Current Economic Challenges
Various changes in the environment are increasingly disrupting the traditional higher education model. Higher education institutions are continually facing new challenges and have difficulty allocating their dwindling resources to deal with all their problems. Economic challenges are at the forefront of the issues faced by colleges and universities. In this regard, several economic challenges currently impact higher education. First, the effects of the last recession have resulted in numerous problems for higher education institutions' financial power. These institutions are increasingly unable to keep up with their operating costs due to shrinking budgets and declining endowments. Thus, institutions are being forced to search for innovative sources of revenue beyond the standard tuition fees.
Second, the ever-rising cost of running higher education institutions is gradually tuning off potential clients while alienating the public to the point that the support for these institutions is waning. As a result, enrolments have been falling recently in the midst of rising college costs, which pushes many to question if their investments in higher education are worth it or not. Typically, many people go to colleges and universities to enhance their marketability in the employment market. However, unemployment rates make people question the efficacy of going to college and spending so much with no guaranteed employment in the future.
Third, the CCAP (2017) notes that the intrusive federal regulation and the rising federal student financial aid have created an environment where there is inflation of tuition prices and a reduction of universities' distinctive advantage in terms of competitiveness, freedom, and diversity. It is evident that the bulk of federal aid only benefits staff and universities at a higher degree than students.
Factors such as politics, demographic changes, and other external socioeconomic factors often create specific financial pressures on higher education institutions. For instance, the combination of an aging population and anemic economic growth has resulted in a significant drop in the ability to increase resource allocation for higher education institutions. Over the past generation, economic growth has considerably dropped, which has lowered the relevant stakeholders' power to fund a higher education program that is increasingly inefficient in its duties. More so, political inclinations towards funding healthcare reduce the funds allocated to other areas such as education.
Based on this information, the financial patterns/trends that greatly influence higher education include dwindling enrollments, anemic economic growth, and smaller federal budgets for the education sector. However, different types of higher educational institutions have been affected differently. According to Altbach (2020), public institutions are highly dependent on financial support from the federal and state governments. They cover their costs from funds sourced from both government funding and student tuition. More so, these public institutions are highly reliant on the student loans financed by the federal government.
On the contrary, private institutions have a lower reliance on federal funding. Thus, they have to work harder to increase enrollment rates to meet their bottom lines. This implies that the economic challenges affect private institutions more adversely than the public ones.
Finally, it is vital to note that the economic challenges faced by higher education institutions are likely to continue to be adverse if relevant policy changes are not initiated soon. Currently, more people are turning towards online learning as a means of cutting costs and facilitating convenience. There are higher learning institutions that are adapting to this environment and offering online courses as well. However, the traditional form of learning continues to be underfunded and is experiencing dropping enrollment rates. Thus, the whole environment must be restructured to ensure institutions get more funds and increase their interest in enrolling. This will require the institutions to offer value for their clients' money by liaising with relevant stakeholders to ensure employment opportunities once a person completes his/her education.
Relation of the Economic Challenges to the Institution
The factors discussed above have the potential to influence the operating budget of my functional area. First, there may be a need to reduce the number of workers operating in the Office of Student Leadership. There are currently eighteen employees, even though some of them are part-time workers, while others are student workers. Reducing the number of workers will ensure that the cost of salaries will reduce to ease the burden brought about by the economic challenges. Alternatively, the employees might each have to take a pay cut. This will ensure that nobody loses his/her job. Either way, both of these alternatives have their drawbacks and are likely to present opposition from the workers.
Second, there may be a need to cut down some expenses or eradicate them if the budget keeps up with the trends presented by the economic challenges discussed above. For instance, cuts can be made on marketing materials. This will imply that the department will have to develop innovative marketing methods to pick up the slack from the reduced funding. The most comfortable and most convenient way is to rely on social media marketing and web-based platforms free. Other areas that may require cutting costs include meals, entertainment, and travel. This will free up funds for more vital expenses such as training and office supplies.
The current enrollment and projected enrollment are vital elements in my budget. From the budget, it is noted that the budgeting process was carried out based on 16,280 full-time enrollments (FTEs). However, the fall enrollment dropped by 10 percent and resulted in the budget depending on 14,652 FTEs. This drop-in enrollment mirrors the trends discussed above. Enrollment has a huge impact on my functional area's operating budget because it provides the funds needed to run the operations of the Office of Student Leadership. However, the current trend implies that the budget will continue shrinking for the foreseeable future unless innovative measures are taken to reverse the trend. Dropping enrollment rates result in dwindling finances, and the Office of Student Leadership may have to make major changes to ensure that it continues to carry out its responsibilities but on a tighter budget.
Given the current economic challenges, there are certain changes in the revenue stream, which are likely for the institution. For instance, the institution may need to have new sponsors and donors for certain school initiatives. For instance, the institution can establish certain initiatives that promote the education of specific minority or disadvantaged groups to get sponsors and donors to pump in funds to keep the institution's operations running. Alternatively, the institution can initiate business opportunities to create new revenue streams through innovative service or product creation.
Finally, there are other relevant details about the institution's financial landscape, which can present a full picture of the institution's budget challenges. This includes things like how promptly students pay their fees, the rate at which enrolment rates are dropping, the implications of the failing economy on people's abilities to pay tuition fees, and the likelihood of the federal and state governments increasing the funding they give to the institution.
References
Altbach, P. (2020). Higher education in context: Economic factors, an era of competition, demographic realities, governmental political and legal challenges, religious factors. Retrieved from https://education.stateuniversity.com/pages/2041/Higher-Education-in-Context.html
CCAP. (2017). Seven challenges facing higher education. Retrieved from https://www.forbes.com/sites/ccap/2017/08/29/seven-challenges-facing-higher-education/#1c2745f33180
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