Editor’s Note: In testimony before the D.C. Council Committee on Housing and Workforce Development, the members of the District of Columbia Community College Transition to Independence Advisory Board discussed steps that the university must take to move the new community college toward independent accreditation.
Good Morning Chairman Brown. Thank you for providing us an opportunity to testify on issues related to the budget for the University of the District of Columbia (UDC) with a specific focus on how they might affect the newly formed community college. We are the five member District of Columbia Community College Transition to Independence Advisory Board (Advisory Board), appointed by Mayor Gray and Council Chairman Kwame Brown in accordance with the Community College of the District of Columbia Plan for Independence Act of 2011 (Independence Act): Walter Smith, Carrie Thornhill, Alice Rivlin, Joshua Kern and John Hill. That law charges us to develop jointly with the UDC Board of Trustees, the UDC President, and the Community College CEO a plan for the community college to operate independently from the flagship university.
In order to develop this plan, we have engaged subject matter experts in higher education accreditation, higher education financing, and labor law. We also have met with partners and stakeholders including members of UDC’s Board, President Sessoms and his staff, and Community College CEO Jonathan Gueverra and his staff. We are pleased that our partners will also testify today.
We are currently working to finalize the plan, which will recommend a process for moving the community college to academic, operational, and financial independence in accordance with guidelines of the Middle States Commission on Higher Education (Middle States), our region’s higher education accrediting body. The plan recommends a process by which the community college would first become a branch campus of UDC in Fiscal Year (FY) 2013 and then move toward separate accreditation. Once the community college achieves separate accreditation, it can become an independent institution or remain part of a university system. Taking the final step to full independence would be up to the Mayor and Council and the Board of UDC, not Middle States.
While this entire process is likely to take three to four years, there are critical steps that UDC and the D.C. Council must take in FY2013 to start moving the community college to independence while also strengthening the flagship university. While we expect our proposal about that process to be explored in some detail in the plan we are helping to develop, our testimony today is focused on four issues particular to the FY2013 budget.
- First, we describe the resources we think are necessary in FY2013 for the community college to achieve branch campus status and build the necessary capacity to start moving toward separate accreditation.
- Second, we explain why UDC’s financial status must be sound in order for the community college to achieve branch campus status and eventually independence, and why we think UDC’s current financial condition is precarious and unsustainable.
- Third, we suggest that UDC’s Board of Trustees, in partnership with elected officials, develop a shared vision of public higher education that is part of a continuum of life-long learning. The priorities identified in this vision should drive the community college’s move to independence as well as the university’s efforts to become sustainable.
- And fourth, we describe the major institutional right-sizing effort we think UDC should undertake in FY2013 in order to improve its financial sustainability.
II. The FY2013 Budget should provide the community college with the resources necessary first to achieve branch campus status and then build capacity to start moving toward separate accreditation.
In creating the community college in 2009, UDC recognized that DC needed a community college and that the mission, staffing, and operations of a community college were different from those of a four-year institution. Since then, UDC has implemented several changes to differentiate the community college from the flagship university—the community college has an open admissions policy; a lower tuition rate; its own administration, faculty, and academic staff; and separate facilities.
Yet the community college remains an academic division of UDC. It is included in UDC’s accreditation status, does not have a legal identity outside of the university, and cannot confer its own degrees. It operates under UDC’s labor agreements, but the terms of those agreements do not address the community college’s unique operational, staffing, and financial needs. Though the community college now occupies a separate physical location, UDC provides services to the community college in several key areas, such as academic affairs, financial operations, and student affairs among others. In addition, the community college’s CEO serves at the pleasure of the UDC President, and does not report directly to the Board of Trustees.
The best path to move the community college from its current circumstances to independence is through the Middle States’ accreditation process. This process would allow the community college to achieve separate accreditation without risking its ability either to confer accredited degrees or provide financial aid to students during the transition to independence. The first stage in this process is for the community college to become a branch campus of UDC. Once branch campus status is achieved, UDC and the community college would work toward achieving the requirements for the branch to be separately accredited. It is important to note that, as the accredited institution, UDC must lead this process.
