Turning Around PUC?

In early March, when the COVID crisis was just beginning to rock the United States, an additional crisis arrived at Pacific Union College where the administration was valiantly working on a turnaround plan for the financially challenged school. The crisis came in the form of a letter from the Western Senior College and University Commission (WSCUC). It acknowledged the ongoing work PUC was doing to address its financial situation, but also issued a formal Notice of Concern — never something to be taken lightly at an academic institution, because it is the first warning step toward possible removal of accreditation.

WSCUC had nine issues that it asked for a response from the College. Number two on that list was “Move beyond a continuous improvement focus to strive for a strategic break through to address the college’s challenges in transformative ways.” A miracle, in other words. The story of the search for a miracle at PUC goes back a long way. It includes coming close, but the search continues.

With the selection of every new president at PUC over the past twenty years, the Board of Trustees has been looking for someone to find a way to make the campus economically sustainable, for a turn around. Given the size of the college property — 1,800 acres of valuable Napa Valley land — plus the age of its buildings, and the cost of living for faculty and staff in a prime real estate area, it has proved to be an elusive task. Enrollment, the key source of income, fluctuates from year to year, but when it goes down by more than 15 or 20 students it severely impacts the budget. What plan could be put in place to use the resources of the campus to supplement enrollment income and achieve a balanced budget? While each president has tried to address the problem, the level of debt has escalated precipitously in recent years. In 2008, it was about $5 million. Ten years later, in 2018, it had ballooned to $36.6 million, according to WSCUC documents, but the school was only servicing $14.6 million with lines of credit at $502K annually. Today, according to one reliable source, the debt now stands at about $45 million. This current level helped prompt the WSCUC letter.

With an annual budget of $32 million, the amount of debt seems ominous. But because the debt is primarily owed to the college’s parent organization, the Pacific Union, and not to a bank or outside lender, the campus continues to work on a turn around, grateful to the Union — it’s family — for support. As long as the Union backs the school, it can securely continue. And for the Union, lending money to PUC may be politically dicey, but it is not financially risky given the high value of the PUC land. The politics of the support derives from the fact that the Pacific Union has two colleges — La Sierra University and Pacific Union College. Twenty-five years ago, La Sierra negotiated a land deal with its property holdings, a financial miracle that created a $100 million endowment for the school. Their success has increased the pressure on PUC.

Back in 2001, the bottom seemed to have fallen out of enrollment at PUC, when Richard Osborn assumed the presidency. The campus was down 160 students from the year before. He spent the next eight years trying to address the situation. Once a professional recruitment and marketing strategic plan was put in place, it looked like a corner was being turned. But, the economic downturn of 2008-2009 hit colleges, too, and the Board of Trustees voted no confidence in his leadership. Osborn resigned and at the end of the school year moved on to become a Vice President at WSCUC.

Heather Knight was chosen to take his place. She came to PUC from the provost position at Andrews University and developed the “Adventist Advantage” as a marketing tool. With the enrollment plan organized by Julie Lee, vice president for recruitment and marketing, and begun under Osborn, Knight initially oversaw a rise in the number of students. However other issues arose. The tuition discounting that was being done to entice some of the students meant that the net student tuition income was not as high as might have been expected. Knight lost the confidence of many faculty, partially over her treatment of members in the Psychology and Social Work Department. There were also questions about how she spent money. With a loan from the Pacific Union, she spruced up the campus, but also plunged it more deeply into debt. At the end of 2016, she left.

Throughout these years, PUC’s Board of Trustees and its presidents wrestled with a recurring question: Was PUC’s location, with its increasingly valuable land holdings, a legacy to be preserved or an asset to be “monetized”? Shortly before PUC’s longtime and beloved President Malcolm Maxwell retired, the Board voted to sell some of PUC’s land in order to create an endowment for the future. Osborn then led a major effort to sell major portions of the College’s land for creation of an eco-village, but without success. The land use restrictions in Napa County made what seemed like a ready resource for cash into an impossible situation.

Beginning in 2017, PUC seemed to be moving in a new direction. Under Interim President Eric Anderson and then current president Robert Cushman, the College rejected the goal of selling off major portions of the PUC’s land heritage. Discussions about the land’s educational potential were revived. Long-gestating plans for a nature conservancy led to a $7 million-dollar infusion of cash and the creation of the PUC Forest. It helped the college to address in good faith its cooperation with the Pacific Union to retire the debt.

However, enrollment continued to decline. Between 2013 and 2019, enrollment declined by 45.6%. Building up the sports program was one way the college sought to attract more students. But it has not proved to be the silver bullet that some had hoped. Some faculty felt that more attention should have been given to the enrollment problem, and if it had been the current situation would not be as dire.

