Tuesday, April 14, 2015

Finances at Women's Colleges...and at Sweet Briar College...May Be Better Than You've Been Led to Believe

Reading articles and blog posts over the past few weeks with authors speculating about the prospects for women's colleges led me to see if this might be a good time to calculate a few financial ratios and play a bit with Tableau Public's visualization software.  

I certainly learned a lot and enjoyed the opportunity.  I have also concluded that analysis of financial information available through the Integrated Postsecondary Education Data System (IPEDS) suggests that the financial health of women's colleges generally, and Sweet Briar College in particular, may be improving and is better than what you might think.  

The following tables summarize data for two five-year periods for 46 institutions...members of the Women's College Coalition that report financial information to IPEDS.  There are also a couple of institutions included that were women's institutions during the early years of this past decade before deciding to admit men as students.  These were retained since women still comprised 90% or more of their enrollment.  

The analysis used follows a model laid out by Bain and Company with their Sterling Partners on The Sustainable University website.  These pages are enjoying a bit of resurgence in popularity among pundits and are typically cited favorably as evidence that higher education is on shaky financial footing.  In contrast, I found that few, if any, critics of the approach provided any evidence that they attempted to replicate the analysis initially published in a brief linked off the site and authored by Jeff Denneen and Tom Dretler.  Instead, most comments in this latter category focus on the many organizational and policy suggestions offered. 

To put it simply, I wanted to see if the model might work.  The ratios are easy to calculate and provide an added benefit that you can compare both public and private institutions.  So, I started with data from the FY 2004-FY 2008 time frame and found that eight institutions, or 17% of those in the study were characterized as "financially sound."  

The number considered "financially sound" then rose to 32 institutions, or 70% of the group when using FY 2009-FY 2013 data.  The financial situation for Sweet Briar College showed similar signs of improvement during this period, moving from cell A-3 to C-2 in the following tables.  The one women's institution in the group that did close at the end of FY 2014 was Lexington College in Chicago, IL and it landed in cell A-3.

The process for placing institutions in cells involves calculation of the differences in two ratios between two points in time.  Three cells in the upper right hand corner reflect increasing expenses as a percentage of revenues and declining net assets as a percentage of total assets...and are considered as unsustainable for institutions.  In contrast, the ideal situation represented in cell C1 in the following table results from decreasing expense ratios and positive changes in the equity ratios.

The current Sustainable University site indicates that it is updated for 2014 and classifies 43% of the institutions as unsustainable, spending more than they can afford.  Note that this current 2014 update appears to cover a six year period spanning FY 2007 through FY 2012.   The initial briefing paper linked from the site that I mentioned previously appears to have used data from FY 2006 through FY 2010.

I also used the same IPEDS data for the women's colleges and universities to create a quick dashboard in Tableau Public that is inserted below.  You can hover over the views to see an institution's name with the corresponding values or you can access the data set through Tableau.

The initial view in the dashboard places institutions on the map with the size of the marker determined by Fall 2013 FTE enrollment and the color by their classification.  The view in the lower right hand corner places institutions by their ratios for the FY 2009 through FY 2013 period...please note that the vertical axis here is reversed from that used for The Sustainable University model described above.  Finally, the view in the lower right hand corner plots two FTE enrollment figures for each institution.

With the exception of Lexington College mentioned previously, it certainly appears that three-fourths of the women's colleges and universities were in a healthier financial position at the end of FY 2013 than they were five years earlier.

Thanks for reading and I am looking forward to your feedback and suggestions!