Achieving Branch Campus Status in FY2013
In order to qualify as a branch campus in accordance with Middle States policy, the community college must be geographically separate from the main campus and must have the following three characteristics :
- Courses in educational programs leading to a degree, certificate, or other recognized educational credential
- Its own faculty and administrative or supervisory organization
- Its own budgetary and hiring authority
As it currently stands, the community college is close to satisfying these requirements. It has its own locations separate from UDC’s Van Ness campus, in the former Bertie Backus Middle School, 801 North Capitol, and the Patricia Roberts Harris Building. It offers courses that lead to certificates and associate degrees, as well as an extensive workforce development program. In addition, the community college has its own faculty and administrative organization, and the CEO of CCDC has some hiring authority. To fully satisfy the branch campus requirements, however, the community college will need more organizational capacity and budget autonomy and authority. This can be achieved through the FY2013 budget.
In order to fully achieve branch campus status in FY2013 the Budget Support Act will have to include both line-item budget authority for the community college and sufficient funding to clearly indicate the capacity for separate fiscal operations. Our independent financial experts, Attain, have concluded that the total direct costs of operating the community college and building necessary capacity for branch campus status is $21.48 million: $18.7 million of this amount would cover the community college’s existing direct operating costs; and the remaining $2.7 million would provide additional support for recruiting four department heads, adequate levels of adjunct faculty, and some direct service staff to meet student needs at the community college’s locations. (Please see attached budget for more detail). However, projections anticipate that these total direct costs will be offset by $7 million in tuition revenue raised by the community college in FY2013—making the community college’s net cost $14.48 million. Shared services provided to the community college by UDC are not included in this budget.
To ensure that the community college has the organizational capacity necessary to achieve branch campus status, and can demonstrate authority and capacity for separate fiscal operations, we recommend that the Council direct $14.48 million of UDC’s FY2013 subsidy to the community college as a line-item in the UDC budget. Since this is only the net operating cost, it is critical that community college tuition collected by UDC also be passed through directly to the college.
We believe that the community college needs these resources in FY2013 because it is still in a start-up phase and must be given support to grow. However, the community college inherited some of its academic programs directly from UDC without an analysis of market demand or potential for cost savings. For example, some programs appear to have low enrollment and some courses are taught by UDC faculty that have workloads and pay scales more appropriate for a university than a community college. It may therefore be appropriate for the community college CEO, in partnership with the Board of Trustees, to conduct a thorough review of its academic programs in FY2013 in order to identify opportunities for adjustments.
Likewise, the community college’s workforce development and lifelong learning programs will account for approximately $5 million of the community college’s direct costs in FY2013. The cost of these programs, however, has exceeded the revenue they raise (by about $4 million in FY2012) because programs are mostly provided to residents for free or at a highly subsidized rate. As Attain notes, other institutions operate workforce development programs that result in net revenue, thereby supporting affordable degree programs. The District government, in concert with the Board of Trustees and the community college CEO, should decide what role it wants the community college to play in providing workforce development to enhance the employability of D.C. residents and the level at which it wants to subsidize those services.
Helping the Community College Move Beyond Branch Campus Status toward Separate Accreditation
The community college’s progress toward independence in FY2013, however, should not stop once it achieves branch campus status. Rather, separate accreditation should be pursued as soon as possible for the community college to provide it with the greatest opportunity to succeed. The community college and the flagship have diverging missions and different operating needs, and quite often compete for limited resources. Moving quickly toward separate accreditation can help alleviate this competition and tension between the two institutions.
As noted, the move to separate accreditation will likely take 3-4 years. However, the Council and the UDC Board of Trustees can take additional steps in FY2013 to help UDC and the community move further toward its next step—becoming “separately accreditable.”
To become separately accreditable, the community college must at a minimum have substantial financial and administrative independence from the flagship, including matters related to personnel, through policies adopted by the Board of Trustees. Accordingly, we recommend that the D.C. Council direct the Board of Trustees to develop a plan for providing the community college with the following elements:
- Periodic reporting of the community college CEO directly to the Board of Trustees regarding the state of the community college to ensure that the Trustees have direct oversight of the community college and its leadership. Until it achieves separate accreditation, the community college CEO will continue to report to the UDC President, who in turn continues to report to the Board of Trustees. However, periodic reporting by the community college CEO to the Board will allow the Board to better fulfill its oversight of the development of the community college.
