Friday, November 17, 2017

Q & A With MCA President Laura Hine

Debt, declining enrollment, and low endowments create a difficult environment for academic institutions. Memphis College of Art struggled with all three

Posted By on Fri, Nov 17, 2017 at 3:02 PM

click to enlarge MCA President, Laura Hine
  • MCA President, Laura Hine
As reported in this week’s Memphis Flyer cover feature "Art of the Deal," the Memphis College of Art was severely impacted by a declining enrollment. But what does that really mean? And was it merely the kiss of death to a small, private college already struggling with a low endowment and debt?

There’s some context necessary for understanding college enrollment and trends in higher education. An institution’s reputation, and the kinds of training programs it offers are meaningful of course. There will always be a Harvard, probably. But enrollment numbers are also aligned with things as basic as birth rates, and one of MCA’s last major economic crises came about in the 80’s, as the last members of the enormous Baby Boomer generation reached the end of their formal education. Enrollment dropped from 246, which was an all-time high in 1976, to 207 in 1980. After losing only 39-students, the school was described as being, “under siege financially,” and it faced faculty layoffs, major changes to academic culture, and an $80,000 shortfall.

When wages are stagnant while tuitions go up colleges are taxed with finding larger and larger amounts of financial aid. Unemployment, on the other hand, can increase some enrollments as displaced workers look to acquire skills, marketability, etc. while a warming economy (conversely and counterintuitively) shrinks enrollment by sucking those potential students back into the workforce.

90% of MCA students have traditionally come from within a 300-mile radius of the school so, in this case, proximity and convenience have driven enrollment.

MCA’s interim President Laura Hine understood that the Overton Park-based art college’s future was tied to smaller, realistic headcounts, a 21st-Century curriculum, and funding models that hedged against the natural ebb and flow of enrollment. She also knew that enrollment was just one part of a three-pronged threat the school was facing — a threat that included crippling real estate debt, and an endowment too low to sustain the school during harder times.

Hine spoke to The Flyer for this week’s Art of the Deal cover story. Here’s a transcript of the conversation. It has been edited for length, focus, and clarity.

Memphis Flyer: I know you’ve been at the school for a while now. But you’ve only been in your current position for what six or eight months, right?

Laura Hine: I came here in the academic year 2014-15 as the VP for Advancement and when Ron retired in the middle of last semester I was asked if I would take the position and I said yes I will.

When you came on as interim President, did you have any idea you’d be the person who’d announce the school was closing?

No I didn't. I've been here, and there’ve been serious economic and financial challenges. Of course I was aware of those. But it wasn't a thought in my mind that it would come to this. Someone asked me would you have taken the job had you known this would be the outcome and that's a really hard question for me to answer because I love the school. But this has been the worst professional experience of my life in terms of the sadness and the heartbreak of it all. You have jobs, and you work hard. I'm not afraid of any of that and I've done that my whole life. But I've never had the same passion and love for something as I have for the school, so I think that's what's made it different from any of the work I've ever done before. The board and Ron had approached me at some point prior to my being asked to take up the job — more or less rather suddenly. Would I have an interest in applying for the president's job at the end of Ron's tenure and I said yes, it's possible I would throw my hat in the ring. Then Ron decided to retire and the college needs someone to step into the position, so I accepted it on the interim basis. We never made it to the process of full National search because we were otherwise occupied .

Looking back at some of the media when Ron Jones first joined MCA — He often seemed like maybe he wasn’t fully aware of what he was stepping into — or that the problems got much bigger, much faster than anticipated.

He inherited some situations I think that probably caught him a little bit unaware and he very quickly had to spring into action and take some steps that would stabilize the college. There were issues related to accreditation, and he stabilized that. So much has been written about the real estate debt. I know the college sold some properties at the time. There were some active layoffs. Your instructional cost is the largest line item in your budget — as it should be. But I think there were some faculty layoffs, and at that time we got to the accreditation problems etc.

It did seem like a lot happening at once.

When I got here people said, “You jumped on a sinking ship.” I said, “Well, it was listing.” But there's always an opportunity for stabilizing a sinking ship.

I think there’s a sense — related to the abruptness of the announcement — that the school wasn’t exploring all its options, beating every bush...

