Financial exigency in the higher education industry is an equivalent to bankruptcy in the corporate world. Term Financial Exigency first appeared in 1920s in the draft of the Declaration of Principles on Academic Freedom and Academic Tenure of the Association of American Colleges (Berube, 2013, p.7) as a condition when it is possible to terminate tenured faculty. At that time, there was no clear definition or concise circumstances when universities can declare a state of financial exigency. Since then, this phenomenon has been covered in more details. In this paper, I will define financial exigency, its declaration process, causes, and possible short and long-term consequences and demonstrate it on the example of the University of Louisiana …show more content…
(LSU) of the University of Louisiana System. American Association of University Professors (AAUP) is "the leading organization primarily dedicated to protecting the academic freedom of professors." (AAUP) Since its foundation in 1915, the AAUP has defined "fundamental professional values and standards for higher education" and developed "the standards and procedures that maintain quality in education and academic freedom.” (AAUP) However, AAUP has no legal authority over universities and can only make public that certain institutions do not follow its regulations, which is still damaging to the reputation.
It should be noted though, that almost all institutes of higher education cite or refer to AAUP's regulations in its by-laws.
AAUP's regulation 4(c) covers financial exigency. It starts with its definition: financial exigency is an "imminent financial crisis which threatens the survival of the institution as a whole." (AAUP) The focal point here is that the institution in its totality, not one school, or one program faces closure. The only reason why institutions seek to declare financial exigency is to be able to terminate tenured faculty appointments. AAUP enforces this measure to be sought as the last one in the efforts to save an
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institute. Regulation 4(c) also describes the process of faculty and administration working together when considering financial exigency. It focuses on protecting faculty's rights. I.e. faculty senate or similar body should be involved "in the decision that a financial exigency exists or is imminent, and that all feasible alternatives to termination of appointments have been pursued." (AAUP) If such a determination has been made, only institute's governing board can approve the declaration of financial exigency. Faculty senate's primary responsibility is to judge within what academic programs the termination of appointments will occur, criteria for consideration for termination and finally, "whose appointments are to be terminated." (AAUP). Each faculty member up for termination has a right to a "full hearing before a faculty committee" to question the validity of the judgment. Over the years, AAUP discovered that in the majority of cases of the financial exigency, regulations regarding faculty were not followed. Even more, university administrators declared financial exigency only as an excuse to terminate tenured professors they did not like. Although in the light of the recent developments, administrators might not need an excuse of financial exigency to get rid of tenured professors. Florida State University laid off 21 tenured faculty members in 2010; Clark Atlanta University eliminated 20 tenured jobs in 2009; lastly, the Idaho Board of Education allowed college presidents to make budget cuts including termination of tenured faculty. All these -- without declaring financial exigency. (S. Jaschik, 2010). What is about tenure that matters so much that the huge organization like AAUP has devoted its existence to preserving it? Joseph F. Baugher (2015), a retired faculty (non-tenure), physicist, and author says that tenure is "the most effective guarantor of academic freedom." Job security provided by it allows faculty to preserve professional integrity and choose teaching methods and course organization; participate in the shared governance and prevent administrators to lower academic standards to pass more students; choose the research topic and make a break through. (Baugher, 2015) At the same time, it allows institutions to attract the best professors who deliver "higher quality pedagogical output" and compete for bigger federal research grants. (Baugher, 2015) On the other hand, Baugher (2015) recognizes the following downsides of tenure: it is "abusable"; it permits older faculty to stay on the job even when they cannot perform it while young faculty members add to the adjunct army; tenured faculty "sometimes conspire ... [to] force institutions to waste tons ... of money." In short, tenure system costs too much money not to try cutting it during financial hardship -- and for that administrators need a 'financial exigency' tool. However, it is a very important part of the institutional academic prestige to allow administrators to terminate tenure faculty at their whim. Many higher education professionals agree that tough times require tough measures. Mark Browning, a spokesman for the Idaho Board of Education, says that college presidents should have all possible tools to manage finances in the rapidly deteriorating conditions. (M. Browning as cited in S. Jaschik, 2010) John Millsaps, associate vice chancellor of the University System of Georgia, thinks that legislative committees force institutions to plan for financial exigency by decreasing state aid and not allowing individual campuses but whole systems to close (J. Millsaps as cited in S. Jaschik, 2010) If financial exigency gives institutes more wiggle space to deal with financial crisis, why so few of them do it?