- Independent procurement authority for the community college to contract with external vendors for key services that it currently receives from UDC, but that don’t meet the needs of the community college. Since the additional cost of procuring such services is not included in the community college’s direct budget, the Board must determine how such services for the college would be funded and how UDC would realize cost savings associated with no longer providing certain services to the college.
- A mechanism to formally recognize community college faculty and staff as a separate classification of employees within the UDC system so that workloads and pay scales appropriate for a community college can be established and necessary modifications to the UDC labor agreements can be negotiated.
- A process for establishing a community college foundation so that it can expand its independent fundraising capacity.
To implement the elements of such a plan, the Board of Trustees may have to pass resolutions or take other actions in accordance with UDC’s governing requirements. Implementing this plan will also require open lines of communication and cooperation between the Board of Trustees, the UDC President, and the community college CEO because decisions about moving the community college to independence will impact the flagship.
III. UDC’s unsustainable financial structure must be addressed in order to successfully move the community college to independence.
UDC’s financial stability is essential to the community college’s success. The community college must depend on UDC’s own accreditation and legal status as it moves through the multi-year process described above. Indeed, Middle States is not likely to approve branch campus status and separate accreditation for the community college if it finds that UDC cannot afford those changes or if it views those changes as a threat to UDC’s own financial viability.
UDC’s Precarious Financial Condition:
Unfortunately, UDC already has significant financial challenges that will become more acute with the separation of the community college. UDC is relatively well-funded with a large public subsidy compared to peer universities. In the 2009-2010 school year, UDC’s appropriation of $16,785 per full-time equivalent (FTE) student was the highest in a group of 17 peer institutions and was more than double the group’s median of $7,500 per FTE. At the same time, UDC’s costs per FTE student are higher than its peers in nearly every category. At $36,684 in 2009-2010, UDC’s total expenditures per FTE student were approximately 60 percent higher than the median expenditures of its peers.
Despite having a relatively generous public appropriation, UDC’s very high costs per student have contributed to operating deficits over the past three years, which were funded through a spend-down of its reserves. UDC’s unrestricted net asset reserves are now less than $12.8 million, $4.8 million of which is restricted to support the new student center. By contrast, a financially healthy institution of UDC’s size would typically have more than $50 million in reserves. The university no longer has enough reserve funds to continue covering operating deficits as it has done in the past. Without substantially changing its cost structure or increasing its revenues, UDC runs the risk of defaulting on operating obligations in FY2013.
While it is true that the drawdown of reserves in FY 2011 and FY 2012 was accelerated by the creation of the community college, UDC’s high operating costs and low and declining enrollment at the flagship mean that its budget is unsustainable with or without the community college. Creation of the community college has underscored UDC’s underlying financial weakness and the need to bring costs in line with reasonable expectations of enrollment.
UDC’s Cost Drivers:
UDC’s high cost structure results in large part from a complicated legacy of historical factors. First, the university’s degree programs, faculty and staff, administrative systems, and facilities are all too large for the size of its current student body. UDC’s student body declined significantly during the District’s financial crisis in the mid-1990s, from roughly 10,000 undergraduates in fall 1994 to its lowest enrollment level of under 4,500 undergraduates in fall 1997. Although UDC’s total undergraduate enrollment (community college and flagship) has increased since then, it has never surpassed 5,400 students. The creation of the community college has also impacted the flagship’s enrollment. Since its establishment, the community college’s student body has grown while the flagship’s declined. In fall 2011, the community college had 2,529 students in academic programs compared to 2,129 in the flagship’s undergraduate program. Additionally, over 2,600 individuals were enrolled in a course or program for general employment assistance, basic skills, or occupational skills training at the community college’s workforce development and lifelong learning program during the 2010-2011 program year.
