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Paying for college: WV private schools' business model adapts to changing economic, education landscape

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JIM ROSS / The State Journal JIM ROSS / The State Journal
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Officials at state schools in West Virginia often say that with dwindling financial support from the Legislature, they may have to adopt the private school model eventually.

Joke? Doomsday scenario? Rally-the-troops rhetoric?

What is the business model for private colleges and universities in West Virginia?

Compared with a few years ago, the financial performance of West Virginia's eight private colleges appears to be improving.

According to reports filed with the Internal Revenue Service, six of the state's eight private schools reported operating losses in the 2008-09 fiscal year. That does not include the now-defunct Mountain State University. In the 2011-12 fiscal year, four of eight reported operating losses. Not all schools have filed reports for the 2012-13 year, but at least two of the four that operated in the red in 2011-12 are now in the black.

Finishing the school year in the black is no guarantee of longevity, however. Mountain State University in Beckley was making $4 million a year or more up until its last. Several people in higher education said Mountain State was a nonprofit that was run as a for-profit. In the end, it didn't pay enough attention to its product — accredited degrees — and ended up going out of business, with much of its operation taken over by the University of Charleston.

Seeing the difference

Gene Grilli has been chief financial officer at Wheeling Jesuit University for just a few weeks, having come to the school from Youngstown State University in Ohio. It didn't take him long to see the difference between how finances work at a private school as opposed to a state school.

But his time at Youngstown State helped him prepare for working for a private school. State aid for Youngstown State dropped from about 80 percent of the school's budget to about 25 percent over 10 years, Grilli said.

"I guess what's happening is that the public schools are becoming more like the private schools. It's some advantage to the privates that that's happening," he said. "In the public side, we had considerable support from an endowment."

Privates are much more agile in being able to adapt to the changing market, as they are not restrained by the same rules that govern public colleges, Grilli said.

"The quality of the private school is very high," said Grilli, whose own children have attended public and private schools. "There's a community here at Jesuit. There's a Jesuit rigor that will help them later in life.

"Our students are in grad school or are engaged in a job that is consistent with what they were doing in school."

Going private

The small size of the state's private schools helps recruit some students.

Megan Bauman is a senior at the University of Charleston, where she majors in communications and minors in public policy.

She spent the first two years of her college career at a community college. When it was time to move on to a four-year school, she was offered a scholarship at UC to play soccer.

"Coming from a community college, I really liked the small class size," she said of choosing UC over a state school. "I was able to meet with faculty, and I felt they would be involved in my individual education."

Plus, being interested in public policy and being in the capital city was a draw, she said.

Cailee Goddard, a freshman from Beckley, said she chose UC over several state schools that are near hometown.

"It's small," she said. "On my visit, there was not one person that was not friendly to me. 

"I really love the campus itself — the view of the Capitol in winter or fall."

Goddard, who is studying communications and graphic design, said she did not know anyone who had attended UC except for her mother's coworker's cousin.

"She just talked it up," Goddard said. "She loved it here. Her word of mouth persuaded me."

Stephanie Corbelli, a junior in the elementary education program at Ohio Valley University, comes from western New York. A trip to the OVU campus many years ago attracted her, she said.

"The first time I was on campus was in seventh grade with a competition, and I knew I wanted to be here," she said.

There were other reasons, too.

"I wanted to be away from home and sort of be semi-independent from my parents," she said. "I never really wanted to go to a state school. I really wanted to go to a Christian school. My faith is very important to me."

Caleb Dillinger, an OVU junior studying for a career in the ministry, said he had a practical reason for choosing Ohio Valley University over a state school.

"A scholarship brought me here," he said. "It's not why I stay.

"I went to a bigger high school. My graduating class almost had as many people as OVU has total. My sister was here, so I had a tie here."

Dillinger grew up in Pittsburgh but was born at Camden Clark Hospital in Parkersburg. His father is a minister who gets his summer interns from OVU. In the typical teen rebellion phase, Dillinger at first wanted to go anywhere but OVU.

But OVU offered the most scholarship money, and he had the other ties, he said.

Turnaround at D&E

Davis & Elkins College has had the strongest financial performance over the past few years, helped in part by some good fundraising in the 2009-10 fiscal year. The school's net assets also jumped in the past four years, from $29.8 million to $45.9 million.

Financially speaking, Davis & Elkins College leads the pack among the private nonprofit colleges and universities in West Virginia.

D&E President Michael Mihalyo credits the college's financial strength to his predecessor, G.T. "Buck" Smith. When Smith took over as president in 2008, Davis & Elkins was in bad shape. Enrollment was on the decline and went as low as 500. Gifts and donations totaled only about $500,000 a year. The college was operating at a loss, requiring it to borrow money from an internal account and from outside.

So Davis set down some rules and followed them:

 

  • Budgets would be balanced. That was nonnegotiable.
  • All external debt would be paid.
  • No capital projects would be undertaken without funding secured first.

 

"It's rather simplistic, but it's what we're doing," Mihalyo said.

Smith retired last year. Since his program was implemented, enrollment is up about 62 percent and D&E has added programs, such as one in dance, Mihalyo said.

Renovations have been done on the 1,200-seat concert hall, a 2-D art lab, a 3-D art lab and the lobby of the Myles Center for the Arts, Mihalyo said. This fall D&E is adding lacrosse teams for men and women. The move to the Great Midwest Athletic Conference has increased athletic expenses, but it has helped the college overall, Mihalyo said.

On the academic side, retention is up and visits are doing well.

Next school year, D&E is freezing tuition for current students as an experiment, and it is guaranteeing incoming students their tuition will not increase for the four years they are on campus.

Enrollment is up among all geographic regions — in-state, out-of-state and international, Mihalyo said.

"It's a nice time to be here at Davis & Elkins, but we're mindful things can always change," he said.

Among the challenges private schools face is the availability of financial aid, especially with possible changes in tax laws that could discourage gifts from alumni and other donors, Mihalyo said.

But there are opportunities, too, he said.

"We believe we've found a niche within the state and the country," he said. "What we do well we want to continue to do."