Decades of disinvestment and borrowing have left New Jersey’s colleges and universities in a financially precarious position, officials said Tuesday. (Courtesy of Rutgers University)
University leaders are seeking increased state oversight and financial support for New Jersey’s public colleges, warning high debt and a looming enrollment cliff threaten the future viability of some institutions.
The remarks, delivered at a conference hosted by Rowan University’s Steve Sweeney Center for Public Policy, come as elected leaders are considering broader changes to higher education after years of borrowing and growth — or a lack thereof — have left some colleges in dire financial straits.
“We really need, today, leaders like us to sit down and think about, what is the future of the university going to look like? How do you believe your grandchild is going to be educated 17, 18 years from now? I can assure you it’s not going to be like today,” said Rowan University President Ali Houshmand.
New Jersey colleges and universities saw a massive regulatory shift in 1994 after lawmakers approved legislation that abolished the Board and Department of Higher Education in favor of decentralized governance that vested more power in schools’ governing boards.
The changes were praised for lending universities greater flexibility to expand their offerings and respond to local changes in workforce demand, but leaders on Tuesday warned the shift increasingly moved funding burdens to universities and limited New Jersey’s ability to plan statewide higher education policy.
“The restructuring in 1994 perhaps created more opportunities for innovation and freed up institutional leaders to become more entrepreneurial in ways they had not had the privilege to be previously, but the approach in many ways also threw out the baby with the bathwater,” said Secretary of Higher Education Brian Bridges.
Colleges’ growing responsibility to fund their own operations and furnish their own capital funding pushed them toward borrowing, and their growing debt threatened instability that university officials said might have been prevented with more oversight.
Such oversight could have earlier identified New Jersey City University’s staggering budgetary shortfalls before declining enrollment, aging facilities, poor real estate investments, and hundreds of millions of dollars in debt forced statutory changes to appoint fiscal monitors at financially troubled universities, Pruitt said.
The 5,000-student New Jersey City University is located in Jersey City. (Courtesy of NJCU)
The dearth of state funding, particularly for capital costs, was a result of past fiscal decisions in New Jersey — like a quarter-century stretch of underfunding or not funding pension obligations — and spurred the reliance on bonding to fund university costs, said George Pruitt, president emeritus for Thomas Edison State University.
In real terms, New Jersey provided roughly $323 million more in institutional aid to state universities in the current fiscal year than it did 30 years ago.
“The state is broke. It is historically and structurally broke, and after this administration leaves, it’s going to be catastrophically broke. The fact that the state has no money has driven the lack of investment,” Pruitt said. “We’re the only state in America where there is no capital support for higher education.”
New Jersey’s structural deficit is set to expand in the next fiscal year after revenue from a tax on high-income businesses is dedicated to NJ Transit and federal pandemic funds are spent as required by the end of 2026.
Sen. Joe Cryan (D-Union), who chairs the chamber’s higher education committee, acknowledged that elected leaders were aware of the problems at New Jersey City University for more than a decade before its fiscal issues reached critical mass. He warned other schools face the same risks.
“We knew 15 years ago that this would be a problem. We just let it spend and get out of control,” the senator said. “That’s not unique. Some of you are simply carrying debt loads that you can’t manage. We have to foster an understanding of debt in New Jersey.”
University officials warned institutions of higher education must retain a high degree of independent management even as they urged increased supervision, warning overregulation could stifle or slow colleges’ ability to adapt to shifts in workforce demands and new technologies.
“We need oversight, but the very worst thing you could do to these institutions is put a blanket of regulation on top of them,” Pruitt said.
Colleges expect a drop in enrollment in the coming years due to a decline in birthrates during and after the Great Recession. Cryan warned the demographic trend could cause a 10% statewide drop in enrollment by 2035.
The drop, which would cost schools sorely needed tuition revenue, is unlikely to impact each of the state’s universities equally, though community colleges and smaller institutions face the gravest risk, Houshmand said.
Some officials pointed to mergers as a solution, noting a 2013 merger that rolled the University of Medicine and Dentistry’s schools into Rutgers and Rowan universities and Montclair State University’s merger with cash-strapped Bloomfield College last year had helped stabilize the absorbed schools.
Such mergers can also help schools that aren’t struggling, particularly if they draw students from backgrounds with less historical representation in institutions of higher education. Those students could replace revenue lost as enrollment declines among other demographic groups.
“I believe in creative destruction and the idea that sometimes it’s good for institutions to sunset. We thought Bloomfield College should persist because it served a unique purpose in the state of New Jersey as the only four-year predominantly black institution,” said Montclair State University President Jonathan Koppell.
Other solutions could include more direct support, including state funding of colleges’ capital needs, whether through the use of unexpired pandemic aid or through New Jersey’s annual budgeting.
“It is embarrassing that we are one of only six states that do not provide a capital funding program for higher education, but yet we turn to it in every marketing that we can that we have the most brilliant and the strongest labor force in the country,” Cryan said.
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