Second, UDC has high personnel costs. It has a professionally mature faculty with a high salary level relative to peer institutions. Nearly three-quarters of UDC’s faculty are full or associate professors as compared with a 40% average for peer institutions. Salaries for all faculty are 33 percent above the median salary at peer institutions. Pay scales for administrative functions also appear to be high relative to compensation in the broader market. Moreover, some administrative areas seem to be overstaffed, in part because new employees with proficiency in new technologies have been hired while existing employees have been retained. UDC’s ability to adjust personnel costs is in part complicated by existing contracts with faculty and staff unions, which have not changed for years due to protracted collective bargaining. Existing contracts, although expired, continue to govern, and UDC and its unions have been unable to reach agreement on the terms of new contracts. It should be noted, however, that only half of UDC’s full-time faculty and staff belong to unions.
In addition to these legacy costs, recent efforts to transform UDC into a “university system” with a competitive, research-oriented flagship university and a community college are impacting UDC’s cost structure. In FY2010, the community college’s net direct cost was $3.1 million. However, most of the costs experienced that year were already part of UDC’s overall cost structure and were associated with re-assignments of programs, faculty, and staff from university to the community college. In FY2011 and FY2012, the incremental net costs of operating the community college were $6.5 million and $7.8 million respectively. These are additional annual costs associated with starting up the community college; a large portion of these costs are operating costs associated with leases, operations, and maintenance of the community college’s facilities. New investments to transform the flagship, such as enhancements to the athletics program, and the development of a new student center and dormitories that are planned will further increase UDC’s operating costs.
These efforts are aimed at growing the student body in order to match the university’s large programmatic, administrative, and facilities structure. While growth at the community college has occurred and is likely to continue, aggressive growth of the flagship in the near-term will be challenging for three reasons. First, UDC’s enrollment trends over the past 15 years, and in particular declining enrollment at the flagship, does not set a strong precedent for growth. Second, while the District’s total population grew by 5 percent from 2000 to 2010, the number of residents under 18 actually declined over this period, from 114,992 in 2000 to 100,815 in 2010—an indication that UDC’s potential resident student population is shrinking. Third, UDC must compete for students with several universities in the Washington region, as well as with public universities across the country, which D.C. residents can attend at in-state tuition rates due to the federal D.C. Tuition Assistance Grant (TAG) program.
In summary, UDC’s operating deficits, high cost structure, spend-down of its reserves, and unlikely potential for growth in student population at the flagship have together produced an unsustainable situation. And this situation has occurred at a moment when it is critical for UDC to become financially stable in FY2013 in order to move the community college to branch campus status and sustain the flagship. However, we believe UDC’s precarious financial condition offers an opportunity for the Board of Trustees and the District’s leadership to rethink the mission of the city’s public higher education system and better align it with the District’s needs. This re-visioning can help ensure the sustainability of both the community college and the flagship.
IV. UDC’s Board of Trustees, in concert with the District’s leaders, must develop a shared vision of public higher education for the city.
In order to move the community college toward independence while strengthening the flagship, UDC’s Board of Trustees must partner with the District’s elected officials to create a shared vision for public higher education for the city that is focused and realistic. UDC has suffered from mission confusion since its inception in the mid-1970s, when it was established as a consolidation of three different schools with three very different missions. This problem was exacerbated in the mid-1990s, when UDC, under financial duress, was forced to make major cuts even though a guiding plan had not been developed first.
This time, UDC’s right-sizing should be done in accordance with a thoughtful vision for a public education system that meets the current and future needs of our city and its residents. While it is not our task to develop this vision, we believe it should include an independently accredited community college, a law school, and an institutionally smaller but strengthened flagship with the capacity to grow according to demand and District priorities. We recommend that the Board of Trustees and the District‘s elected officials begin setting this vision immediately so that UDC can begin to take actions to right-size the flagship in accordance with priorities and move the community college toward independence in FY2013.
To ensure that this vision gets set and implemented, we recommend that funds provided to UDC by the city in FY2013 be conditioned on the development and implementation of a plan to right-size the university and move the community college to independence. We also believe that a portion of the District’s future higher education subsidies should be conditioned on meeting agreed-upon performance goals that are necessary to transform the District’s public higher education vision into a reality. Many states have higher education performance-based funding strategies that the District can look to, but it must first set priorities for what it wants its higher education system to accomplish.
