Tucson After the Coronavirus

Back when I was blogging regularly, one of my rules of thumb was: if I have the same conversation with three different people in a week, it’s worth blogging about. Maybe I can try that again.

One conversation I’ve had a lot over the last seventy days of quarantine is “What does Tucson look like after this?” I have a few different directions from which to tackle this question. First, let’s talk about the elephant in the room… and the reason I moved to Tucson.

The University of Arizona

Without the university, Tucson would be Pensacola… a pleasant small city in a delightful climate adjacent to an Air Force base, with lots of retirees and golf courses. Tucson has developed in a symbiotic relationship with the university for over 100 years. And the university is taking an enormous hit due to COVID-19.

Richard Florida and Jeff Selingo do as good a job as anyone of examining the “Crisis of Urban Universities.”

Link: A Crisis for Urban Universities

Although UA isn’t in the middle of New York City, many of the concerns apply to Tucson as well. Long-term, I have no doubt that the university will continue thriving both as a center of academic excellence and as a dynamo of research. But the road to get there may be rocky.

If you hearken back to the Before Time, when none of us had heard of COVID-19, there were many voices claiming that higher education was in an unsustainable bubble that was bound to burst. High costs, high student debt loads, questionable value of certain degrees, dependence on foreign students, you name it… pick an aspect of the modern university, and you’d find someone decrying the impending apocalypse.

Well, the apocalypse is here, and from an unexpected source. Rather than collapsing under its own weight, higher ed was dealt a knockout punch by a virus (and the national response to it). Specifically, at the University of Arizona, the budget projections are astonishing. Over the fifteen-month period from April 2020 through the end of the next fiscal year in June 2021, UA leadership is projecting a $250 million loss of revenue.

Link: President’s Robbins statement on the budget situation

You can’t find $250 million in a $2 billion budget by tightening your belt. Cancelling travel and skimping on office supplies won’t get you there. And universities aren’t like factories, where you can adjust to a downturn by purchasing fewer raw materials. At a university, our “raw materials” are students — and they pay us! Three weeks ago, we were facing a 45% reduction in the number of entering first-year students. That deficit will reduce over time… but when the minivans arrive in August to move students into the dormitories, that freshman class is likely to be 20% smaller than last year. And that deficit gets baked into the next four years as that smaller class progresses through to graduation in 2024.

I’ve heard people say “make up the difference with research!” The U of A is already a research powerhouse, with over $700 million of sponsored research last year. and we’re at the forefront of many areas of research likely to be boosted by the COVID-19 response, from drug development to diagnostics to new medical devices. Our goal is to grow that research line to $800 million or more over the next few years.

But one of the less-understood aspects of university economics is that most universities lose money on research. The overhead costs of operating and staffing a top-tier research enterprise aren’t adequately covered by either Federal or corporate research contracts.

Link: High costs of research at universities made worse by funding gap

The joke has always been “We’ll lose ten cents on the dollar, but we’ll make it up on volume!” That, actually, works as long as research is one element of a vibrant scholastic community… great research attracts great faculty who attract great students who not only pay tuition but (sometimes) eventually become great philanthropic donors. It truly is a virtuous cycle, and it has led to enormous success among America’s Tier One research universities, including UArizona.

But when the music stops — as it has — the tuition dollars that account for the largest portion of university budgets will drop. And the domino effect will knock everything over.

“What about online education?” That’s an entirely different discussion, and both UArizona and ASU made enormous strides in deploying effective online education before the COVID-19 situation made going online mandatory. But research universities are caught between the horns of a dilemma. If we claim that online education is precisely equal to on-campus education, then there is no reason to go through the risk and expense of re-opening campus. Everyone should just stay home.

But the University of Arizona has made national news for its early and strong support for opening campus for in-person education in the fall.

Link: President Robbins: UArizona Plans to Resume In-Person Classes in Fall

On the other hand, if online education is not equal to on-campus education, then the university should charge less for it. Perhaps much less. But the cost structure of the university isn’t driven by bricks and mortar… it’s driven by the intellectual capacity of our faculty and staff. Those people don’t become less capable, or less expensive, when asked to teach online.

(This is perhaps a case where you could lower the price, and make it up on volume… but the overall supply of potential students isn’t increasing, so you’re looking at a zero-sum game. If University A triples its enrollment of online students, then Universities B and C go out of business. Etcetera. None of this is simple.)

Add it all up. Worried students planning gap years. Worried parents encouraging their children to go to college closer to home (drying up the out-of-state students paying triple tuition). Overseas students finding it unpopular or impossible to start or continue their studies in the United States. (The visa offices are currently shut down.) Lower sales taxes leading to lower TRIF dollars. Worried athletic directors trying to figure out how, or if, to invite paying spectators back on campus for football and basketball. Worried alumni putting the brakes on charitable giving. Worried legislators trying to balance a state budget with the bulk of their items untouchable except by referendum… leaving higher ed as one of the few knobs they can turn. All the needles are pointing in the wrong direction for top-tier state universities.

Link: Higher Education at the COVID-19 Crossroads

The University of Arizona has excellent senior leadership, and they’re navigating this tsunami as well as possible (and better than many peer institutions). The U of A isn’t going broke, and it will continue to be a pillar of the Tucson community for decades to come. But it’s going to be hurt by this. Some good faculty will decide to retire earlier than planned. Some good staff will retire or be asked to leave in order to make budget targets. And some good students will never matriculate. The damage isn’t irreparable, but it may take years to reach the numbers that we had planned for FY2021. Those setbacks will have a ripple effect throughout the regional economy.

Part II: The Pandemic Diaspora

(Please note: Like all my posts, this article represents my personal opinions based on publicly-available information, and should not be viewed as an official statement by the University of Arizona or the Arizona Board of Regents.)