Public postsecondary systems nationwide face the grim task of piecing together budgets ravaged by the ongoing health crisis. With some systems forecasting shortfalls in the tens of millions of dollars, discussions of institutional mergers and closures have taken on new legitimacy. 

But for leaders of the Pennsylvania State System of Higher Education, these conversations predate the pandemic. Its 14 campuses have collectively seen a roughly 20% enrollment drop over the past decade, and anemic state investments have forced the system to drive up tuition to keep pace with its rising costs. Unsurprisingly, the financial turbulence has prompted questions of whether PASSHE's most vulnerable campuses can survive. 

One example is Cheyney University, the oldest historically Black college in the country, whose student body has shrunk considerably since 2010. It owed more than $40 million — which is about $10 million more than its annual budget — in debt to PASSHE, most of which was forgiven earlier this year for the college meeting certain benchmarks. 

But before, so dire was the school's outlook, that its accreditation was in jeopardy, a sign its operations and budget had deteriorated to a crisis point. It ultimately retained its status after the governor and system pledged to keep it financially stable. 

As the entire system braces for the financially rocky years ahead, it is armed with new tools. A bill signed by Gov. Tom Wolf earlier this month enables PASSHE's governing board and chancellor to arrange for most of its colleges to share certain services, as well as expand, consolidate or create branch campuses, decisions that traditionally needed the approval of Pennsylvania's state lawmakers.

But whether system leaders will take full advantage of the decrease in red tape remains to be seen. 

Campus mergers, even in times of extreme financial distress, have proven unpopular across the U.S., as colleges often serve as economic engines for their respective jurisdictions and maintain brands and identities their supporters staunchly defend. 

The resistance to consolidations was exemplified in the debate around the new law, which was watered down from the original proposal. The bill initially allowed system heads to close campuses entirely, but this provision was removed.

Still, the legislation offers new avenues for the beleaguered system to correct its problems, higher education policy experts say, and shift from functioning as a loose collective of competing campuses to a nimble unit. 

"It has the potential to be effective," Robert Kelchen, a higher ed professor at Seton Hall University, said of the law. "It takes awhile for changes to occur, closing or merging departments requires faculty and staff buy-in. And I'm skeptical the legislature will allow consolidations at any one campus."

PASSHE's persistent challenges

The system was born out of a 1983 law, but only in recent years has it endured converging challenges that compromised its business model. Its slipping enrollment can largely be attributed to demographic changes in the Rust Belt, experts say. Pennsylvania's population has flatlined, and experts expect the drop-off in birth rates during the Great Recession will affect colleges' enrollments nationwide. 

These trends have started to dry up the local applicant pool from which PASSHE's campuses draw most of their students. Pennsylvania residents comprise nearly 90% of the system's overall enrollment as of fall 2019, which was 95,802 students, down from a peak of 119,513 in fall 2010.

With fewer students, the system raised tuition to fill budget gaps left by the state's middling contributions. Full-time tuition for in-state undergraduates has gone up about 33% since fall 2010.

Pennsylvania hasn't returned to its pre-Great Recession funding levels and PASSHE relies more on tuition dollars than state appropriations, and far more than most other states. However, the decision to raise tuition has pushed out some low-income students and likely exacerbated the enrollment downturn, said Kevin McClure, a higher ed professor at the University of North Carolina Wilmington.

"The legislature in PA has not been a particularly good partner for these higher education institutions and (has) not provided adequate resources," McClure said.

"People are quick to say regional colleges are struggling because of demographic changes," he continued. "They're turning these issues into a natural phenomenon that's outside of anyone's control, and it's absolving policymakers of their responsibility."

Acknowledging the burden continual tuition hikes could have, the system has frozen in-state tuition for two consecutive years. Starting in fall 2020, the 14 campuses can set their own tuition rates. 

Meanwhile, PASSHE campuses compete not only with one another, but also with a robust network of public institutions in the state, including the bigger and more prestigious Pennsylvania State University, as well as the University of Pittsburgh, and Temple and Lincoln universities. The state also boasts several prominent private institutions, among them Carnegie Mellon University and Swarthmore College.

Most recently, Southern New Hampshire University, a private online giant, partnered with Pennsylvania's community colleges in a move that could undercut PASSHE by siphoning off students who would otherwise transfer into the system, analysts predict.

