The Journal. - A University Spent Lavishly to Attract Students. Enrollment Fell.

Episode Date: September 14, 2023

For years, West Virginia University, a state flagship, poured money into gleaming new research facilities and dormitories to attract new students. It had to borrow money to do so. The university now faces a huge deficit and major cuts. It's a problem facing many major public universities, as WSJ’s Melissa Korn explains.  Further Reading: -West Virginia University Banked on Growth. It Backfired.  -Colleges Urged to Produce Better Information on How They Spend Money  -Colleges Spend Like There’s No Tomorrow. ‘These Places Are Just Devouring Money.’  Further Listening: -Wesleyan’s President on Admissions Post-Affirmative Action  Learn more about your ad choices. Visit megaphone.fm/adchoices

For weeks now, there's been an uproar at West Virginia University. Students and faculty have been protesting big changes that the administration is trying to push through. There were hundreds of students and faculty and local residents who came out in the protested place outside what's known as the Mountain Lair. That's the student union, the hub of the campus. And they had their bullhorns and they had plenty of chants. Our colleague Melissa Korn has been covering what's happening at West Virginia University. Over the summer, the administration proposed a massive restructuring, scrapping dozens of academic programs and laying off over 160 faculty members.

The students were really riled up, and they've continued to be. The reason for the cuts? A huge hole in the school's budget. The president came out and said, hey, we're facing significant financial troubles. We have this deficit of about $45 million if we don't do something with next year's budget. And if we keep on this course, that could go up to $75 million by 2028.

And West Virginia University is not the only school where this kind of thing is playing out. For decades, public universities across the country have spent lavishly to attract students. Now, they're finding themselves in deep financial trouble. Now, they're finding themselves in deep financial trouble. West Virginia is, in many ways, a poster child for the challenges and the mistakes in higher education right now. And they're not unique. And I think that's one of the big scary parts of all this is they're not exactly an outlier here. Welcome to The Journal, our show about money, business, and power.

I'm Jessica Mendoza. It's Thursday, September 14th. Coming up on the show, what West Virginia University tells us about the spending spree in higher ed. you spot something different. The Bold Seagram 13, a 13% cosmopolitan cocktail. You grab a can and take a sip. Suddenly you're on a fresh adventure, becoming the hero of your own night. Unapologetically full-flavored cocktails with a 13% punch.

Seagram 13, dare to make your own luck. Must be legal drinking age. Please enjoy responsibly. Available at the LCBO. Melissa and the journal's investigations team have spent months reporting on how flagship public universities spend their money. They wanted to figure out why the cost of some of those schools was soaring. College can be expensive, and there are many assumptions about why that is,

but we decided to really dig into the data and explore where the money goes and whether that makes sense, right? Whether the spending priorities are logical, whether the spending patterns match the patterns in revenue. Melissa and her colleagues focused on these public universities in part because they get state funding. They also tend to charge lower tuition,

which makes them accessible to lower-income students. You honed in on West Virginia University. What caught your attention about that campus in particular? So West Virginia University is interesting for a number of reasons. One is it is led by Gordon Gee, who is perhaps the most seasoned university president. Welcome back to campus, everyone. This is my first gmail of the new academic year. He has been at Brown, at University of Colorado Boulder, Vanderbilt, Ohio State, two different times. So this is not a newbie in higher ed.

Gordon Gee became president of West Virginia University in 2014. It was his second time in that role. West Virginia University in 2014. It was his second time in that role. And he set a goal for the school to grow its student body from 33,000 to 40,000. He started his presidency with an eye toward growth and expansion and adopting an idea that is kind of common across higher education, that bigger is better, that you constantly have to be growing, because if you're not growing, you're going to be withering and dying. What was his strategy for boosting enrollment? Build it and they will come. Ah, the old field of dreams mantra. Exactly. You know, I've been covering higher ed for a long time, and it's kind of amusing slash disturbing how many university leaders really see that as the path to growth. If you prepare the campus, prepare the organization for growth, it will come.

These students will just see the inherent value of this institution and show up. But when all of the other schools are also doing that, it's really hard to stand out. To attract new students, Gee's administration started planning new projects. And out came the school's checkbook. What were the big projects that the university wanted to spend money on? Where did they start putting the money? So a lot of the money did go into physical campus upgrades. And some of that was really necessary, right?

These are old buildings, run down. You know, a lot of times the buildings are not up to code or just not up to the expectations of a 21st century college student or faculty member. If they're trying to become a big research institution, which they were, they needed really top-notch research facilities in order to lure researchers. So putting a lot of money into that, putting a lot of money into new academic buildings. They have a relatively new business school that's on the waterfront and it is beautiful. Reynolds Hall is more than just a place you go to class. It's a place where you will learn, collaborate, and shape the future of business. It is 186,000 square feet. That is very big. It has huge windows, floor-to-ceiling glass in some areas.

So it's just a beautiful place to sit and look out at the water. There's a staircase that's modeled after one at Google headquarters. It's got a bagel shop because who doesn't need a bagel shop? It also has a fitness center on the first floor. I mean, it sounds like a great place to be a student at.

Right, for sure. A lot of this is needed. Whether all of it is needed is hard to say. And the big question is, how much did it cost? This was not a cheap pursuit. This building cost about $100 million. The school was spending a lot, but it was living beyond its means. Over the previous two decades, the state had cut funding for the university by half. So the school had to piece together another way to pay for it all.