V. UDC should undergo a major institutional right-sizing effort in FY2013 in order to become financially sustainable.
UDC must develop a plan to right-size the institution so that it: 1) better reflects the size and needs of its student body and the District of Columbia, 2) puts the institution on sound financial footing, and 3) ensures the future of the community college. This plan should be made in accordance with the vision to be developed for public higher education in the District. In fact, it should serve as the blueprint for achieving that vision. We recommend that the plan address how the university will cut costs to live within its means and a timetable for doing so. It’s possible that some of these changes may require short- term investments in order to achieve long-term cost savings. While we have not attempted to develop a complete list of all the elements to be included in such a plan, we believe that the plan should be based on a thorough review that includes the following:
- Review academic programs at the flagship relative to market demand and determine how to adjust accordingly. We understand that UDC has reviewed programs and market demand—the findings of that work should be reviewed in the context of the vision for a right-sized UDC.
- Review administrative areas to determine whether the staff is the right size, has the right skills, and are paid appropriate wages
- Review information technology (IT) services to evaluate whether it would be more efficient for a host to provide infrastructure and core services
- Review existing facilities to determine options for cost savings and evaluate whether existing facilities and planned capital projects are appropriate for a right-sized UDC
UDC’s right-sizing plan must also address personnel issues—personnel costs account for about 70 percent of UDC’s total costs and issues of staffing size and pay scale cut across all of the categories listed above. Rightsizing UDC will require the UDC Board, Administration, staff, and labor unions to work in partnership to develop staffing, work rules, and pay scales appropriate for a re-envisioned flagship and a separate community college. This will include reaching new labor agreements that meet these goals. There may be a role for the District’s leadership to play in helping UDC and its unions resolve key issues. To make such a partnership practical and viable, the UDC Board must first develop a plan that provides a clear vision of an attainable future for the university.
Thank you for your time today and your leadership on this critical issue.
 Accreditation ensures that educational institutions meet basic quality standards. It is required for students to transfer credits between educational institutions and receive federal financial aid, as well as for the institution to be eligible for federal funding and grants.
 Middle States Commission on Higher Education Policy Statement on Substantive Change, Effective November 18, 2010. Available on the web at http://www.msche.org/documents/updated-Substantive-Change-policy-11-18-10.pdf
 Middle States Commission on Higher Education Policy Statement on Separately Accreditable Institutions, available on the web at http://www.msche.org/?Nav1=POLICIES&Nav2=INDEX
 Attain Consulting’s analysis of data from NCES, IPEDS 2009-2010 GASB Finance File, 2009-2010 Instructional Activity File. Peer universities include Delaware State University, Alabama A&M University, Southern University and A&M College, University of Maryland Eastern Shore, Virginia State University, Coppin State University, Fort Valley State University, Lincoln University, University of Arkansas at Pine Bluff, Fayetteville State University, Mansfield University of Pennsylvania, Eastern New Mexico University-Main Campus, Francis Marion University, and University of Houston-Victoria. University of the District of Columbia Report: Financial Assessment and Cost Drivers (Forthcoming, Spring 2012).
 Attain Consulting’s analysis of UDC 2011/2012 financial data. Attain UDC Report (Forthcoming, Spring 2012).
 NCES, IPEDS data center, available on the web at http://nces.ed.gov/ipeds/datacenter/
 Presentation on UDC Budget Overview, Prepared for CC Transition Committee. Delivered by Steven Graubert, Managing Director for Finance, UDC, January 23, 2012.
 Presentation on Workforce Development and Lifelong Learning Student Data: Program Year 2011 and PY 2012 YTD. Prepared by Kairos Management, January 27, 2011. Program Year (PY) 2011 is from September 1, 2010 through August 31, 2011
 Attain Consulting’s analysis of data from NCES, IPEDS 2010-2011 Instructional Staff Salary File. Attain UDC Report (Forthcoming Spring 2012)
 All figures related to baseline and incremental costs associated with the community college are based on Attain consulting’s analysis of UDC budget figures. In FY2010, it cost a total of roughly $9.9 million. However, $6.8 million in revenue from the community college and workforce development programs was also raised that fiscal year, leaving the net cost of $3.1 million. Attain UDC Report (Forthcoming, Spring 2012)
 U.S. Census Bureau, 2010 and 2000 Censuses. The District’s total population was 601,723 in 2010 and 572,059 in 2000.