U.S. higher education leaders remain overwhelmingly positive about the financial health of their institutions now and in the near term, according to the CFO Outlook for Higher Education, the sixth annual such report from Syntellis Performance Solutions.
Eighty-nine percent of college and university finance professionals say they are confident their institutions will be financially stable over the next five years, up from 72 percent in 2021.
The 2023 Syntellis CFO Outlook for Higher Education takes an in-depth look at financial challenges, priorities, and progress at U.S. higher education institutions. The report is based on a survey of more than 100 U.S. higher education financial leaders.
“We’ve seen institutions improve their ability to adapt swiftly to changes, and that agility remains critical in today’s fluctuating higher education landscape,” said Flint Brenton, CEO of Syntellis Performance Solutions. “But there are forces now converging to create additional volatility that will require financial leaders to be prepared – namely in the adoption of modern finance and budgeting tools – to enable quick and precise analysis, planning, budgeting, and forecasting.”
Key findings of the report include:
Optimism Against the Odds
A staggering 89 percent percent of survey respondents said they are confident their institutions will be financially stable over the next five years; this is up from 72 percent in the 2021 survey and 62 percent during the first year of the COVID-19 pandemic in 2020. However, confidence varied depending on the funding sources. A majority (98 percent) of four-year public colleges and universities agreed or strongly agreed their institutions would be financially stable over the next 10 years, compared to 86 percent of four-year nonprofit private institutions, which are more dependent on tuition/fees and augment revenue with endowments and investments more vulnerable to volatile market conditions.
More than half of respondents (60 percent) reported their institutions have not made significant cuts due to financial constraints. For those respondents who said their institutions had made cuts the reductions included: reducing administrative staff (84 percent); reductions in undergraduate academic programming (35 percent); reduced academic faculty (26 percent); and campus closures (16 percent).
The Demographic Cliff Looms
The demographic cliff — a downturn in first-time, full-time enrollment — is expected to start around 2025, and is the challenge expected to have the greatest financial impact on institutions in the next five to 10 years. Many institutions introduced programs and services in 2022 to improve student enrollment, with 57 percent noting improvements to mental health and wellness services, 45 percent bolstering at-risk student tracking and advisory services, and 35 percent increasing food scholarships and support for students.
Confronting the Workforce Shortage
Following enrollment declines, labor costs were cited as the second biggest challenge expected to have notable financial impacts on colleges and universities over the next five to 10 years. Most of the respondents (96 percent) said labor challenges already impact their budgeting and financial planning. While 45 percent of survey respondents identified labor management as an area that would benefit from improved data analytics, only 21 percent of finance professionals plan to modernize financial planning processes related to labor planning in the 2023-2024 academic year.
Higher Ed is Technically Behind
Many finance professionals (60 percent) feel higher education is behind other industries in adopting modern budgeting and financial planning tools. While nearly two-thirds (64 percent) feel their college or university has the right budgeting and planning tools to respond quickly to changing conditions, an overwhelming majority of survey respondents (85 percent) said their organizations should do more to leverage financial and operational data to inform strategic decisions. It’s also clear that universities are still using outdated tools, with nearly half (49 percent) of respondents noting their institutions use manual spreadsheets to develop tuition projections, 48 percent using spreadsheets for forecasting, and 41 percent using them for scenario modeling.
“From enrollment to labor, inflation, and beyond, it’s vital that universities have the right tools to remain agile amid uncertainty,” said Kevin Bresser, vice president of Higher Education at Syntellis Performance Solutions. “While we are encouraged by the optimism found in the 2023 CFO Outlook for higher education, in working with our customers we know the importance of robust data and analytics capabilities, and comprehensive financial planning, forecasting, and budgeting tools to navigate current challenges and prepare them for a secure financial future.”
Material from a press release was used in this report.
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