In February 2020, the Board of Trustees approved new initiatives within the ongoing plan to cut expenses and grow revenues. President Cushman says that unfortunately the plan also forced the college to layoff faculty. The school has separated with just over 22 employees, including 17.25 faculty and five staff. “It has been challenging for people to understand,” he says. Particularly because in the past layoffs tended to impact more staff than faculty. However, as enrollment has declined the faculty/student ratio has fallen below 10 to 1. The Board expects the College to grow it back to 16 to 1, and has asked the administration to accelerate that for the fall of 2020 with a goal of 14.5 to 1. “We had not planned to have to do that in one year,” he says.

Cushman has sought guidance in this difficult process with outside management consultants including Leap Solutions of Santa Rosa and Credo Higher Ed, an organization specializing in assisting independent institutions of higher education. Some faculty have been critical of these outside voices saying the college has very little to show for the money invested in them; however, WSCUC gave Credo credit for helping to move along some of the reorganization that had been envisioned.

In February, the chairs of the academic departments sent a letter to the Board of Trustees outlining their top six issues at the college. In addition to the money spent on consultants, they questioned the accountability of the vice presidents, calling out the addition of four assistant vice presidents in the past two years. They criticized the administration for a lack of urgency in solving the enrollment problem, while also acknowledging and welcoming the hiring of Gene Edelbach as vice president of enrollment. They decried their own lack of voice saying that despite participating on committees that have generated thoughtful recommendations, there is little evidence of being heard. They called for yearly performance evaluations of the administration by the Board, and better internal communication that would include reports of enrollment numbers, changes in debt, and amounts spent on consulting fees.

As a result of the letter, which was sent to each of the Board members, Board Chairman Bradford Newton arranged through the administration to have a meeting with the chairs, as the heads of the academic departments are called. It took place in February, before the Board of Trustees’ regular meeting. One of the chairs reported that it was a good session, and that Newton listened to what the faculty had to say. So, the listening part of the exchange went well. However, there was an expectation by some that after the Board meeting the chairs would hear more directly from Newton about the Board’s response to their concerns, but there has been no further word. For his part, Newton felt he conveyed to the Board what he heard from the faculty and that the Board took it into account in their deliberations. Given the governance structure, any further answers to the faculty would need to flow through the administration, he said.

What is the role of the Board in the search for a miracle? In addition to faculty cuts to bring expenses in line, WSCUC specified changes that needed to occur at the Board of Trustees level: “Increase Board of Directors engagement and monitoring of the college’s efforts to foster a sense of urgency about PUC’s challenges.”

The Board of Trustees’ chairmanship has changed at the same rate as presidents at PUC. Thomas Mostert was the president of the Pacific Union and Board Chair when Richard Osborn was elected president of the college. When Mostert retired, Ricardo Graham was elected president of the Union, and it was under his board chairmanship that Heather Knight was selected to be president. When the regional accrediting agency stated that it was not appropriate for one person to chair the boards of two competing institutions (Graham was also board chair at La Sierra University), Graham turned over the chairmanship of PUC’s Board to the Executive Secretary of the Union, Bradford Newton. Newton oversaw the selection of Robert Cushman as president.

Recent changes have been made in the Board committee structure to align it with the college’s strategic plan. Board members serving as chairs of board subcommittees coordinate with the campus vice presidents in charge of that area. Plus, the chairs of those subcommittees have been formed into an Ad Hoc Committee to foster ongoing communication between board meetings, and the board’s engagement with the campus, according to Newton. Whether or not that will fulfill WSCUC’s requirement for “the engagement and monitoring of the college’s efforts” by the Board remains to be seen.

A number of Board members have stepped away during this challenging situation at the college, including Steve Spears, the vice chair of the Board. Three new members have been added to the Board this year: Andre Wang, a PUC alumni from Portland, Karen Cress from Southern California, and Larry Witzel from Vancouver, Washington. A new vice chair has not yet been chosen. Newton says that election within the Board will take place at the next Board meeting in August.

Members of the Board bring their professional expertise to the table and have contributed to the search for a miracle. In addition to outright sale of the land, many other options have been considered as possible ways to add another income stream including a retirement center, multi-use housing, and partnership with Adventist Health. The Adventist Health proposal was the latest promising venture that did have the potential to be the miracle that PUC was seeking. The nursing and pre-med programs are two of PUC’s strongest majors. Expanding the places where such classes could be taught might bring in many students. However, negotiations fell apart about the time the COVID-19 pandemic forced Adventist Health into its own round of layoffs. Newton comments that while there is nothing to announce, it is not a dead option.

