Academic Closures with Husch Blackwell
Host: Hello, and welcome to “Prevention and Protection,” United Educators’ (UE’s) risk management podcast. Today’s guest is Ellen Babbitt of Husch Blackwell. She is here to discuss academic program changes in higher education and to highlight resources on the topic that she and her colleagues wrote for UE. Hosting the discussion is Hillary Pettegrew of United Educators’ risk management department. A quick reminder that you can find other episodes of Prevention and Protection, as well as risk management resources, on our website, www.edurisksolutions.org. This and all episodes of Prevention and Protection are also available on iTunes. Now, here’s Hillary Pettegrew.
Hillary: Thank you, and welcome everyone. I’m Hillary Pettegrew, senior risk management counsel with UE, and I’m happy to introduce today’s guest, Ellen Babbitt. Ellen is a partner in the Chicago office of Husch Blackwell and has devoted most of her career to representing and counseling higher education institutions on an array of issues, including general employment practices, tenure and academic freedom on the faculty side, and, relevant to today’s discussion, academic program changes ranging from isolated program reductions to full institutional closures. Welcome, Ellen, and thanks so much for joining me.
Ellen: Thank you so much, Hillary. It’s my pleasure to speak with you today.
Hillary: So to kick things off, Ellen is the lead author of five resources that UE recently published on our risk management website, EduRisk Solutions. They consist of a Guide to Manage Risks of Academic Program Change, and four related checklists; the first addresses general considerations applicable to all types of program changes, and the other three each focus on a different specific type of change: a program reduction or discontinuance, a change of institutional control, and institutional closure.
Now some listeners may be familiar with a monograph by Ellen that we published quite a few years ago. It was titled Closing an Academic Program Without Litigation: Process, Planning, and Pragmatism. And since then, as anyone who reads the Chronicle of Higher Education or Inside Higher Ed even casually probably knows, in recent years many more colleges and universities have had to take cost-saving measures ranging from reducing or terminating individual majors and programs up to and including the most drastic option, institutional closure ─ and as a result, UE asked Ellen if she would update and expand her earlier monograph. We were delighted when she agreed. Because of the new project’s much broader scope, she enlisted help from several of her colleagues with expertise in different areas. Ellen, could you give a shout out to the other authors of the pieces?
Ellen: Yes. As you noted, I’m now part of the higher education practice team at Husch Blackwell. And among other benefits of joining this group, I have gained some colleagues with deep interest and experience in practice areas that are now essential whenever we grapple with the legal and operational aspects of program change.
Lisa Parker, one of my partners within the Chicago office, is extremely experienced and knowledgeable in the area of program change, and changes of control. She’s actually my “go-to” colleague on anything having to do with a program change that has accreditation or regulatory implications.
Lisa Hoskins is a consultant working out of our Kansas City office; she was previously employed within the Department of Education itself, and she brings to the table valuable experience in how our clients need to address federal financial aid issues with the department whenever we reduce programs, or we discontinue programs, or we affiliate, or even close.
Kate Leveque, a partner working out of our St. Louis office, has invaluable experience in the employment aspects of institutional change. This includes issues of administrator and staff employment as well as faculty employment.
And Karen Courtheoux is my colleague in Chicago who works very closely with me on these and other matters.
So, yes, this means our updated publication has five authors this time, but I think this illustrates the essential reality we’re now facing in any institutional change scenario: that is, the challenges are varied and significant now, so it really does takes a village – the right village – to assess and address these challenges.
Hillary: So Ellen, over the years, can you estimate about how many higher education institutions you have advised on one aspect or another of academic program change?
Ellen: Yes. They do range from a restructuring to some very dramatic changes of control, and I am certain I have counseled at least 50 different institutions through decisions ranging from program reduction to closure. Lisa Parker has likely done even more because she’s very involved now in changes of control. And, as I think everybody knows – everybody within higher education or following higher education – the pace of these changes has increased significantly within the past 10 years. In the 1990s, issues of production reduction or closure probably came up once every five years nationally; now, it is more like once a month or even more frequently. Moreover, the diversity of our institutions considering such changes has widened. Now not-for-profits and for-profits affiliate; private institutions merge into public institutions; institutions sell programs; and programs actually relocate to a different state or a different institution. The diversity of higher education means that these kinds of transactions now vary very widely.
Hillary: So what are some common factors underlying the economic pressures that have driven many program changes in, say, the last five to 10 years?
Ellen: There are many factors, and these are just a few. A leading driver is the change in demographics, which means that there are fewer and fewer potential students of traditional college age – and therefore there’s more competition in the enrollment arena. Public institutions have also experienced a dramatic decrease in state funding. This has set up a vicious cycle in which public institutions must increase tuition, whereupon they also experience increasing difficulty meeting enrollment targets.
At the same time, higher education has experienced a diversification of opportunities for students – community colleges, for-profits, and online programs now offer options that simply were not available 30 to 50 years ago, which is when many of the operating models for higher education were developed. Now this diversification is a positive development for many students, but it has placed additional pressure upon traditional programs and upon liberal arts programs in particular. It’s also become clear that changes in the economy and demographics have made certain types of traditional liberal arts programs less attractive to students now. Many institutions have faculty members tenured into departments or disciplines with waning demand. This places additional economic and strategic pressure upon institutions that want and need to innovate in order to thrive and sometimes to survive.
Hillary: Are there typical early “red flags,” so to speak, that may signal trouble is coming?