Let us first think of what can lead to such a dire situation and what can be done as an alternative. Unbalanced budget, low enrollment, economic recession, inflation, decrease in state and federal appropriations, lower investment income, even poor budget decisions could cause a near bankruptcy. At first, institutes try reallocation of resources, increase of tuition and fees, reorganization, hiring freezes, payroll cuts, lowering expenses; then elimination of full programs, or minors (i.e. French or History), lowering admissions standards, etc. Anything not to admit that financial exigency is inevitable. Even gossips of financial exigency can damage institution's reputation. Student recruitment will become even more difficult, quality professors will not accept job offers, creditors will lower the credit ratings, donors will be scared to give money, and accreditors may conduct an unplanned reaccreditation visit. In the case of declared financial exigency, in addition to the above-mentioned, current students will start transferring out due to the lack of sections or a big number of students in the class; professors will resign because of the lack of stability; faculty to student ratio will increase. This may lead to the loss of accreditation which in turn will lead to the inability to access Title IV financial aid. In other words, declaring financial exigency is
not something colleges would do if they can avoid it.
A resolution passed by Congress was the Financing Corp. (FICO), created in 1987 to provide funding to the FSLIC. FICO contributed $8.2 billion in financing. Then came the enactment of FIRREA, The Financial Institutions Reform, Recovery and Enforcement Act by Congress in 1989, which began the taxpayer’s involvement. The large number of failures overwhelmed the resources of the FSLIC, so US taxpayers were required to back up the commitment extended to insured depositors of the failed institutions. As of Dec. 31, 1999, the thrift crisis had cost taxpayers approximately $124 billion. ( Curry et al. 2000)
To begin with, there are valid points made. For starters universities need to stop considering themselves as businesses and stop putting business first, and
What stands out about American universities today? Is it the academic opportunities offered to students, experienced faculty, or strong sense of community? Or...perhaps they have lost their focus. It is not uncommon for universities to focus their efforts and budgets elsewhere; by building state of the art gyms, for example, remodeling luxury dorms, grooming campuses, or creating more management positions. College students and professors alike are subject to the nationally occurring changes in higher level education. Colleges are becoming commercialized and tuition is rising, but is the quality of education improving? In “Why We Should Fear University, Inc.”, Fredrik DeBoer is able to provide a personal take on the issue of corporate domination
Accreditation has always been a lengthy problematic process for HBCUs. It is hard to imagine how a college would display without being accredited. There are many rumors saying that Alabama Agricultural and Mechanical University lost their credibility back in 2013. That is a serious thing to loose. Most people do not know what it mean to lose credibility. When a school loose accreditation that mean the college or university is force to close its doors. This is because the school will no longer be eligible to receive federal and state financial aid. 98.9 schools significant source come from federal funding. It's not illegal for a school to operate without institutional accreditation but no students would like to attend one of those colleges. There are numerous reasons that could cause a school to lose accreditation, not all of which necessarily mean the school is poorly educating students. Since the passage in 1952 of the Readjustment Assistance Act accreditation has been tied to federal financial aid. Unaccredited institutions are not eligible to award federal and state student aid which are veterans’ benefits, loans, and different grants that the state offer. Most of the students could not attend college without these
Recent studies show that the number of individuals who default on their student loans has been steadily increasing as well. Statistics from the Institute for Higher Education Policy (IHEP) show that between 2004 and 2009 only 37% of federal student loan borrowers were able to make uninterrupted payments; it is an annual average of 7.4% (Cunningham, and Kienzl). According to IHEP, for every one borrower who defaulted, two ...
