Cash-Strapped Universities Turn to Corporate-Style Consolidation

For many public and private institutions looking to cut costs, A&M now stands for acquisitions and mergers

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Mel Evans / AP

People attend a ceremony at Rutgers, officially adding the University of Medicine and Dentistry of New Jersey to the university, in Piscataway, N.J., on July 1, 2013.

Workers at Augusta State University in Georgia are spending the summer putting up new signs, redesigning the school’s website, and carting furniture and files among offices. There are new T-shirts in the bookstore, new logos on the business cards, a new fight song and alma mater–even a new name, for the first time, on the degrees of students who graduated in May.

What was known as Augusta State when those students arrived as freshmen has been combined with the neighboring Georgia Health Sciences University to form Georgia Regents University. It’s a kind of corporate-style consolidation that is becoming increasingly common not only for public institutions, but also for nonprofit, private ones that can pool their resources for marketing, fundraising, purchasing and information technology in a time of falling budgets.

“Size matters, even in academia,” said Ricardo Azziz, president of the new, 10,000-student unified school, which he said cut administrative costs by 3% in just its first few weeks. “A lot of times we talk about students preferring small colleges, and that may be true, but it is much more costly to maintain all of the moving parts at a small college than at a larger university.”

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There have been a few mergers of colleges and universities in the past; the University of Colorado at Denver combined with the University of Colorado Health Sciences Center in 2004, for example, and the Medical University of Ohio merged with the University of Toledo in 2006. But the pace of such consolidations is picking up.

It’s not necessarily that there’s a surplus of colleges and universities, though it is true that demand is down while supply is up; the number of students slipped 1.8% last fall and another 2.3% this spring, according to the National Student Clearinghouse, and while some schools are consolidating now, that follows a 10-year period during which their ranks have actually increased from 6,508 to 7,398, U.S. Department of Education figures show.

But the cost of running all these separate institutions at a time of spiraling tuition and reduced state funding, and the appeal of adding services without duplicating expenses is pushing many schools to merge.

In addition to Augusta State and Georgia Health Sciences University, Georgia has fused six other institutions into three, reducing the total number in its public system to 31, and reorganized 15 of the state’s technical colleges, saving an estimated $6.7 million a year on overhead. The heavily indebted public University of Medicine and Dentistry of New Jersey will be absorbed this year into Rowan and Rutgers. The 10-school Louisiana State University System is merging its chancellorship with the presidency of Louisiana State University A&M, and plans to bring all its separately run campuses together by 2015. And in Baton Rouge, four technical colleges are being merged with Baton Rouge Community College.

“It’s very logical, what’s happening,” said Richard Carter, the incoming president of City University of Seattle, which was just merged with the private, nonprofit National University System based in California, joining several other recent acquisitions including John F. Kennedy University, Spectrum Pacific Learning and WestMed College. “Costs are going up, the number of new students is flat, and a lot of colleges and universities are experiencing the squeeze. Everyone is looking for ways to operate more efficiently, and this is clearly one option.”

“In the business world, the prevailing philosophy has long been that efficiencies and savings can be achieved by getting bigger and building economies of scale,” wrote the authors of a recent report on universities from the nonpartisan New America Foundation. “That is why companies grow or merge with competitors.” The bond-rating agency Moody’s, in a January analysis that was otherwise grim about the financial prospects for higher education institutions, highlighted the consolidation trend as one of the “bolder actions by universities leaders” that can “foster operating efficiencies and reduce overhead costs amid declining state support.”

But while combining colleges and universities to reduce duplication may be logical, it isn’t easy. Legislators who like having higher-education institutions in their districts often resist consolidations. So do students and alumni, who have loyalty to their schools, and faculty and staff who fear losing their jobs.

“It’s not an easy thing politically,” said Richard Novak, senior vice president for programs and research at the Association of Governing Boards of Universities and Colleges. “You certainly have academic departments that will have on the surface the most to lose, and will be the most vocal critics. And faculty, who have tenure and job security, are the most likely to be outspoken about it.”

Fierce opposition by Baltimore boosters who resent what they see as the greater influence of Maryland’s Washington suburbs derailed a proposal to merge the University of Maryland, Baltimore, and the University of Maryland at College Park. A bid in 2004 to combine three public universities in Maine also failed. And several proposals to merge historically black public colleges and universities with predominantly white ones—Southern University at New Orleans and the neighboring University of New Orleans, for instance, which was approved by the Louisiana Board of Regents but died in the state legislature—have been complicated by issues of race.

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Where consolidations have been successful, they’ve been handled gingerly. Georgia Regents, for example, sent a survey to 46,000 students, faculty, staff and alumni before settling on a new logo, seal and school colors, and the first graduates this spring were given the option of receiving a second, commemorative degree with the name “Augusta State University” inscribed on it.

“A tremendous amount of diplomacy and savvy is required,” said Azziz. “The structure of higher education is very resistant to change. The academic community in general is a thoughtful community, but it’s also a ‘show-me’ community. It’s a community that’s skeptical by nature. Only time will allow us to demonstrate the benefits of consolidation.”

One way of doing this, say consolidation advocates, is to point out that it can not only cut costs, but improve quality while attracting more research funding.

With its new connection to a medical school, for example, Georgia Regents has launched joint MD/MBA and BS/MD programs. City University of Seattle offers a doctoral degree in education, which the many alumni of other National University affiliates who are teachers can now seamlessly pursue. And one of the arguments for bringing together the College Park and Baltimore campuses in Maryland was that they ranked 41st and 52nd, respectively, in research spending; combined, they would have jumped to ninth, which proponents of the merger said would have strengthened their position to attract even more money for research.