We're running annual campaigns and fundraising. So, to say we haven't been out in the community raising money is just not true. There are various events for fundraising. To say we aren’t beating every bush is just wrong. I would say, within the major donor funding community, there was no stone left unturned. People raised the issue of Sweetbriar, when the alumni came in and saved them. Well historically, if you look throughout the entire college’s history, our alumni are not wealthy people. And they have been asked to give and give. They are part of every campaign to raise money. But to look to them to provide the kind of funding this institution needs, it's just not there. The funding capacity is just not there. They can help in other ways or support the school in other ways. But they don't have the capacity to give on a large scale. The problem with that — Let's say you have a pretty successful campaign and it yields $2,000,000. Well that's that’s one year. But unless you have ongoing commitments, and know you can count on those commitments, what happens here is, you get into a situation — and this was at the front of the minds of the board when they made their vote — you don't know that you have funding lined up to teach them out. Could you have raised enough money to maybe get you through a year? Fine, you've now admitted new students but you have no funding commitments that will sustain the institution over a longer period of years. There is no private college of any kind that doesn't rely on its donors to survive and the major donor community here has been extraordinarily generous to this college over a very long period of years. But the efforts to line up multi-year commitments didn't materialize. So then you have a situation.
I know the teach-out is scheduled to end in 2020. Will you still have students then? Or faculty? Or will they transfer to other schools, get other jobs?


There will be students all the way up till commencement May 2020. We are staging a transfer fair on November 9th. But let me explain to you how this works. We are professional Fine Art and Design School. The way art curriculum is built doesn't translate easily to other environments.The pool of credits that are accrued here by our students are studio credits. So the longer student goes in our environment and uses their federal financial aid, the more obligated we are to see them through to degree completion. When we talked to our accreditors after the board vote trying to get some guidance on accreditation during a period like this, we asked about what would be appropriate for the teach out. They said, “well, we’ve unfortunately had too many of these kinds of conversations because of the failure rate of small private liberal arts and fine arts schools. And the answer is how long can you teach out? There are some schools they just go ‘we're closing the doors tomorrow. We don't have the means to carry on. We don't have the funding in the resources to carry on.’” And that's what happens. In this instance we looked at how long can we carry on if we liquidate our assets and how long can we carry on and teach out students. You know, there's no book or roadmap on how you do this with compassion and understanding for all of the people who are going to be impacted, so in my mind it was imperative that we come out as soon as possible and share the information. The accreditor said, “You can wait till the spring,” and I said, “There's no way we're going to do that because what happens you're going to have students your continuing to accrue credits without in the information that they need? This is something that's going to impact their lives.”

What about faculty?

Decisions about faculty are going to be based on student need. You go back to what's our mission? It's to educate students. So faculty decisions will be made based upon what faculty are needed to serve the students. So you have to look at things like do program analysis. What are the larger what disciplines? What are the largest populations of students that we need to serve? So the faculty that are needed to serve those students are the faculty who will remain. In a general sense there are never any guarantees about faculty saying through four years. Faculty go and come and make career choices and decisions based on their life circumstances. based on student need.

I’d like to talk a little about the real estate debt. I know a lot of it happened before you got here, and I don’t want you to feel like you have to answer questions right now if those questions are better suited for someone else, or feel like you’re putting words in other people’s mouths.

I'm pretty familiar with the history because I've had to become familiar with it. Because it's been a financial challenge for the school. So I'm familiar with a snapshot of the incurred debt. That was in the first decade of the 2000s. And it grew to over $11-million. And I think there's always this notion — and it's human nature to point the finger of blame but 3 fingers always come back — I just don't like to collapse into that. There were some detractors. And these steps were taken during probably what you would say was a more hopeful time. There was an expansive vision. That just frankly didn't materialize. And the folly of it? There's some validity to that. It's kind of a “you build-it-and-they-will-come” versus “there here and what are we going to do about it?” All the while you have the wild ticker tape of nationally declining enrollments running in the background.

I don’t think I realized it was as high as $11-million.

