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With Universities Feeling Financial Pressure, an Initiative Looks To Spur Partnerships

April 07, 2021

The following article is from Inside Philanthropy

Before the pandemic struck, the Kresge Foundation’s website mentioned an opportunity to help universities save money by partnering with other schools to consolidate and share “back office” services like payroll, finance and IT. Only one organization applied.

“We removed the language a few years ago since there seemed to be so little interest,” said Bill Moses, managing director of education.

This anecdote captures an uncomfortable pre-pandemic truth across the higher ed space. Despite facing an array of pressing financial challenges, leaders still passed on a funder’s offer to reduce costs. When I asked Moses why he thought this was the case, he said that leaders were often reluctant to pursue partnerships, since “public candor about an institution’s financial health can impact donations and applications.”

University leaders also have to contend with long lists of priorities, said Lynn Alvarez, vice president of programs and strategy for ECMC Foundation, another funder supporting this work. “Carving out the time to do the important and forward-thinking work of exploring partnerships usually falls to the bottom of the list.”

The pandemic, of course, has changed leaders’ calculus. Writing in Forbes last October, Michael Nietzel, former president of Missouri State University, noted that the pandemic has forced universities to consider mergers and partnerships, citing Illinois’ Robert Morris University’s integration with Roosevelt University and the state of Pennsylvania’s plans to consolidate various colleges under a single unit.

“Although one could claim that these closures involved mostly small colleges that had been on the enrollment and financial ropes for years, and therefore aren’t the best examples of schools knocked out by the pandemic, that view betrays a false optimism in light of the major universities and university systems now considering large-scale consolidations along with the faculty layoffs often preceding or accompanying them,” Nietzel wrote.

So what’s philanthropy’s role in what Nietzel calls “higher education’s big shake-up?” For an answer, we turn to the $2.5 million Transformational Partnership Fund (TPF).

Established by the ECMC Foundation and SeaChange Capital Partners, with additional support from Ascendium Education Group and Kresge, the fund will enable colleges and universities to “explore student-centric partnerships and collaborations that could meaningfully transform how they operate and enhance their ability to provide reliable, high-quality educational opportunities for students.”

For the funders behind the collaborative effort, it’s an extension of priorities that have emerged or become more pressing as academic institutions faced hard realities during the past year.

Pandemic-era priorities

The higher education grantmaking of the Kresge Foundation, one of the largest private foundations in the United States, aims to increase college access and success while reducing inequitable student outcomes. The foundation advances these goals through three focus areas—urban pathways to college, institutional capacity building, and aligning and strengthening urban higher education ecosystems.

In mid-February, Moses laid out Kresge’s five 2021 grantmaking priorities on the foundation’s site. They include mitigating declines in first-time enrollment, strengthening college promise programs, sustaining equity-driven student success solutions, prioritizing student persistence, and supporting re-enrolling and transfer students.

The Los Angeles-based ECMC Foundation supports higher education and career success among underserved populations. Last year, the foundation awarded $44.8 million in grants and total investments, a 13% increase over 2019. The foundation awarded 443 grants, a 52% increase over the previous year, added 182 new organizations to its portfolio, and supported organizations in 48 states.

In 2020, the foundation launched the GO! Program for Educational Equity, which distributed $500,000 to 37 organizations to advance racial equity in education, and committed $8.5 million to four “big bets” designed to transform the postsecondary education field in the COVID-19 era: improving online career and technical education, catalyzing new thinking around transfer pathways, exploring innovative financing models, and creating the Transformational Partnerships Fund.

Obstacles to collaboration

Moses and Alvarez have thought long and hard about why university leaders don’t actively pursue collaborations. Some are reluctant to partner with institutions they perceive as competitors, while others fiercely guard their independence. “There is more than a nugget of truth in the term ‘ivory tower,’” Moses said.

Many leaders worry about how the public will respond to a potential partnership. College isn’t cheap, and parents and students may think twice before committing to an institution if they think it might close. A university may have to cut programs if it merges with another institution, potentially imperiling its accreditation. And leaders, understandably, seek to avoid bankruptcy at all costs, as it inhibits their ability to offer financial aid.

Leaders also need to consider how alumni donors might react. “Our experience is that alumni and donors will rescue a college once, possibly, if they think there are dire short-term problems but that there is a good long-term future,” Moses told me. “But donors tend not to support institutions more than once if they think problems are not being addressed.”

Rather than opt for potentially disruptive partnership and mergers, leaders “run full steam ahead until they run out of financial tracks,” Moses said.

When university leaders do engage in partnerships, they are often one-sided or more symbolic than real collaboration, Moses said, citing “rarely used articulation agreements between community colleges and four-year institutions, or the lack of shared purchasing or service management agreements among colleges that may be close neighbors.”

Of course, many leaders do want to explore meaningful partnerships. But they often lack access to the requisite technical acumen and legal expertise to navigate regulatory hurdles. “That is why providing funding that can catalyze action and provide college leaders with funding to bring on help is so valuable,” Alvarez said.

How the fund came together

Before joining ECMC in July 2019, Alvarez worked with other foundations in creating similar funds focused on partnerships for nonprofit organizations. Alvarez was also familiar with the work of the New York-based SeaChange Capital Partners, a nonprofit advisory firm and merchant bank that facilitates transactions by making grants, loans and investments.

