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"January 16, 2011 Financial Outlook Is Brighter for Some Colleges, but Still Negative for Most By Scott Carlson Moody's Investors Service says the outlook for a relatively small number of well-managed, diversified colleges looks stable in 2011, an upgrade from the negative forecasts that the credit-rating agency has given higher education over the past couple of years. In its latest outlook report, however, Moody's maintains a negative outlook for the majority of higher-education institutions, which it says are too dependent on tuition, auxiliary income, and state support. The Moody's report, "2011 Outlook for U.S. Higher Education," which will be available from the company to its subscribers this week, highlights a widening gap between have and have-not colleges. "This outlook speaks to the fact that the strong continue to get stronger," said Kimberly Tuby, a vice president and senior analyst at Moody's who is the author of the report. Institutions that already have large, well-established research programs and strong philanthropic support are pulling through the economic downturn relatively well, she said. The strongest institutions are in top demand and have fingers in a number of business lines. Meanwhile, the weakest institutions-which draw students from a regional base and lack diversity in business lines-could still be endangered. Those institutions are generally small or mid-sized and do not have a robust fund-raising capacity. "We could see some of those merging or being absorbed by larger institutions, or even going out of business," Ms. Tuby said. The report points to three "critical credit factors" that drive the 2011 outlook for colleges: * "Weakened prospects for net tuition growth" because of a market preference for low-cost or high-reputation competitors. * "Differing degrees of pressure on nontuition revenues," such as philanthropy or research money. * A "need for stronger management of operating costs, balance-sheet risks, a

"Fixing the Broken Financing Model October 4, 2010 By Darryl G. Greer and Michael W. Klein In the title of a recent paper, David Breneman, a regarded higher education economist, asks: "Is the Business Model of Higher Education Broken?" While he objectively weighs the pros and cons of his question, we answer emphatically, yes! Put simply, the way in which America finances public colleges and universities, which serve over 70 percent of college students nationally, is severely and irreparably broken and needs to be changed. Without a new model, public higher education will fail its principal purpose of providing broad college opportunity, especially to low- and middle-income students and an emerging population of new Americans. Moreover, without a new funding rationale that has transparency and predictability for all funding partners, these colleges will lose the public trust - a critical element in sustaining the American democratic experience through education. Public colleges can achieve the dual goals of public and private benefits only by demonstrating equity and fairness regarding who goes to college; legitimacy for who pays and how; and responsibility for how colleges account for educational outcomes and sustaining the public trust. The solution as we see it should include a new public service corporation model that creates private partnerships; produces new revenue to replace lost public financing; protects and enhances the core educational enterprise; and, thereby, generates greater transparency, accountability and public trust that will support a sustained investment in public colleges. The Problem There is widespread evidence, in addition to opinion, that the longstanding model for financing public colleges that has seemed to work so well in many states for decades, now seems, even with an expected economic recovery, to need radical change. (See the soon-to-be-published "A New Model of Financing Public Colleges and Universities," in On the H

"January 23, 2012 Outlook for Higher Education Remains Mixed, Moody's Says By Scott Carlson In a report released on Monday, Moody's Investors Service sticks with the mixed outlook for higher education that it established last year: For leading colleges that are well managed and diversified, the market is looking stable. For the rest, not so much. The outlook report, which is released annually at the beginning of the year, says that a majority of colleges-those dependent on tuition or state money-will continue to face challenges in the next 12 to 18 months. Those challenges will, in part, stem from the public's scrutiny of rising tuition and from pressures to keep it down. Analysts at the credit-rating agency also expect demand to rise for admission to the largest and highest-rated institutions, while other colleges may struggle to attract students. The Occupy protests and other events have put intense focus on college tuition. "Tuition levels are at a tipping point, and the cost of college will be a critical credit factor for universities to manage long-term," the report says. "We expect that the pace of future net tuition revenue growth, both on a total and a per-student basis, will be much lower than the strong growth experienced over the past 10 years." A declining yield in admissions is troubling trend, the report notes. Many colleges may appear more selective, but only because more students are applying to more colleges. "Median freshman yield rates (percentage of accepted freshmen who chose to enroll) at both private and public universities have steadily declined over the past five years, highlighting increased competition," the report says. "The trend of declining yield is particularly notable for the lower-rated private colleges, which are increasingly competing with lower-cost public colleges and feeling the most pressure to slow tuition increases and offer more tuition discounting." Demand for some graduate and professional programs, particularly

Overview of Economic and Fiscal Dynamics 1. Tepid U.S. Growth for 2011 2. The great Recession's Corrosive Effects 3. A Turnaround in State Revenues But a Long Climb Back 4. State Budget Planning in a Pressure Cooker 5. No relief in the Fight Against the Cost-Shift in Who Pays for College 6. Moving Forward in the National Interest