It has been a financial albatross around this institutions neck for many years. When I first came here in there was a board-led fundraiser and the philanthropic community showed up for this institution in a big and mighty way. And we took that money and we reduced debt by 31%. We had multiple loans and the interest rates were pretty high. So what we did was, we found out about a bond issue tax-exempt refinance mechanism. So we can colidated our debt, went through that refinance, and got interest rates down to 3.67%. Over the life of the loan it would save the institution about $800,000 in interest, so it was a very smart thing to do. At the same time we looked at Nissan [Graduate School] downtown, and when you looked at the operational expense associated with having a building that far from where we are, it was about a $230,000 a year expense just operating the shuttle and security down there. So a decision was made to sell the building.

Let’s talk some more about enrollment.

We've seen declining enrollment. The other thing: Recruiting students here is one thing and retaining students here is another. This is something I wasn't really aware of when I started working here. I always had this impression there's a pretty affluent student body of the College of Art. These are kids who can pursue a fine art degree etc. And I want to be careful here because I don't want to disparage any of our existing students — it's important me that that doesn’t happen. There are no shame cooties for this institution that you're serving kids who are largely coming out of poverty. These are talented kids and we change their worldview and they go out and they're different people when they leave here than when they came in. But their financial barriers are considerable and present a lot of challenges. You started to see more and more pressure in the post-recession era on colleges and universities every institution struggles with enrollment, with no exception. There is a fight for every headcount in every college, in every University. In the post-recession era it starts to catch up. With the Disappearance of the middle class normal families the middle class families ability to pay a fine and liberal arts schools tuition. You have things that occur at the state level like Tennessee making the first two years of community college free. It's hard to say no to two free years of school, and that deals a blow to institutions like us.

I’ve heard mentions that there may have been missed opportunities in terms of identifying emerging disciplines and developing curriculum...

I think there were some missed opportunities to build out programs here in areas where you're seeing enrollment upticks… Everything is digital in terms of the interest and demands of students on a national level. They're looking for design programs, user experience, user interface, app development and that kind of cutting edge design program. And we have some classes here, but there wasn’t an emphasis on that in our curricular developments. Due to the generous support of some of our donors we had some consultants come in to help spur thinking and passion for program changes and development but those consultancies didn't lead to any actions in a period where we didn't have any time to waste.

I know Ron Jones wanted to upgrade, or modernize enrollment. And he brought in someone from a different kind of academic environment. From the for-profit environment. Can you speak to what kinds of changes were made? Did they work?

The new changes in enrollment didn't work out as we intended it to. That's clear. The thinking was, we needed to look at the pressures that exist in the macro environment — Like community college, free tuition etc. There was the fight for every headcount and I think that the choice was made to bring in someone who had a very aggressive approach to enrollment. And I think the short answer I'm willing to give is I don't think that person was a good cultural fit here here, and I wasn't shy about saying it.

This happens at a time when a lot of colleges are struggling and failing. I was hesitant to describe it as a trend, but the more I look...

It's a trend. It's an absolute trend.

But is MCA just a statistic? Just part of that trend or it’s story — how we arrived here — unique even inside that trend?

I think it's truly a combination of all of it. You cite the national trends the declining enrollment in the traditional and fine arts. There are three factors that determine the fate of an institution and we had on all of them: declining enrollment, low endowment, and debt. That's 3 combined factors that will sink an institution. If you have a large endowment that sustains you. We don't have that. It's important to note to this institution has maintained the corpus of its endowment. You read about the colleges like Sweetbriar, where they were dipping into the Corpus of their endowment to sustain themselves and to keep their operations going. We haven't done that but when you look at the size of our annual drawdown — we have a 5% drawdown policy. So with an endowment of about 4.7- 4.8 million, 5% comes to $225,000 to $255,000 annual draw down on a 10 or 11 million dollar budget. It doesn't help us. I mean, it does help us, but only to that amount and then there’s no more. I've seen it written over the last week,people saying, “It’s just not that much money. It's onlu 6.9 million dollars right?” We have all three of those kisses of death for an institution of higher education in a post-recession environment. You have to look at statistics. I think closure rate has doubled in the last decade. We're not unusual. We talk to our accreditors, and there is a heartache in higher ed nationally. If you ask a person like me, especially in the political environment we’re in right now, I don't think there’s ever been a more important time for the liberal arts and the fine arts. I think this dynamic is a tragedy at a time when we need people who are educated in this fashion — people can change the world with their worldviews, through their expansive thinking.

