Alverno College is no longer considered under financial distress, an encouraging sign for the south side Catholic women’s college.
The college’s accreditor, the Higher Learning Commission, said it dropped the designation earlier this month after determining the college had resolved problems that led Alverno’s Board of Trustees to declare a financial emergency last June.
Alverno whittled down its academic programming, from 43 undergraduate majors to 29, and 25 graduate programs to 19. It also eliminated 24 full-time faculty and 14 full-time staff positions, Alverno spokesperson Kelly Cole said.
“As a result of those actions and other changes, Alverno is now in a stronger financial position,” Cole said. “We continue to implement cost-saving measures, and to increase opportunities for revenue generation.”
Here’s what publicly available documents tell us about Alverno’s financial situation:
990 tax forms show repeated deficits
Alverno ran deficits in four of the last five fiscal years, according to its latest tax returns. The most recent 990 form on file shows the college ran a $13 million deficit in the 2022 fiscal year.
Alverno told the Milwaukee Journal Sentinel last May that the projected deficit for the fiscal year that ended June 30 would be about $9 million.
The college declined to say whether it has closed its deficit or what it projects the deficit will be for the year ending next June.
Enrollment statistics reflect some vulnerability
Declining enrollment isn’t necessarily a telltale sign of doom. Most institutions have fewer students than they did a decade ago because there are fewer higher school students available for colleges to recruit.
Fewer students means fewer tuition dollars coming in, straining the budgets of smaller schools that don’t have the economies of scale that larger institutions do. It’s not a hard-and-fast rule, but experts consider schools with student bodies of 1,000 or fewer to be the most vulnerable to closure.
Federal education data show Alverno’s enrollment over the past five years has fluctuated from a low of 1,341 full-time students in 2019 to a peak of 1,785 in 2021.
Endowment performance has generally been good
Well-managed schools withdraw a small percentage of their endowment annually, leaving the rest to accumulate interest. Most money in endowment funds is set aside for a designated purpose based on the wishes of the donor, such as scholarships for students studying a specific major or construction of a new campus building.
The larger the endowment, the better position the school is in. But experts were reluctant to provide a cutoff for how small an endowment would constitute a red flag.
Look at the endowment’s performance over time, they said. If it’s been spent down, that’s a sign the university may be tapping it to plug budget holes.
Alverno has built up its endowment over the past decade from about $22 million to as much as $42 million in 2021, according to federal education data. Then it dropped to $35 million in 2022.
Accreditor can offer clues to financial problems
Accreditation is important for an institution to have because it allows students to access federal loans, grants and other financial aid.
The Higher Learning Commission accredits colleges and universities in the Midwest. It regularly visits institutions and reviews data, watching for significant changes in enrollment, faculty headcount, student-teacher ratio and number of degrees awarded. It also studies the schools’ finances and scores their financial health.
These scores aren’t made public, but if an institution’s score falls below a certain threshold, the commission may require the institution to submit an additional report or host it for another visit. The accreditor can take more serious steps, too, by placing schools at risk of being out of compliance on sanction or probation. It can also designate a school as being “in financial distress” or “under governmental investigation” though those labels are later removed from the website after the designation is lifted.
Type in your school’s name on the Higher Learning Commission website to view its accreditation history.
Look up U.S. Education Department financial composite scores
The U.S. Education Department annually calculates the overall financial health of private institutions participating in federal student aid programs based on schools’ audited financial statements.
The scores range from -1.0 to 3.0, with schools scoring 1.5 or higher considered financially responsible. Scores falling between 1.0 and 1.4 are considered financially responsible, but require additional oversight.
Alverno scored a 2.2 in the 2022-23 school year, the latest available data.
The scores get their fair share of criticism, predicting only half of closures since 2010-11, according to a 2017 Government Accountability Office report. It’s worth noting that schools can close for nonfinancial reasons as well.
Cardinal Stritch University scored 2.3 in 2021-22, the most recent data on file for the school before it closed in 2023. Holy Family College, a private institution in Manitowoc that closed in 2020, scored 0.4.
U.S. Education Department cash monitoring is another data point
The federal education department can also monitor schools’ cash monitoring as a way to provide additional oversight.
Northland College is the only private nonprofit Wisconsin institution currently under heightened cash monitoring.
Kelly Meyerhofer covers higher education in Wisconsin. Contact her at kmeyerhofer@gannett.com or 414-223-5168. Follow her on X (Twitter) at @KellyMeyerhofer.
This article originally appeared on Milwaukee Journal Sentinel: Alverno College no longer considered under financial distress