Latest CBO Survey Shows Optimism Despite Headwinds

Despite palpable business challenges, the latest Inside Higher Ed Survey of College and University Chief Business Officers finds rising optimism among respondents.

The survey shows that college business officers are more confident than they were last year about both the short- and long-term financial sustainability of their institutions, regardless of the challenging headwinds facing higher education. However, respondents tended to view the state of their own institution more favorably than their peers’ on a variety of metrics, including projected financial stability, college costs and AI readiness.

Released today, Inside Higher Ed’s 2024 Survey of College and University Business Officers offers insights from the financial leaders of 114 public and 106 private nonprofit institutions, and four for-profit colleges.

The Financial Outlook

This year’s survey, the 14th annual edition, found that 83 percent of respondents believe their institution will be financially stable over the next three years, and 85 percent believe the same is true of the next five years. That number falls to 73 percent, however, when the timeline is 10 years.

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CBOs were less confident about their long-term prospects last year, with 72 percent indicating they would be financially stable over the next five years and 65 percent over the next 10 years.

Cindy McDaniel, controller at St. Peter’s University in New Jersey, expressed surprise at the increased optimism and wondered whether selection bias played a role in driving survey responses, suggesting that more institutions may be struggling than the results indicate.

“I think you are going to see a lot happen in the next three years that doesn’t fit with the survey,” McDaniel said.

Many small private institutions “are not in good shape,” she noted, particularly in the Northeast, a point illustrated by a swath of recent closures in New York, Pennsylvania and elsewhere in the region. Already more than a dozen nonprofit colleges have announced closures this year, including University of the Arts, Wells College, Goddard College and various others outside the region.

Despite their increased confidence, fewer business officers noted positive operating margins. Slightly more than half—57 percent—noted a positive operating margin for fiscal year 2022–23, down from 76 percent in the previous year’s survey. For fiscal year 2023–24, 62 percent of respondents said they expected a positive operating margin. However, that varies by sector, with 73 percent of CBOs at public institutions expecting the 2023–24 fiscal year to yield a positive operating margin, compared to 49 percent of those at private, nonprofit colleges.

More than half of CBOs—56 percent—said their institutions will be better off financially a year from now. They pinned those hopes on anticipated increases in enrollment and net tuition revenue, even as many institutions have deeply discounted tuition in their struggle to attract students.

George Middlemist, vice president and chief financial officer at Northern Illinois University, said he was surprised at the number of institutions banking on a financial boost from enrollment.

“Enrollment trends over all are going down, with a modest exception for the next few years, so we all can’t be growing unless we employ some new recruitment strategies to engage high school graduates that choose not to go to college,” Middlemist said. “Given the public perception around the value of higher education, we have some steep work to do to get that population.”

Many also reported good news on the endowment front. Sixty percent of respondents said their endowment was up somewhat, with another 11 percent reporting a significant increase in the past year. Last year only 30 percent of CBOs indicated a rise in their endowment value.

Consolidations, Costs and Cuts

Nearly 30 percent of CBOs said their institution should combine academic programs with another college—and 59 percent believe they should share administrative functions—but the vast majority noted a lack of discussion around possible mergers. Only 10 percent indicated that they have had serious internal discussions about a merger. However, in the demographically challenged Northeast, the share saying they’ve weighed a merger rose to 23 percent.

On the flip side, 14 percent of CBOs said it’s likely their institution will acquire another within five years.

As the former chief financial officer of Bloomfield College in New Jersey—which was absorbed by nearby Montclair State University in 2023 after it publicly sought a partner amid serious financial struggles—McDaniel finds it alarming that more universities have not moved faster to seek mergers. The merger process is complex and can span years, she noted, thus underscoring the need to start the work early.

“You have to entertain merger talks. You can’t just say, ‘Next year’s tough, let’s merge,’” McDaniel said, questioning how receptive college trustees are to merger possibilities.

Cost concerns may dominate public discourse about higher ed, but CBOs overwhelmingly believe in their own pricing models.

A whopping 94 percent of respondents said that their institution offers good value. But only 68 percent of CBOs believe that is true of higher education as a whole. And 69 percent believe that the public overestimates the cost of a college degree.

While McDaniel noted the pain of writing tuition checks for her college-age child, she also emphasized that “we’re charging what we have to to make ends meet.” She pointed to rising operating costs and the expansion of necessary services, such as student mental health supports.

On cost-saving measures, 71 percent of CBOs said they oppose cutting tenure while another 55 percent are against limiting tenure—though 50 percent indicated they would consider increasing faculty teaching loads. A slight majority, 54 percent, said they would not decrease athletic spending.

Other Findings

The survey probed a number of other areas, including artificial intelligence, turnover and more.

While much of the focus on artificial intelligence in higher education has been around student misuse and the potential for academic abuse, respondents had mixed views on the technology. More than half—55 percent—expressed optimism about the potential uses of AI in higher education, and 33 percent noted that they are already using AI to make more informed decisions in their jobs.

Fewer than a quarter of respondents—24 percent—expressed confidence in their own institution’s ability to handle the rise of AI, and 67 percent indicated they somewhat or strongly disagreed that higher education was prepared to grapple with the recent ascent of AI.

While turnover presented a significant challenge during and in the wake of the COVID-19 pandemic, those concerns seem to have cooled, according to survey respondents. This year 56 percent of CBOs indicated that turnover is about the same as last year, while 26 percent noted it was lower and 17 percent said it was higher. Only 12 percent of respondents expressed concern about turnover.