John’s community.
While we might all wish that growing our endowment through our capital campaign would solve our financial problems on its own, that view is unrealistic. We are determined to reach our campaign goal of $300 million, a remarkable objective for such a small college. But we need to remember that the amount added to the endowment will be roughly half that. This is because:
It is also essential to remember that because these funds include long-term pledges and bequests, it will be many years until the remaining $150 million will be in the endowment.
When banked at some indeterminate time in the future, at 5 percent yield, the incremental $150 million will provide an additional $7.5 million in operating income each year. Although that is a substantial sum, it is not equal to what we have lost in annual student-derived revenue to this point in time.
In other words, a successful capital campaign is absolutely essential, but on its own, even after all dollars have been received, it cannot even fully compensate for the decline the college has experienced in student-derived revenue, let alone ensure the college’s financial future.
The capital campaign is only one component of a strategy for ensuring the college’s long-term sustainability. A comprehensive strategy, the BVG believes, requires us to act on three fronts simultaneously. We need to:
We well understand that action on the second front has been and will be difficult and laden with controversy.
To aggressively address the growing structural deficit, the BVG changed the college’s management structure in 2016. Since then, college leaders have made great progress towards achieving a balanced budget. Tough decisions have been made. Faculty and staff have made significant sacrifices. But many of these actions are seen as temporary.
The BVG understands that it is especially challenging to achieve savings in the college’s instructional model. Tutors work very hard, and their total compensation has fallen over the years. We recognize that this is not healthy, or sustainable, over the long haul. As the college regains its fiscal health, the BVG intends to prioritize faculty compensation by increasing M.
In our view, increasing the baseline metric of tutor compensation is the best path to better compensating our faculty for the invaluable service they perform for the college, the Program, and our students. But to move on this front requires us to have open eyes about how the college can manage the costs of instruction consistent with the Program.
Intense financial pressures have already catalyzed major changes in how other colleges employ faculty, changes we have no intention of embracing at St. John’s. Perhaps most significantly, most colleges and universities have held costs down and maintained compensation levels for tenured faculty by dramatically increasing their use of part-time, non-tenure-track faculty. Today tenured or tenure-track faculty represent only one quarter of all college faculty and only one-third of the faculty at four-year institutions. Many colleges have also reduced their smaller class offerings, which, again, is not an option at St. John’s.
Another avenue to instructional cost savings is sabbaticals. Nearly every college facing economic conditions similar to St. John’s, and even most of those with far greater resources, have already significantly reduced their paid sabbaticals, with most now offering one-semester rather than one-year sabbaticals. We recognize that the role of tutors differs from that of faculty at other colleges and that, therefore, the nature of sabbaticals is also different. We are not looking to blindly mirror what other schools are doing. But this movement by other schools is powerful evidence of an economic reality we do share: septennial, full-year, full-pay sabbaticals are no longer affordable to colleges with anything like our level of endowment and student-derived revenue.
This reality has played out in practice. We are already achieving savings from reducing sabbaticals at St. John’s. We currently restrict sabbaticals to six per year on the Annapolis campus and five in Santa Fe. This practice has saved an average of about $275,000 per year, but if kept in place will soon save us about $700,000 annually and mean that tutors will have a sabbatical about every 10, rather than every seven, years. But we cannot tell ourselves, even in our most optimistic moments, that this is a temporary measure. A more affordable sabbatical model is a financial necessity. And so the BVG believes that reduced sabbaticals need to be incorporated in the long-term plans of the college. Since the Polity defines sabbaticals, we believe that those changes should be codified in the Polity.
The BVG also supports the hiring and retention of effective staff, but college leaders must resist calls to return to earlier, higher staffing levels. The BVG also wishes to express its support for efforts designed to improve the overall student experience, including but not limited to resource allocation. This is the third front in achieving our goal of a sustainable college.
There is no question that the Program stands at the center of our mission. We believe that as strongly as ever. But we also believe that our campus cultures should be welcoming and supportive—and should be appropriate for the experiences and expectations of today’s students. Each campus should offer ample opportunities to balance our rigorous academics with other activities that promote mental and physical health. While we are not interested in fancy facilities, we support work on both campuses to upgrade the physical plant so that it has a positive effect on student recruitment and retention. It is essential that Title IX matters be dealt with in a manner that prioritizes student safety and well-being. Finally, we believe that we must maximize effective programs that prepare students for life after graduation.
To focus on campus culture is not just the right thing to do; it is imperative for the college’s long-term sustainability. There is a direct correlation between the student experience and admissions, retention, and alumni giving rates. We have work to do to improve each of these metrics. The BVG is committed to prioritizing these efforts.
The St. John’s College Board of Visitors and Governors is immensely proud of the college, its transformational education, the faculty who deliver that education, and the staff who provide the needed administrative vision and support. We show that pride through our financial support, our commitment of time, and our willingness to make difficult decisions when required. This message is part of our effort to be as transparent as possible about our deliberations. We look forward to working with all college constituencies as we support our flourishing as a community—students, faculty, staff, alumni, and board—and to ensure that St. John’s College maintains and enhances its mission of providing its distinctive education to future generations of extraordinary students.