Ellen: Well, I think multiple studies have identified as “red flags” some of the following: enrollment below 1,000 students; tuition increases of over 8% over a short period of time; tuition discounts of over 35%; and dependence upon tuition for more than 75% to 80%, I’d say, of revenue. I’d add to that a proliferation of programs that are underenrolled but are difficult for the institution to reduce or cut.
Hillary: As the guide you created explains, institutions may start with ─ relatively speaking ─ small cost saving steps like reducing or eliminating certain majors, but those measures prove inadequate and the institutions eventually have to take more extreme measures, up to and including closure. Do you find that’s the usual trajectory – sort of “death by 1,000 cuts” ─ for institutions that do ultimately end up closing?
Ellen: It often is. It often can be the trajectory, and the “death by 1,000 cuts” scenario may be highly demoralizing to the campus and destructive to the reputation and mission of the institution, and that sets us up for failure. And that’s why we recommend in the guide that a board, leadership, and faculty think deeply and strategically early on about what is really needed to preserve the institutional mission – it’s not just about focusing on short-term cost-cutting, but about mission. Sometimes an institution is better off choosing at the outset a fairly radical course of action. On the other hand, any board and leadership group would prefer to do less radical surgery if minor surgery will do the trick. So this is difficult. These pose difficult judgment issues, and that is one reason why leadership should take the time necessary – and call in the experts necessary – to really evaluate the options, even if reevaluation may prove necessary down the road.
Hillary: In your experience, what would you say are the three biggest mistakes institutions make when it comes to program changes?
Ellen: Following up on my prior comments, I think that institutions fail to think deeply and strategically at the outset about what they are trying to achieve. It’s not just about surviving semester to semester until some miracle happens – it can’t be about that. It’s about realigning to continue fulfilling your institutional mission, hopefully, far into the future. Sometimes the best way to do that may be to affiliate with another institution. And leadership needs to be willing to think strategically, creatively, and flexibly about options.
Second, we think it is also a major mistake to act too quickly, without planning and assessing the parameters of the institution’s authority to make changes. We have to know the laws, the accreditation requirements, the accreditation promises you’ve made, and your own internal policies. These will frame your options to a very significant extent.
A third related and very serious error sometimes is to depart from the institution’s own policies and procedures, including the provisions of your bylaws, faculty handbooks, and student handbooks. Unfortunately, nothing will more quickly turn a difficult situation into a legal and public-relations disaster than failing to follow your own rules.
Hillary: So Ellen, whose interests should take priority when an institution is considering any type of program change?
Ellen: Well, all higher education attorneys, I think, would agree that the interests of students take priority even over the clearly significant interests of your faculty and staff. Sometimes institutional leadership tends to focus upon the challenges posed by the tenured faculty, or posed by difficult faculty handbook provisions. Actually, the most important interest is the interests of students in completing their courses of study without interruption. Both as a legal matter and as a matter of fundamental fairness, we recommend making student interests the priority. This also helps ensure that decision-making aligns with the institution’s fundamental mission. Our fundamental missions are focused upon education. Not on, with due respect, keeping the campus employed. Student interests have to be paramount.
Hillary: What types of litigation have you seen arise from academic program changes?
Ellen: The types of litigation that can arise from academic program changes are varied, and they can be very serious. Students can sue to try to keep a program open, arguing that the institution breached its promises to them and owes them a teach out. They can sue for consumer fraud, claiming that they were misled into attending an institution only to learn that a particular program or major was being eliminated. They can even file class actions or complaints with the state attorney general. These have all been done and are all very serious when they occur.
Faculty also raise contract claims, based upon the faculty handbook, or discrimination claims, based upon the selection of particular faculty members for layoff. Unionized faculty can file claims of unfair labor practice.
There are other types of issues that arise. Sometimes institutions are alleged to have mishandled restricted scholarships or funds in the context of a change of control. State regulators or even angry donors file suit.
We don’t want any of these things. The possibilities are many and they are very serious. And it’s worth noting that litigation arising from a program change can work reputational as well as direct financial harm upon an institution. To the extent this comes at the wrong time and decreases enrollment, it can quickly eat up all of the anticipated benefits of the program change. So litigation can be very serious, and we should treat it as such.
Hillary: Ellen, if you could give one piece of advice to the leadership of an institution that so far hasn’t implemented program changes to cut costs, but is facing the possibility, what would that advice be?
Ellen: Simply speaking, I’d say, “Take the time to plan.” Don’t act precipitously. Take the time to locate your applicable policies, procedures, accrediting commitments, catalogs, and other governing documents. These may form the basis for stakeholder expectations. They’re also legally required. Take the time to educate those who are going to be making decisions. Take the time to comply with your applicable policies and procedures. And take the time to think about your students. So simply speaking, I say take time. It will pay off, not only in risk management but also in underscoring for your commitment to doing the right thing and your commitment to considering the interests of all constituents before you take action.
Hillary: That is great advice, Ellen. Well, that’s all the time we have today. Thank you again to my guest Ellen Babbitt for sharing her insights, as well as to Ellen and her co-authors for working with us and creating the guide and the checklists. UE believes they will provide very practical help to institutions considering any academic program changes – and again, UE members can find these resources on our risk management website, EduRisk Solutions. Thank you to everyone for listening.
Host: From United Educators Insurance, this is the Prevention and Protection Podcast. For additional episodes and other UE risk management resources, please visit our website: www.edurisksolutions.org.