What’s the Meaning of the Moody’s Report?

The new report from Moody’s Investors Service, casting doubt on the
financial state of affairs in higher education, has provoked a good deal of anxiety.

The report referenced five revenue streams affecting all public
universities. Two (philanthropy and endowments) deal primarily with broad,
macro-economic trends over which university leaders have little, if any,
control. On endowments, Moody reasons, “
The outlook for capital
market returns is partly linked to the potential resolution of the federal
budget deficit and any economic fallout from action or inaction taken in
Washington. However, some degree of volatility is likely over the next several
months as the U.S. government struggles to settle key tax and budget issues and
Eurozone problems persist.” Regarding philanthropy, Moody’s expects “gift
support to show little to no growth in the near term due to continued
volatility in the stock market, which is the best indicator of private

It’s hard to argue with this political analysis:
Barack Obama will remain President through January 2017, and Republicans are
almost certain to retain control of the House for the next four years. So
political “volatility” likely will be with us for some time.

report listed three more university-centered concerns. On tuition, Moody’s
believes that “years of depressed
family incomes and net worth, as well as uncertain job prospects for many recent
graduates and a slight decline in the number of high school graduates, are
creating enrollment pressure and weakened pricing power for colleges and
universities.” At the level of state governments, “U.S. states have mixed revenue results in
2012 with many still pressured by the weak economic recovery, so state
contributions to operations are not likely to rise meaningfully in the near
term.” And at the federal level,
“the current fiscal environment offers limited possibility for stable or
increased funding by the federal government.”

announcing the report, Moody’s analyst Kim Tuby offered an intriguing comment,
noting that
during the past year,
“public and political scrutiny of colleges and universities, both
not-for-profit and for-profit, have escalated and that ‘the sector will remain
under the microscope in 2012 and beyond.'”

should we interpret Moody’s findings?

comments about tuition are potentially most alarming. Institutionally, the most
significant change in higher education over the past generation has been the
explosion of administrators’ positions, whose rate of growth has far exceeded
that of full-time faculty. As any glance through FIRE’s website reveals, the
emergence of administrators has had a pernicious effect: student life bureaucracies
have a well-deserved reputation for both political correctness and a hostility
to free exchange on campus.

the stated rationale behind the growth of administrators has been that a
massive student life bureaucracy will enhance the typical student’s campus
experience, since these students are incapable of navigating the modern college
experience themselves. In theory, the vision behind the student life
bureaucracy sees the student as a consumer rather than a learner, someone who
needs to be accommodated lest he take his finances elsewhere by transferring.
(Student life bureaucracies rarely work this way, of course; most often, they
focus on enhancing “diversity” by championing policies to ensure that certain
groups of students never feel uncomfortable on campus.)

the extent, then, that Moody’s forecast about a possible tuition squeeze is
correct, the likely impact is doubly ominous. First, the development will deny
needed financial resources, especially at non-elite institutions that lack
large endowments. Second, a fear of losing students will enhance the internal
power of student life bureaucracies, who will argue that student retention (and
preserving scarce tuition dollars) requires more student life bureaucrats.

finding regarding a diminution of state and (to a lesser extent) federal
support seems likely even if the economy suddenly improves. Over the past
generation, as politics have become increasingly polarized and partisan, higher
education has moved consistently in one ideological and partisan direction. (At
my home institution of CUNY, the faculty union is notorious for refusing even
to reach out to Republican state legislators, even as the GOP controls the New
York state Senate.) Universities are perfectly free, of course, to create
race/class/gender-dominated faculty and adamantly commit themselves to
“diversity” as their preeminent goal. But it should come as little surprise
that colleges with such an agenda will tend to isolate themselves politically–meaning
that, in hard economic times, as legislators have to make tough choices over
what programs to fund, state governments will fund other, more politically
popular, programs.

Tuby’s speculation about a possible increased
“public and political scrutiny of colleges and universities”
might be promising: while politicians can and must respect principles of
academic freedom on campus, state legislatures have an important role to play
in improving higher education–at the least by ensuring that trustees do their
job as part of the principle of shared governance, at the most through a more
aggressive legislative oversight role, bringing transparency to campus
personnel and curricular decisions that advocates of the status quo would
prefer remain in the stealth.

Unfortunately, I suspect
that increased public and political scrutiny will likely yield calls for
colleges and universities to demonstrate that students are fulfilling stated
“learning objectives,” a development borne out of the business community and a
call for universities to concretely demonstrate how students are learning. But
the concept of “outcomes assessment” too often has been a cover either for
anti-intellectual instruction that de-emphasizes content or a method to conceal
politically correct curricula on grounds that students are learning “skills.”

In short, there’s little
promising and much potentially troubling in the Moody’s report.


  • KC Johnson

    KC Johnson is a history professor at Brooklyn College and the City University of New York Graduate Center. He is the author, along with Stuart Taylor, of The Campus Rape Frenzy: The Attack on Due Process at America's Universities.

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