Roy, Joydeep. "Impact of School Finance Reform on Resource Equalization and Academic Performace: Evidence from Michigan." Mitpress Journels, 2003: 1-31.
Clingman, J. (2014, May 05). Time to bail students out of $1 trillion debt. University
To understand the student debt crisis, one must first understand what caused it and what results from it. College undergraduates use student loans to finance the cost of tuition, room, board, transportation, and personal expenses while attending (Gage and Lorin). Student loans are different from other forms of debt because basic consumer rights like bankruptcy protection don’t apply to students who default on their loans. As a result, students are virtually locked into their debt, offering them little to no ability to refinance it. Solutions to debt problems like consolidation are available to students but that process doesn’t involve shopping for a better deal from competing lenders like it does in other debt areas. Therefore, interest rates often remain high and the loans remain with the original lender (Vanegeren). As Kayla Webley expl...
Student loan debt makes up a large portion of the debt in this country today. Many defaulted loans are the demise of high interest rates, poor resources to students in educating them on other avenues and corruption in the governmental departments that oversee education and financing. There are many contributing factors that lead to the inability to pay off student loans which need government reform to protect the borrower’s best interests.
Kaplin, W., & Lee, B. (2014). The law of higher education. 5th ed. San Francisco, CA. Jossey-Bass.
The article, of the extreme student debt crisis, written by James B Steele and Lance Williams, is a disturbing truth fact. The student loan industry is not there to help the students get ahead. Its only goal is to line the pockets of private investors, banks and the federal government.
College debt is a universally known issue that remains one of society’s largest burdens today. Over the past ten years, high school students and graduates realized that they must seek a higher education in order to find a job that keeps food on the table. Attending a college or university is practically required in order to succeed in life today. Millions of people seek a higher education to pursue a degree, graduate, and acquire a quality job that supports their everyday needs. It often means a lot of money to pursue and earn a degree nowadays. What they don’t realize, is that paying their tuition and housing deposits is essentially signing a contract, costing them thousands of dollars in the near future and leading them down the dark path
As colleges’ funds dry up, colleges must turn to the public to further support higher education. By raising state taxes, colleges can collect funds to help improve the school’s budgets. The state provides funds from the taxes for colleges to receive a certain amount for each student currently enrolled. All community and traditional four year colleges collect these funds in order to maintain the school’s budget. As reporter, Eric Kelderman states, “less than a third of colleges’ budget is based from state taxes”. The school’s budget is how colleges are able to provide academic support programs, an affordable intuition, and hire more counselors. Colleges must now depend on state taxes more than ever for public colleges. Without collecting more funds from state taxes, as author, Scott Carlson explains how Mr. Poshard explains to senators “our public universities are moving quickly toward becoming private universities…affordable only to those who have the economic wherewithal to them” (qtd. in.) Public colleges must be affordable to anyone who wishes to attend. If colleges lack to provide this to students, it can affect dropouts, a student’s ability focus, and cause stress. The problem of lack of funding is that colleges have insufficient funds. Therefore, the best possible solution for the problem of lack of funding would be increasing and collecting more funds from state taxes.
An insolvent debtor may file a debtor’s petition for voluntary bankruptcy. The insolvent debtor must provide to the court a summary of debts and assets. An agreement between a debtor and creditor that the amount stated as being owed to the creditor is accurate is an account stated. However, an account that is open and unsettled is an account current.
The issues and infractions mentioned above are examples of what is and has occurred at universities nationwide. This is not an isolated problem. As these corrupt acts of academic fraudulence and plagiarism continue to reoccur, it is slowing chipping away at the prestige and respect that make these educational establishments what they are suppose to be, institutions of the highest learning. By treating academics as a secondary concern to the athletic primacy, universities cannot fully accomplish their sole purpose. These acts of immoral and unethical procedures do not permit the schools from maintaining unblemished academic environments. Although part of the universities' goals are to create well rounded students, this objective should not come at the expense of academics, corruption, or unethical behavior.