Brenda Albright is a higher education consultant based in Franklin, Tennessee, and she currently serves as executive director of the National Postsecondary Education Cooperative, Washington, D.C. She can reached at bnalbright@aol.com.

Colleges and universities operate in a complex environment. They are affected by political realities, fiscal realities, and competitive realities, and these realities change from year to year and decade to decade. What are the realities now and what do they mean for next year? The year after? Five years after? Ten years after?

Political Expectations
What do political leaders expect from higher education? Recent surveys of governors and legislators show three major expectations. First, accountability- When political leaders talk about accountability, they mean that they want to hold institutions responsible for meeting state priorities and local and regional needs. The emphasis is on service, which represents a paradigm shift. Rather than the states providing resources to meet the needs of the institutions, the institutions are expected to meet the needs of the states and its citizens.

Political leaders are responding to citizens' expectations for a high quality of life. Higher education is seen as an entry point to an individual's future quality of life, both financially and socially. Political leaders are responding to employers' expectations of well-qualified individuals entering the workforce. A well-educated workforce is recognized as essential for strong national, state, and regional economies.

Second, collaboration- When political leaders talk about collaboration, they want to achieve closer collaboration between policymakers and education leaders, among colleges, within education, and with other public services. They expect colleges and universities to be problem solvers in addressing state needs in the areas such as improving public schools, building a stronger economy, and having a cleaner environment. In a sentence, political leaders want colleges and universities to share their human and physical assets with the citizens of the state and the community.

Third, performance- When political leaders talk about performance, they focus on funding. They believe that specific institutional performance measures should be tied to funding and that institutions should be rewarded or penalized for their performance on these measures. Thirty-six states now link some share of their tax-dollar support to performance. Even states that do not allocate funds based on performance periodically grade the performance of institutions through report cards or benchmarks or performance reporting. This parallels reporting of performance for public schools; this parallels performance reporting for other services. Performance funding and reporting is not unique to education. Even states are receiving higher education report cards. In 2000, the National Center for Public Policy and Higher Education issued a "report card" grading each of the 50 U.S. states.

When political leaders are asked, "What should colleges do to cope with increased demands?," their responses include a belief that colleges and universities should use technology to deliver more course offerings. Colleges and universities should "go to" the student, rather than expecting the student to come to them. Political leaders believe that technology will result in significant cost savings and will want institutions to use these cost savings to respond to increased demand.

Second, political leaders believe that colleges and universities should reallocate within their institutional budgets to improve efficiency. In other words, do more with less. In a recent conversation with a governor's budget director, who was very supportive of colleges and universities, he asked, "Have colleges and universities done all that they can to make cost reductions?" He was reflecting a general sense that higher education has not done all that it can to effect savings. Some external leaders see higher education as richly funded; this perception is strengthened with media reports on compensation packages of key institutional leaders and athletic coaches.

Third, because of public concern about rising prices, political leaders want to see colleges and universities limit tuition increases. In the past decade, college prices have outpaced inflation by about three percent a year; for the current year, the gap will be even greater. All public surveys show that the public believes that higher education is not affordable and that their children will not be able to attend college because of the cost. Given the plethora of financial aid available from the federal government, state government, institutions, and private sources, many see higher education as affordable. Families and students may have a number of misperceptions about price, but concerns about affordability are realities and they will not go away.

Some Colleges' Views
Many trustees of colleges also see accountability, collaboration, and performance in much the same way as political leaders. However, colleges' internal leadership, presidents, senior administrators, and faculty have a different perspective.

Accountability. Colleges believe that they are accountable, and that most accountability efforts are too cumbersome and the measurements for performance too imprecise to truly reflect their efforts. While colleges routinely measure what students learn, when legislators and others external to higher education talk about accountability, colleges and universities usually respond with, "Trust us" or "Leave us alone" or "But we do a good job, and accountability is measured through our rigorous accreditation process."

Collaboration. Colleges and universities view each other as competitors and see academic collaborative efforts as threatening because they "give away the competitive edge." They believe that collaboration is difficult to implement and that the greatest potential may be for smaller institutions. Colleges and universities are willing to consider collaboration in administrative functions such as purchasing. They believe collaboration works best when it is natural and non-threatening, for example, when institutions within a geographical area negotiate for snow removal. Collaboration outside of the academy is even more complex. In areas of shared responsibility, such as teacher education, higher education is reluctant to take responsibility for collaboration.