Alvarez reached out to SeaChange to explore the idea of creating a fund specifically for institutions of higher education. She ran the idea by Kresge’s Moses, who, having “seen the storm clouds on the horizon for higher education” for several years, signed on to the initiative.

Alvarez’s pitch came after Kresge facilitated Georgia State University’s (GSU) merger with Georgia Perimeter College, and helped other higher ed nonprofits conduct merger negotiations. “For Kresge, the direction became clear in June 2020 when one of our board members mentioned how much colleges needed this kind of support given the financial and business model pressures imposed by COVID-19,” Moses said. “We were delighted when SeaChange and ECMC took the lead and were very pleased to participate and excited about their vision for the Fund.”

After several months of discussions with experts in the field and other funders, SeaChange submitted a request for funding to ECMC Foundation to create the TPF. ECMC, Kresge and the Ascendium Education Group, a Madison, Wisconsin-based student loan guarantor, collectively developed grant eligibility. “The criteria identified are aligned with the mission and priorities of all three funders and are the cornerstone for the fund,” Alvarez said.

A focus on underserved students

The TPF will fund as many as 20 pairs of institutions over its first three years through catalytic grants up to $100,000 per partnership. Partnerships can include partial mergers, sharing of facilities and infrastructure, co-curricular offerings and student services, and business/administrative consolidations.

Institutions will receive technical assistance and access to relevant resources collected from advisors and other third parties. According to the TPF’s press release, the fund “has the capacity to expand the offering if the need arises.”

To qualify for funding, one or more of the participating institutions must serve a student population that is at least 25% persons of color and/or where 40% meet the financial criteria for Pell eligibility. The partnership should also be expected to produce “materially better academic outcomes” for students attending one or more of the institutions. Alvarez told me that the fund’s eligibility criteria lets potential funders know their support “will be focused on improving outcomes for students of color, students from low-income backgrounds, and other underserved populations.”

Acknowledging that leaders may still be hesitant to pursue partnerships that may rankle administrators, faculty and alumni, the fund ensures that “institutions seeking assistance can approach the fund with the assurance that all discussions will remain confidential.” Click here for more information on the fund.

A funder to-do list

One of the big stories in higher ed philanthropy has been how funders have stepped up pandemic-era support for universities serving disadvantaged students. We’ve seen donors provide unrestricted support to community colleges, historically black colleges and universities, and tribal colleges, guided by the idea that the recipient institutions are best-equipped to allocate the funding according to their needs.

By incentivizing institutions to embark on partnerships and collaborations, ECMC and Kresge are taking a more operationally focused approach, cognizant of the fact that, according to the TPF’s press release, 19% of all Black students currently enrolled in college or university are attending an institution that is at risk of failure. For ECMC, this work also includes improving online career technical education, providing grants addressing students’ basic needs, and investing in “edtech innovations that provide students advising and counseling,” Alvarez said.

And although Kresge will fund some entities new to its portfolio in 2021, it will focus primarily on “deepening existing grantmaking, investing in partners that we believe must be sustained to address the current era’s crisis and lay the foundation for enduring success,” Moses said. For example, Kresge will support efforts to scale the kinds of data-informed support interventions that helped GSU double graduation rates and eliminate equity gaps based on race, ethnicity and income levels for six consecutive years.

Moses encourages his fellow funders to focus on reform-minded institutions that serve historically disadvantaged students at an affordable price.

Philanthropy should consider “what real public benefit institutions are providing to students and the world at large,” Moses told me. “Are the institutions they support perpetuating inequality or enhancing opportunity? Are they supporting the needs of today’s students, who are often juggling families and jobs and may be suffering from poverty? And are they considering how technology, not as a fad, but as a tool, could be helping to make higher education more just, adaptive and higher-quality to meet the needs of a modern era?”

Evolve…or else

Prior to 2020, equity advocates implored funders and universities to make college more affordable and accessible to historically underserved demographics. For many of these advocates, progress was incremental at best. COVID-19 forced administrators into action, and while higher ed’s response had its flaws, “it proved that institutions can, if they want to, be more flexible and adaptive than any of us dreamed,” Moses said.

That said, higher education also seemed “tone-deaf to the legitimate concerns of its students—many of whom often borrow tens of thousands of dollars to attend,” he said. “Their actions sometimes made it seem that their financial health outweighed their public missions, commitment to quality or the health of their students, faculty and neighbors.” Moses thinks these concerns may translate into less government support, which could put additional strain on traditional higher education.

Higher ed fundraisers find themselves navigating this perilous landscape. If the public loses faith in higher ed’s value proposition, fundraisers’ current woes may turn into an existential long-term trend.

Moses advises fundraisers to “emphasize the virtues and public benefit of higher education—and how it can respond to the challenges and needs of our age. Without the research nurtured in higher education institutions, our society would be much less able to face and overcome the challenges of pandemics, climate change and social inequality.”

Institutions that are willing to change, focus on the public good, and aim to serve students well at an affordable price, will flourish—and the donors will follow.

“But institutions that pretend they can just return to pre-COVID times, chase disingenuous U.S. News rankings, and continue to raise prices may seem like dinosaurs,” Moses said. “At best, they’ll be irrelevant. And at worst, like dinosaurs themselves, they’re likely to face extinction.”

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