A Budget-Neutral Approach to Tackling Higher Education's Increasing Cost Challenge Amid Declining Enrollment Rates

The Challenge:

Higher education institutions are navigating uncharted territory as they strive to maintain educational excellence despite a stagnant number of enrolled students and a steady upward trend in operational costs. Finding a delicate balance between fiscal responsibility and delivering student-centered initiatives and quality education is a challenge that requires creative solutions and strategic planning.

According to the Chronicle for Higher Education, budgeting in 2024 will be tougher than ever. Tuition-dependent private institutions and increasingly tuition-dependent public schools are facing lower revenues, thanks to enrollments depressed by the pandemic and ongoing demographic shifts. The nearly $80 billion in federal aid that buoyed institutions through the worst of Covid-19 is effectively gone. And the go-go economy that helped the country power through the worst of the past three years has cooled, sapping endowment performance and spiking inflation, which makes it more expensive to heat classrooms.

Enrollment represents the biggest stumbling block for many institutions. Undergraduate enrollment fell by about 4 percent nationwide between the fall of 2020 and the fall of 2022, according to data from the National Student Clearinghouse Research Center. With many students who grew accustomed to remote learning during the pandemic, the importance of place-based learning has waned further exacerbating the lower revenue, increasing cost dynamic. One critical solution in the face of declining revenue is reduce operating costs.

Budget-Neutral Solution:

By reducing consumption through energy efficiency, institutions can establish financial stability while making modernization improvements to their building systems. There are several contracting methods, including budget-neutral options requiring little to no upfront funding and off-balance sheet financing, that can be used to accomplish the following needed improvements without making sacrifices to education programs:

1. Utility Cost Reduction:

• Energy Efficiency: By conducting an energy audit, institutions can identify areas where efficiency can be improved and understand the potential cost savings – both immediate and long-term.
• Renewable Energy Integration: Incorporating renewable energy sources such as solar and battery storage can provide environmental benefits and qualify public or private higher education institutions for several currently available incentives. An added benefit of using renewable energy is that it is ‘on-trend’ and a critical imperative with students’ sense of sustainability.

2. Operational and Maintenance Efficiency:

• Smart Building Technologies: Deploying the latest energy management control system technology can help colleges and universities optimize energy consumption, enhance operational efficiency, and reduce maintenance costs.
• Integrated Facility Management: With new equipment, tools, and training, facility and staff members can optimize operations and maintenance processes to further improve campus efficiency.

3. Infrastructure Modernization:

• Building Upgrades: Infrastructure improvements beyond energy systems can include replacing windows, lighting retrofits or roofing – upgrades that make a noticeable impact on campus for students, faculty, staff, and alumni.
• Customized Solutions: Develop and implement a solution that aligns with your institution's unique goals and circumstances while providing budget stability.

Funding Opportunities:

Utility incentives, grants, and federal funds are available that can make infrastructure modernization projects more financially feasible to implement, especially for higher education institutions struggling to maintain enrollment while experiencing inflation. By accessing these incentives in conjunction with a budget-neutral contracting method of performance-based contracting, which leverages the value of future energy savings to fund infrastructure improvements, Colleges and Universities can accelerate their cost-reduction journey and campus improvement plans without compromising on quality of education.

Centrica Business Solutions partners with public and private higher education institutions and independent schools to improve campus infrastructure. Our budget-neutral solutions not only address the immediate need to reduce utility, operations, and maintenance costs but also lay the groundwork for a sustainable and resilient future. With significant incentives available to support these initiatives, now is the time for colleges and universities to act. Together, we can strike a balance between economic, environmental, and educational priorities that are critical to weather the storm of declining revenue and increasing costs facing institutions today.