Performance. Many colleges believe that performance funding and performance reporting will go away, that they are merely fads or trends. Because institutional comparisons are often made when performance indicators are reported or used to allocate financial resources, performance is a threat because it has the potential to present a negative image. This in turn may affect the college's ability to attract students, particularly the students it desires.

Technology. Colleges see technology as an ever-increasing expense, rather than a tool for cost savings. They believe that to be competitive they must make investments in technology and are not sure how to keep up with constantly increasing expenses. Colleges and universities are concerned about instruction integration, user support, faculty reward and recognition, planning, commerce, and service.

When asked, "Can you be more efficient?," colleges and universities usually respond with "What about quality?" Similarly, tuition restrictions and caps limit institutional flexibility and are a threat to delivering high-quality programs.

Fiscal Realities
When budgets are cut, higher education is likely to absorb greater cuts than other state-funded programs. This trend is certainly clear in the current year. Thirty-seven states face a budget deficit for 2002-03. The deficits are dramatic. California faces a $17 billion deficit, about 17 percent of its overall budget. This is the biggest shortfall since World War II. To make ends meet, lawmakers are taking aim at higher education where funding levels are not mandated by federal and state legislation and where investments are viewed to be somewhat discretionary. After all, colleges and universities have other sources of revenue, or so the thinking goes.

How does higher education respond? Colleges and universities are likely to raise prices to students and families to cover these shortfalls. An important reality for higher education is that almost all institutions are becoming more tuition-driven. Families and students are objecting to these increases, and, to attract students, many colleges are emphasizing tuition discounting. It is not clear to what extent these trends are affecting student choice and institutional competitiveness in attracting students. Fiscal realities differ by type of institution. Demand for the most prestigious colleges is growing, while less selective colleges are offering more tuition discounting and larger aid packages to entice students to enroll.

To what extent has higher education financial strength been eroded? One indicator is a business' view. Earlier this year Moody's bond-rating agency changed its outlook for private colleges from "positive" to "cautiously stable," and for public universities the rating was revised from "positive" to "stable." Moody's expects to downgrade the bond ratings of some institutions in the upcoming year-those that entered the current downturn in a relatively weaker position in terms of student demand, financial resources, and net operating revenues, and those that significantly increased leverage in order to finance competitive campus facilities. For many institutions, growing debt to build facilities in order to attract students limits their flexibility to make investments in important areas.

Since higher education is seen as essential to a high quality of life, enrollments are growing in many places. Nearly all seniors in high school expect to continue their education. Nationwide projections are that the number of undergraduates will grow by 19 percent through 2015-from 13.4 million in 1995 to about 16 million. Additional analysis shows that 80 percent of the new students will be minorities, and that many of these students will be first-generation college students. A recent publication by the National Center for Education Statistics showed that these first-generation students are likely to be less academically prepared for college than other students. The National Center for Education Statistics has a wealth of information about these trends on its website at http://nces.ed.gov.

In summary, fiscal realities are: 1) limited resources available from state coffers; 2) student fee increases, and 3) greater demands from students, states, and communities. Students will likely be less well prepared for college which means that more human and fiscal resources are needed to assure their success. The most important question facing higher education is, "How can colleges and universities respond to these realities?"

How Do Colleges View These Fiscal and Educational Realities?
A recent series of interviews with leaders from public and private and two- and four-year institutions revealed ten challenges that they face:

  1. The health of the economy and growing demands on state and local tax funds, including tax relief
  2. Maintaining strong external support
  3. Setting priorities that address state, local, and institutional needs
  4. Being competitive and responsive to customers' needs
  5. Addressing technology issues
  6. Serving students better by addressing non-traditional students needs
  7. Addressing affordability and access
  8. Addressing enrollment increases, declines, and retention, particularly for minority students
  9. Addressing growing regulations and restrictions in areas such as procurement, capital development, and collective bargaining
  10. Unfunded mandates, or external directions that institutions should use funding increases for a specific purpose.

How can facilities managers respond to these political, fiscal, and demographic realities and challenges and still protect human and capital assets? In an interview with management guru Peter Drucker, Max De Pree, author of Leadership Is an Art, asked what is the duty of a leader and what does leadership mean. De Pree said that the first duty of leaders is to define reality. What is reality for a liberal arts college with 2,500 students? One reality might be that it is a tuition-driven college. If you don't identify tuition-driven as a reality, then you may not put the right amount of emphasis on the recruitment and retention of students.

The first step is to understand not only the realities facing all of higher education, but also the realities of your own institution. The remaining steps are being discussed at APPA's Educational Facilities Leadership Forum. in Phoenix, within the focus on Financial Stewardship.