“Not only do you save money on administrative costs; you create some synergy with academic programs,” Novak said. “You can build stronger programs by merging them, and provide opportunities [to] students they might not otherwise have.”
Perks aside, the biggest reason for consolidations remains lower costs. “There’s been a general sense that academia is not a business, which I certainly agree with. But it does have to follow business principles more closely than people would like to admit,” said Azziz.

“In the heyday of higher education, we didn’t have to look around and say, ‘Can you find some efficiencies here?’ It was just, ‘Are you doing okay? Do you need some more people? No problem,’ ” said Christel Slaughter, a consultant working on the reorganization in Louisiana, which has cut $650 million from its funding for higher education in the last five years. “But all of a sudden, when the music stops, you need a new system.”

This story was produced by The Hechinger Report, a nonprofit, nonpartisan education-news outlet based at Teachers College, Columbia University.

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8 comments
winRTftl
winRTftl

I am a student at Georgia Regents University. I'd like to know why Time magazine did not do any research into how the merger took place. President Azziz commissioned a $45,000 survey in order to select a name for the "new" institution. Azziz and the Board of Regents then chose to ignore the results of their own survey in order to plaster their name on a school. Georgia Regents University. This action caused upheaval here in Augusta and was reported on several times by national media. Thanks to the name change several donors to the college have cancelled their donations and another school in Virginia (Regent University) has sued the Board of Regents (this has failed). When asked about this the Board of Regents claimed that they had not even seen the results of this study done in order to evaluate public opinion on the suggested names. Since this Azziz has been caught red-handed using school assets to facilitate his own social pleasures. In April Azziz was caught using a school , a driver for the bus, and a safety officer for his niece's wedding which he commandeered for about 11 hours. He also did some work on his house without first consulting the Board of Regents to approve the work and costs.

“A tremendous amount of diplomacy and savvy is required,” said Azziz. “The structure of higher education is very resistant to change. The academic community in general is a thoughtful community, but it’s also a ‘show-me’ community. It’s a community that’s skeptical by nature. Only time will allow us to demonstrate the benefits of consolidation.” 

President Azziz has been anything but a savvy diplomatic. He has single-handedly managed to outrage and alienate nearly the entire community here in Augusta. Here in his quote he seems to think that the "consolidation" is what the community is upset about. The community recognizes the benefits of a consolidated university, we are however quite displeased with the manner in which it was facilitated and bitter about the way the name change was conducted. Historically, this university has played an integral role in the community. The new name no longer reflects the spirit of either the Alumni or the current student body. I don't think this is an article that most people affiliated with the college would appreciate.

BS527
BS527

Where consolidations have been successful, they’ve been handled gingerly. Georgia Regents, for example, sent a survey to 46,000 students, faculty, staff and alumni before settling on a new logo, seal and school colors..."  The survey also asked about the new university's name.  The majority agreed that "Augusta" should be in the name and GRU was not a popular choice at all.  The survey results were ignored by President Azziz and the Board of Regents.  The merger hasn't been handled "gingerly" at all and President Azziz lacks the diplomacy and savvy that he says is required.  Too bad for Augusta.


Read more: http://nation.time.com/2013/07/19/cash-strapped-universities-turn-to-corporate-style-consolidation/#ixzz2ZWpQ9uYV

ratliff.nicole
ratliff.nicole

I am a senior at Augusta State University and I was excited about the merger with MCG until our new idiotic name was revealed! I will never say I graduated from GRU, it disgusts me and alot of staff, faculty and students. Also, the article does not mention that even though the schools have merged, our new "president" has been under fire for misapproriating schools fund to renovate his house and using school police staff and transportation services for his personal use. Why should us students have to have our tuitions raised and pay ridiculous fees, when he is misusing funds? If I didn't love my department and wasnt a semester away from graduating, I would habe transferred to a different school!

notLostInSpace
notLostInSpace

So much wrong in our education system.  Too many unqualified students.  Too many schools that pass them along with degrees, deflating the value of having a degree.  Too many schools competing for students where they are in engaged in an arms war, only instead of arms it is facilities (offering better and better dorms, pools, gyms, theaters, climbing walls, stadiums, cafeterias....note these don't have a lot to do with teaching quality or expectations).   Not enough honest discussion about the fact that some kids should be employed plumbers rather than unemployed sociology majors.  Starts in k-12, not just college's fault.  Loans too easy to get, too hard to pay back.  Rampant inflation in school such as rohit57 below mentions.  I've been an adjunct at a university for 6 years, never had an increase in my stipend which is about 2600 per course (the university charges about 35k, do the math, the money is not going to the teachers).  Some schools closing is a good thing I think.  Survival of the fittest you know.

rohit57
rohit57

How can they be cash strapped when they are raising tuition all the time so that students spend decades paying off their college debts?

RoyStone
RoyStone

Bottom line is and has been accountability.. and that covers the gamut from custodial to boards.

ongafrac
ongafrac

NEED MONEY, YOU EGG HEADS HAVE BEEN TOLD. . .GET RID OF THE DEAD BEAT PROFESSORS, THE ONES THAT ARE NO SHOWS, THE ONES THAT HAVE STUDENTS FILL IN FOR. . .YOU KNOW WHICH ONES ALSO THE ONES THAT GO ON DO NOTHING FACT FINDING TRIPS TO SEE WHY THE SKY IS BLUE. . . .

crackertroy
crackertroy

@ASU_Student Azziz will probably cite this article to his credit in his next blog. Azziz is a megalomaniac who is using Augusta as a resume-building excursion. Not to mention using MCG buses for personal use and university money to make additions to his home. Azziz says "The structure of higher education is very resistant to change." NO AZZIZ the people are resistant to you forcing unnecessary changes down our throats. Maybe this Time magazine article will give Azziz that little touch of added prestige he needs on his resume to GO SOMEPLACE ELSE!!!


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