Nonobvious Revenue

File this one under “explainer journalism,” or maybe “explainer blogging.” It’s less about arguing a position than about filling in some common information gaps.

Dealing with COVID-19 from a budgetary perspective is more complicated than it seems. Yes, there are the obvious and real concerns about summer and (especially) fall enrollment. With tuition as the majority of revenue these days, a significant drop in tuition revenue can’t help but be felt in the overall budget. But most people know that.

This is about the less obvious parts of the budget.

For instance, in the summer, parts of campus are rented out to outside entities on a for-profit basis. That money goes into the “auxiliary services” budget, which is supposed to subsidize the rest of the budget. My own college, for instance, rents out the basketball arena in late May and June for high school graduations; this year, 24 were scheduled. Each one pays a facility rental fee. If those graduations don’t happen here, we lose that revenue.

We also host a set of summer camps for kids. They’re popular, they bring in revenue and they give local families positive exposure to the college. (My president likes to tell the story of his first time on this campus, when he was 11; he came here for a songwriting summer camp.) If we can’t host those, we take a short-term hit in revenue and a long-term hit in missed exposure.

We have four-year college partners who rent space on campus to teach bachelor’s completion programs. Depending on how long we’re closed, they may start looking for rent reductions.

We get a share of the revenue from the outsourced bookstore and food service operations. When the campus is closed, bookstore revenue drops and food service closes entirely. Those income streams dry up.

On the fundraising side, we take a similar hit. The foundation hosts a Scholarship Ball every June at a local country club. It has grown every year, and it routinely brings in a significant chunk of the annual scholarship budget. Due to COVID, the foundation has already canceled this year’s ball.

Noncredit programming takes a hit, too. In the summer the college sponsors bus trips for local seniors to go to museums or various historical sites, along with a guide from the college. The trips are popular, and they help build relationships that can lead to significant philanthropic support over time. With those canceled, we lose both short-term profit and long-term relationship-building opportunities. We had to cancel our study abroad programs, including a wildly popular trip to Italy for the culinary program. We also have to shut down some grant-funded job training programs for a while, with fiscal consequences for the college, the students and local employers.

Individually, none of those is devastating, but when they all hit at once, they leave a mark.

Admittedly, there are some small savings from going remote. With so many lights and computers off, electricity use (and therefore cost) is down. Use of copiers and the print shop is down. We didn’t have to order a new batch of Scantron forms this semester. (I’m not proud of the fact that we order them at all, but a savings is a savings.) Conference travel came to a grinding halt; instead of sending a half dozen people to the AACC this year, we aren’t sending any. In the very short term, that helps a little, though I’d argue that it’s penny-wise and pound-foolish over the long term. Over time, the cost of missed opportunities adds up.

The instances of savings are helpful but nowhere near the scale of the losses.

Outside commentators sometimes talk about “reinventing the business model,” as if we haven’t been doing anything other than teaching credit classes in the fall and spring. But that’s just not true. We, and most other community colleges, have aggressively monetized facilities and programs whenever possible, and have done so for years. That’s both good and bad. It’s good to the extent that we’ve been able to reduce the damage from other shortfalls and to provide community service. It’s bad to the extent that COVID has targeted those income streams. When you build budgets on the assumption of rental revenue, and that rental revenue abruptly goes away, you have an issue.

I’ve never seen a community college with a lazy river. In this part of higher ed, we really don’t have a spending problem. If anything, we’re frugal to a fault, as adjunct faculty around the country can attest. What we have is a revenue problem, made abruptly worse by the virus.

Virus outbreaks don’t last forever, which strikes me as an excellent argument for bridge funding to get colleges through this stretch. In the meantime, though, don’t blame us for canceled high school graduation rentals. That’s not an innovation problem. That’s a money problem.