When College Finances Falter, Mass. Lawmakers Want More Leverage

In light of a wave of recent closures and mergers, authorities are watching the state’s small colleges more closely for signs of financial stress.

In recent years, federal officials have called for the U.S. Department of Education to more closely monitor colleges' financial health — calls the Trump administration has resisted. And now Massachusetts state lawmakers will seek to tighten their own monitoring with new legislation.

The bill would permit the state’s appointed Board of Higher Education to designate colleges as “at risk of imminent closure” based on regular financial screenings.

Schools thus designated would have to react quickly. They’d be asked to provide “immediate notice,” turning over a host of financial information and preparing a contingency plan for closure, listing possible transfer locations for current students and a means to refund deposits to prospective students.

The bill under consideration — which passed the House unanimously earlier this month — goes before the Senate on Wednesday.

According to one of its co-authors, it represents an explicit response to the 2018 closure of Mount Ida College in Newton. Despite years of financial faltering, the decision to close still came as a shock to many students, staff and state regulators.

“I think everyone but [BHE] knew in November of 2017 that that institution didn’t have the means to continue on,” said Rep. Jeff Roy, a Franklin Democrat who put together the bill. “But the rest of the world didn’t find out until April of 2018 — when it was far too late.” Hence, Roy said, this bill’s emphasis on both speed and transparency.

Colleges and universities are already subject to financial surveillance from multiple angles — what’s sometimes described as a “triad.”

Federal authorities make sure that billions of dollars of financial aid are being well-spent. Independent accrediting agencies, like the New England Commission of Higher Education (NECHE), rely on higher-ed experts to track enrollment and the quality of education, and offer or withhold accreditation.

Finally, state officials use licenses and regulations in the spirit of consumer protection. In that way, NECHE President Barbara Brittingham said this legislation falls within their rights.

“When an institution is very disruptive in its closure plans, that’s a consumer issue,” Brittingham said. “The question is how does the state go about that? How can it partner with the accreditor, which — in the triad — is the reliable authority on academic quality?”

In Roy’s view, this bill is an effort to formalize just that kind of cooperation. BHE and accreditors have “coexisted together” for decades, Roy said, “but they weren’t at a level of communication that really worked for the system.”

Rather than obliging the state to make determinations of financial health, the bill would allow authorities to rely on the deeper inquiries made by accreditors. Brittingham explains that NECHE’s financial monitoring includes space for institutions to provide a “narrative” of how they plan to climb out of financial distress, which the commission can judge on the basis of its practicality.

The bill under consideration comes with legal teeth. An institution found to have failed to comply with those reporting requirements could be fined up to $1,000 for each day they run late, while the state could also withhold their funding or even revoke their license.

But it also seeks to protect institutions’ privacy by making communications to and from BHE exempt from public records law. Both Brittingham and Roy said that if the monitoring were done in the open, it would risk creating a “self-fulfilling prophecy,” as institutions at a financial low point — but with a chance to recover — might come to seem less stable than they really are.

Regis and Simmons are among the Boston-area institutions that seem to have weathered recent crises.

Advocates for colleges and universities in the state say they're pleased with the final legislation. Rich Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, said all parties to the legislation expect that NECHE will be responsible for monitoring, thereby preserving "the confidentiality of some of this information."