Recognizing the firestorm of challenges the system was facing down, in 2018 it hired Daniel Greenstein as chancellor. He previously served in the lofty position of managing the Bill & Melinda Gates Foundation's postsecondary education work and was a University of California System official. By the view of many in higher ed, he is a seasoned administrator who can help right the system. 

"If anyone can do this, and has the political capital, it's Dan Greenstein," Kelchen said of a potential overhaul to PASSHE.

Some signs of change

Greenstein accelerated PASSHE's redesign, which began in 2016 with identifying potential cost efficiencies, such as shared academic programming.

The reform push also included the bill to empower the system's governing board. It was introduced in January, before the coronavirus forced U.S. colleges to shut down. That month, Greenstein also asked the Pennsylvania General Assembly for a slight revenue bump for the upcoming fiscal year, a requested $487 million, and an additional $20 million for the system redesign, part of a five-year, $100 million effort.

The legislation cleared the state House of Representatives with some notable alterations. Lawmakers axed the provision that permitted the board to close schools, a compromise meant to appease the influential unions, namely the Association of Pennsylvania State College & University Faculties. PASSHE is heavily unionized, something to which observers have attributed the slow pace of change.

"We are seeing signs the changes are increasing, though," said David Tandberg, senior vice president of policy research and strategic initiatives at the State Higher Education Executive Officers Association. "The union isn't resisting this bill, which is a pretty huge thing."

Additional amendments stemming from discussions with the faculty union set up a requirement that the public vet — through a minimum of two hearings — any plan to grow or merge a campus. A proposal would also be submitted to lawmakers, who would review but not sign off on it.

The bill was also modified to exclude colleges whose enrollment exceeded 10,000 students, which would apply to the system's two biggest institutions, West Chester University and Indiana University of Pennsylvania, and exempt them from participating in shared services or consolidations. 

Such an exception defeats the purpose of the bill, which is to help PASSHE run less as a patchwork and more as a "true" system, McClure said. It also speaks to the uneven focus on West Chester and IUP, and shows that legislators will probably dig their heels in to defend the universities in their districts, he added. 

Case in point: one state senator representing part of the area where West Chester is located released a statement celebrating the exclusion amendment. The senator said the school would be protected from a potential weakening of its "strength" and academic programs.  

Why not close schools? 

No lawmakers want a college to shutter on their watch, as it would likely cost jobs in their regions and erode their personal popularity and reelection chances, McClure said. Pennsylvania is in the unusual position of having its legislature tasked with deciding institutions' fates, making campus shutdowns even less likely.

PASSHE representatives also haven't supported closures. Even when Cheyney was at risk of losing its accreditation and was plagued with various other scandals, it still had the backing of the system, Wolf and lawmakers. 

"For us, a closure would be terrible public policy," system spokesperson David Pidgeon said.

But pressures are mounting for the system to consider aggressive cuts as the coronavirus aggravates its pain points. It must contend with an estimated $52 million budget deficit, largely stemming from partial refunds it issued for housing and meal fees, Pidgeon said. 

Two consulting firms that studied PASSHE have not recommended closures, though one advocated for consolidations and mergers, while the other urged against them.

Even if they were widely supported, consolidations wouldn't be easy in Pennsylvania given the campuses' locations.

The state is large and economically diverse, and some of the closer PASSHE colleges are still between 50 and 70 miles apart, and based in rural areas, raising questions about how they could easily share programming.

Consolidations have occurred with some success in other parts of the country, most notably the University System of Georgia, which downsized from 35 to 26 campuses since 2011. But experts say it faced fewer of the hurdles affecting Pennsylvania, in particular the geography of the state and powerful lawmakers that emphasize local control.

"These institutions are just so hugely important for the local economy," Kelly Rosinger, an education policy professor at Penn State, said of the PASSHE campuses.

However, little discussed are the possible expansions the bill opens up, Pidgeon said. He presented a hypothetical scenario: the state needs healthcare workers. Medical programs are expensive for an individual campus to launch, but propped up by several schools, they could succeed, he said. 

"These institutions are well over a century old," Pidgeon said. "You don't come this far without learning a thing or two (about) how to adapt the institutions to changes in the marketplace."