You mention conventional wisdom — It’s only $6-million. Which is a lot of money, but I think when other institutions have raised that kind of money, I understand why people might say that.

To go back in address the debt issue, you have several plans for consideration, but we could not secure multi-year commitments and that's what you got to have. Say you raise a million dollars and admit new students then next year you go to the same people who dug deep, and they don't have it the next year. So it really is a process. Will the major donor community sustain this institution for years while we put a plan in place? It's interesting to me that people are telling me, “sell everything south of Poplar. Eliminate your debt. Invest in Rust Hall. Well, that was the plan — go back to what we used to be. Lower expectations on head count. Go back down to a sustainable size. We couldn't line up the commitments.

You sound like an urban planner talking about sprawl…

Right? Forget growing your way out of it. You're not going to grow your way out of it. So that was a plan that we weren't able to line up commitments for. and I think the reason was — there was a feeling, all the while this is going on — we missed our enrollment goals by a lot. Where did we land on enrollment this year? 35% less than we’d projected. Is that the remnants of enrollment is a process or is it truly just a product of the times in terms of the declining enrollment. That resulted in an even greater deficit, and I think it was kind of determinative in a sense, that the model that the school has had just isn't viable.

It’s probably easier to sell the idea of expansion though — whether it’s a good idea or not— than shrinking. You can see expansion in the landscape. Shrinkage? What you see is absence — negative space.

Like, "Can someone just give me a visual on what Rust Hall will look like if we do these kinds of programs?" Because you can go and you can sell that. I think that’s probably part of it. There's a weariness that sets in too. Our donors have been so generous to this institution, and they are called upon to support the community and other nonprofits in ways that are just constant. In fairness to them, it's probably just weariness.

I think I read that the school’s budget model is based on something like 80% tuition and 20% fundraising, is that still accurate?

I would say that's about right. There were striking fundraising years, like the first year I was here.There was a major fundraiser. See, you have these years when the philanthropic community comes on extremely. You'll see that kind of say, “wow that was a pretty good year!” And then you start to see it settling down into just really normal ranges. There's been so many plans and so many projections. Anyway you slice it we are going to need donor support at about a million to a million .5 every year. That's the nut.

Do miracles happen?

I think it was High Ground News that asked what it would take. I think I said it will take a $30-million endowment. Well, why $30-million? Because 5% of $30-million is $1.5 million, and we would need to know we had that kind of resource available to us under pretty much any scenario. And that's where the $30-million amount comes from. So there was a directive from the board to reduce our costs. Cost restructuring is a euphemism for a lot of hard decisions that are made. And I said, “Yes. Okay, we will reduce our costs. I largely come from the for-profit sector so I very much understand when you have a deficit there are two ways to address it. You either cut your costs or you increase the revenues. It's just that simple. It's not even a magic formula, it's very basic. So the board understood that we needed to cut costs. And I think that a lot of hard decisions were made in the cost restructuring that have been demoralizing for the institution on a lot of levels. But where they were a necessary part of a larger plan to create a sustainable future.

How do you mean demoralizing?

I don't know if anybody else has spoken about layoffs. It creates anxiety in the environment that’s almost palpable the minute you walk in the door, you know? Because it signals to the people that there are issues. And they are financial issues Anytime you go through situations like that it’s fear producing. That's what I mean by demoralizing.

click to enlarge PHOTOGRAPHS BY JUSTIN FOX BURKS
  • Photographs by Justin Fox Burks

Tags: , , ,

Keep the Flyer Free!

Always independent, always free (never a paywall),
the Memphis Flyer is your source for the best in local news and information.

Now we want to expand and enhance our work.
That's why we're asking you to join us as a Frequent Flyer member.

You'll get membership perks (find out more about those here) and help us continue to deliver the independent journalism you've come to expect.


Favorite

Comments

Subscribe to this thread:

Add a comment

ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Readers also liked…

Most Commented On

ADVERTISEMENT
ADVERTISEMENT
© 1996-2018

Contemporary Media
460 Tennessee Street, 2nd Floor | Memphis, TN 38103
Visit our other sites: Memphis Magazine | Memphis Parent | Inside Memphis Business
Powered by Foundation