Colleges At A Crossroads: SD Colleges Face Long-Term Financial Challenges

South Dakota School of Mines

EDITOR’S NOTE: This is the last in a three-part series.

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The COVID-19 pandemic is certain to create more financial stress on a public university system in South Dakota that was already facing significant revenue challenges.

Systemwide total student enrollment, a key driver of college revenues, fell by 8.1% from fall 2016 to fall 2020, from 36,531 to 33,566. Administrators point out that some recent dips were in enrollment of international students, who they hope will return once the pandemic and travel restrictions subside.

While revenue losses from the fall semester haven’t been tallied, the six schools in the state university system already lost $16 million in the spring in reimbursements made to students for tuition, fees, housing, meals and parking after shifting to remote learning. Some losses were offset from pandemic aid provided by the federal CARES Act that supplied $14 billion to U.S. colleges and universities.

Tuition, fees and room and board revenues made up about 38% of the total system budget of $832 million in 2020. Meanwhile, state financial support for education has been on the decline for several decades. While the state provided about two-thirds of the cost of public higher education in the 1960s, state support has fallen to about 34% today, and the financial burden on students has risen correspondingly.

The pandemic hit South Dakota public universities at a time when they were already under scrutiny by a legislative panel that will spend more than a year examining system operations.

The Senate Bill 55 Task Force is holding meetings around the state to seek efficiencies in spending and operations, said state Sen. Ryan Maher, R-Isabel, who led efforts to create the task force.

“We’re putting a substantial amount of money into the system, and the question is, Are we getting the most efficiencies we can out of the system?” Sen. Maher said. “Hopefully we can correct the ship and the trajectory we’re on.”

Sen. Maher said early meetings have uncovered potential savings such as consolidation of food-service provision through a single contact rather than individual contracts with different providers at each university, or centralizing some educational programs he said are redundant. He is also concerned that universities continue to build new structures and repair old ones at a time that more teaching is moving online.

For example, Sen. Maher shared a task force report indicating that SDSU had spent about $295 million on major capital projects since 2010 — including the $65 million Avera Science Center and $95 million on an athletic complex and a new football stadium — and has another $42 million in projects projected for completion soon.

Private colleges in South Dakota, which tend to have significantly higher tuition than public universities, are also making major capital investments. Mount Marty University in Yankton, where undergraduate attendance costs $37,500 a year, recently built a $15 million field house and a $4.5 million dormitory; Augustana University, where undergraduate attendance costs about $45,000, has announced plans for a $110 million residence hall addition and upgrade project.

The state charges public university students a fee that pays for some of the new construction occurring on campuses, and Sen. Maher worries that continued spending on buildings will lead to tuition-and-fees increases that may price some families out of sending their children to public universities.

“How are they going to make those bond payments? That’s a big question; where is that money going to come from?” Sen. Maher said. “The cost of a four-year degree in South Dakota is expensive, and we want to hold off on any more tuition increases.”

SDSU President Dunn acknowledged that it will be a challenge moving forward to maintain campus infrastructure at a time when enrollment is falling or shifting online.

“Tremendous infrastructure was built up over a century in a model that predated the web, and so just the maintenance and repair, let alone making new modern facilities, is at odds with an online world,” Dunn said.

Two former higher education administrators in South Dakota — former Regents president Harvey Jewett and former USD president Jim Abbott — argue that greater state investment is critical to maintaining the high-quality education the state system has long provided.

In a 55-page public letter sent to Gov. Kristi Noem, the Legislature and the Regents, the men called 2010 to 2020 a “lost decade” in regard to education funding. They said that $250 million in funding to the university system has resulted from state cuts and spending reductions by the Regents, and that those reductions have put the quality of the system and the value of degrees it awards at a breaking point.

Jewett said that without greater state investment, and perhaps a small tuition increase, the university system will begin to falter.

“There will be collapse — you can’t go on this way forever,” Jewett said. “The quality of the education will fall and the reputation of your schools will fall.”

Given the formation of the task force and past actions of the Legislature, it seems unlikely state funding for higher education will rise dramatically any time soon.

University of South Dakota President Sheila Gestring said  USD spends only two-thirds of the money spent by like-sized universities across the country to produce a graduate.

Gestring said she and other administrators are always on the hunt for new ways to save money while still providing a high-quality education at an affordable cost for students, but that a tipping point in quality might be reached eventually.

“My concern is that even with all those efficiencies that we’ve enacted, we’re running out of ways to address the bottom line through efficiencies,” Gestring said. “I just don’t know that we can do much more there, and the costs don’t go down.”

Public university tuition in South Dakota is the second-highest among public systems seven Great Plains states, trailing only Minnesota. At $9,299 for resident undergraduate tuition and fees, South Dakota is higher than Wyoming, Montana, Nebraska, North Dakota and Iowa. The average student-debt load for 2019 university graduates in South Dakota was $25,427.

Maher said the increasing cost of obtaining a college degree in South Dakota may push more students to attend out-of-state schools or move into the technical college system. The state has seen a decline in the number of South Dakota high school graduates who have enrolled in the university system, from 3,207 (36%) of graduates staying in the state in 2010-11 to 2,910 (32%) staying in 2017-18.

Competition for new enrollees remains high in South Dakota among both public and private schools. The private Dakota Wesleyan University in Mitchell, for example, announced this fall that it would begin offering a $2,000 payment and scholarship offers to students who transfer to the college from elsewhere after Jan. 1, 2021.

The shift to two-year tech schools is already occurring. The pandemic has highlighted the continuing move of students into the South Dakota technical education system, which provides a cheaper, faster path to a post-secondary degree or trade certification and possibly a good job. As public and private four-year colleges saw enrollment declines in 2020, South Dakota’s four technical schools saw a slight rise in enrollment in fall 2020, coming on the heels of a 13.8% jump in enrollment over the past five years.

The annual cost to enroll in a South Dakota technical college is about $7,000 and students do not have to pay to live, eat or park on campus.

Employment and income challenges that arose amid the pandemic will only increase the value of a technical degree, said Nick Wendell, executive director of the South Dakota Board of Technical Education.

‘With spiking unemployment, the deep pandemic impacts and the ripple effect on the economy, getting a credential or a technical degree is a really good way to maintain career security,” Wendell said. “There’s probably a pretty high-paying, in-demand position available for you in South Dakota with a technical degree, and I think that message has resonated with a lot of folks.”

Wendell is seeking ways to make technical credits more transferable to the university system.

He said technical schools can provide an affordable path to a better life for the nearly 25% of South Dakota high school graduates who do not enroll in any post-secondary program within 18 months of graduating.

Parent Julie Becker of Sioux Falls said her daughter, Sydney, decided to live at home and attend the USD university center community college in Sioux Falls rather than attend in Vermillion.

Becker said she supported Sydney's frugal approach after seeing her older son run up about $25,000 in student loans by moving to Minnesota to study at St. Cloud State University. Yet she and her husband, both college graduates, wonder if their daughter’s desire to avoid taking out loans is costing her an important part of the college experience.

“College isn’t just the classes, it’s the people you meet and the friendships and the study groups — all that goes with it,” Becker said. “She is missing out on the social aspects of going to college.”

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