It got some from donations, and then it went out to the bond market to borrow money. So they took on more and more debt, hundreds of millions of dollars in debt. took on more and more debt, hundreds of millions of dollars in debt. And this is a baked-in annual cost. No matter what their enrollment is, no matter what else they do, they have to make these payments. Right. And in order to make those payments, did they increase tuition? Well, the money has to come from somewhere, right? When adjusted for inflation, the average cost for in-state students at the school rose by 20% over the past 15 years. And that's a particular issue in a place like West Virginia where there is a very high poverty level. Are other public universities also increasing tuition?

Yes, that is perfectly illustrative of what many flagships have done. They have raised the price for local students. They have also kind of shifted the mix of students. So there could be more graduate students, there could be more out-of-state students, because they have higher price tags. So West Virginia University built up its campus, rolled out the red carpet, and waited for students to show up. What happened next? That's after the break.

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didn't work. Enrollment didn't rise. It actually fell. In the nine years since Gee took over, enrollment has dropped from 33,000 students to under 28,000. And some places on the school's main campus started to have a ghost town feel. They added 900 beds over the past decade or so. Those extra students never came, and some of those dorms now sit partly empty. One dorm was taken entirely offline because there weren't enough students to fill it. And so you said that they spent all this money, and still enrollment didn't quite pan out the way that Gordon Gee wanted. Could you talk about that, and why did it go down? You've got a shrinking population of local students.

You've got increased competition for students from elsewhere in the region. And you've got price sensitivity. So as that price for local students ticked up and up and up, that put it out of reach for some students. And then one other factor that I suppose we have to consider is the pandemic as well. How did that affect enrollment and the school's revenue

situation? The pandemic was brutal. They lost the revenue that they would have gotten from housing, from dorms, from dining halls, from athletics. It also affected enrollment, right? You had people who were in college who left during the pandemic and just never came back. By last fall, the school had a nearly $15 million deficit. And administrators warned that without major changes, that deficit would skyrocket. Then, this spring, Gordon Gee announced a plan

to plug the budget hole. He recommended dramatic cuts to departments that once seemed untouchable. Dozens of programs and jobs were on the chopping block. Eliminating certain graduate programs like in higher education administration and a math PhD program and trimming back the faculty significantly in a lot of other departments, including English and history. And these were really jaw-dropping changes that were being proposed here. The proposal to cut an MFA in creative writing, you know, people can mock going to school for creative writing and the financial issues with

that as much as they want, but the creative writing graduate students helped teach a lot of the freshman comp classes, right? The here's how to write as a college student required course that everyone takes. And they have hundreds of these sections a year. And all of a sudden, a good chunk of the teaching force would be gone. So the faculty said that these cuts were extreme and that they were perhaps short-sighted and really would hurt the institution. Last week, the administration walked back some of its proposed cuts. It said that students would still be able to take Spanish courses and major in art history. But the faculty is still upset.

They want the school to put its planned cuts on hold. Earlier this week, the faculty's governing body delivered a stinging message to Gee. A quorum was reached and the resolutions were addressed in standard order, resulting in a vote of no confidence in the leadership of President E. Gordon Gee of 797 in favor and 100 opposed. Gee, who was on Zoom, fired back. I will not accept the narrative being promulgated that we have mismanaged this university or we are making it a lesser university. That is absolutely far from the truth.

The administration denies that the school's financial situation is the result of overspending. And Gee says even if there wasn't a deficit, the overhaul would still be necessary. We can't do everything that we've been doing because we've lived beyond our means. The university's board of governors said that it's exhausted its other cost-saving measures. The school has already reduced staff and had its debt refinanced. Melissa's reporting shows that the university's leaders should have known that those moves weren't nearly enough. I spoke to one former member of the Board of Governors

who said that she had started raising red flags around 2017, 2018, just because she was concerned that the enrollment numbers weren't headed in the right direction. Other former members of the board of governors say there really wasn't a sign of trouble until the pandemic. Or yes, enrollment was falling, but we had a great plan to fix that. We were going to go be more aggressive in our recruiting. Well, the problem, of course, is that everyone else was being more aggressive in their recruiting too. None of this was done in a vacuum. else was being more aggressive in their recruiting too. None of this was done in a vacuum.

When Melissa and her team began publishing their findings, university and state officials from across the country reached out to ask to see their data. It wasn't because they wanted to challenge the reporters. Instead, it was because these institutions had simply never seen such comprehensive figures about their own schools before. Why? Because getting the numbers was really hard. This was not an easy task for us. This was a mind-numbing, laborious exercise that took months. But it's not that it can't be done.

It can be done. We did it. So those with oversight of the institution, especially those with fiduciary responsibility, could have noticed problems earlier. They could have asked more questions. Some governance experts would say they should have asked more questions. And this is not an issue just at West Virginia University, but across many universities. across many universities. So overall, from your investigation,

do you have a sense of how successful the strategy of build it and they will come has actually been? It's not a definite failure, but it's far from a sure path to success. I mean, each school's situation's a little different, but just making campus look prettier and the buildings shinier and bigger and the dorms fancier, just adding a bunch of new institutes and research centers. investing in the quality of the academics or in supporting faculty or in really listening to students and what they want or need. That's all for today, Thursday, September 14th. The Journal is a co-production of Spotify and The Wall Street Journal.

Additional reporting in this episode by Chris Marr and Andrea Fuller. If you like our show, follow us wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.