Can the Union help make that happen? Adventist Health is part of the Pacific Union Adventist family, too. Does the whole family need to pull together for this miracle? And what will COVID do to the colleges and universities? There are many dire predictions within the broader higher education community that small independent institutions will not be able to survive, especially those primarily centered around dormitory living located in rural areas. Will the two Adventist institutions of higher education in the Pacific Union need to find ways to work together — as a family? About fifteen years ago there was a study group chaired by Gerry Thompson, former director of education for the Pacific Union, to consider consolidating the two institutions when Osborn left the PUC presidency and Lawrence Geraty retired as LSU president. Those efforts did not continue and recent efforts to start them again have been rebuffed.

President Cushman says he is encouraged by the enrollment information he is seeing for next fall. Despite the coronavirus complications, the administration plans to have students back on campus. The emergency relief funds of $569,112 from the federal Coronavirus Aid, Relief, and Economic Security Act (CARES), with nearly $300,000 going directly to students, in addition to funds raised by the college and PUC alumni, will help. The school does have seven dorms that it can use to spread out the students in appropriate manner under COVID guidelines.

Faculty and staff members report that students want to be back on campus. They are tired of Zoom classes at home and want to be back at school with their friends and to enjoy the experiences of college life. Those who have returned to retrieve their belongings from the dormitories have been asking about what room they will have next year and whether or not they can store some belongings at the school in anticipation of next year. If the students return, and the revamped recruitment plans attract more new students, that could be the first step to a turnaround. A turnaround from the effects of COVID, and an important step forward in financial recovery for the school.

Meanwhile the search for a strategic breakthrough, a transformational miracle, will continue for this beloved institution, one of the oldest Adventist colleges.

Bonnie Dwyer is editor of Spectrum.

Image credit: Pacific Union College website.

Editor's Note: An earlier version of this article misspelled Andre Wang's last name. Our apologies for the error.

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This is a companion discussion topic for the original entry at http://spectrummagazine.org/node/10525

It is always sad to see some important place in your “growing up” phase of life struggling. Unfortunately, some of the struggles are due to where many smaller educational institutions find themselves now. I don’t know what the outcome for PUC will be but I will always be grateful for the time spent there.

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Reading through this article I feel the frustration of each group of people who have met to try to solve what may be an unsolvable situation. I know some of the members of the board and am aware of the dedication they have had to this work. I have been incredibly saddened to see the destruction of an active and healthy department, and therefore its programs, because of what appeared to be something akin to a personal disagreement or power struggle, which did nothing but damage the whole institution. It’s just a terrible string of unfortunate events.

My nephew just graduated from PUC and he seemed to enjoy it. However, of the five kids in my family and my husband’s family, who all attended PUC, only one will be sending one of their children there. We have ten children between us. Four or five will not attend SDA colleges and the others will attend Southern. Southern has simply become the SDA school to attend for most kids these days, with a few exceptions, in our acquaintance circle. I don’t really understand why, as many of these families are not highly observant SDAs. My guess is they still want their children to have an “SDA experience” and possibly marry an SDA spouse.

Still, it is sad to see the decline of what was a good Adventist college. I truly loved my time there.

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The Pacific Union should forgive the 45m debt. The annual savings for Pacific Union College freed up as a result of not having to make its note payments could then be used to strengthen the school’s education program. Enrollment and philanthropic gifts would no doubt increase as a result of the Union’s inspiring action. Economically, this is the smart move for the Union to take.

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Phil, the problem with this kind of schools is that if the debt is forgiven, they will start to immediately build up a new debt. If the school is deficitary it should be closed, and students should be encouraged to attend schools that are in better financial shape, more solid. Just sayin’…

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You can close the school, but closing the school does not eliminate the debt. You can liquidate the assets, including the land (although that may be difficult to impossible because of various government restrictions), but if that option is available now you could do it later. And why liquidate the land, especially if it is appreciating in value, if you don’t have an immediate need for the cash? The Union doesn’t seem to have an immediate need for the cash and can maintain operations without it. If the school is run better, you can avoid deficits. And that avoidance of deficits can be helped by forgiving the debt and saving the school from having to make note payments every year. I don’t know who the ultimate owner of the school is. If it is the Union, then forgiving the debt is a no-brainer.

The political problem that intrudes itself in our analysis is that other constituents in the Union will want to be paid back for their investment in the school. But the school is not able to pay them back. That’s a stubborn economic fact. Sometimes austerity works, but often it does not.

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Even if all you say is true…there appears to be an issue with PUC sustaining enough enrollment. This was the issue with AUC and it was a sad thing to watch the school slowly decay for over a decade. I suspect with the remoteness of the PUC campus. high cost of living for staff and teachers, rising insurance costs, etc., that it will never again be like what it was in its glory days.

With a lot of other SDA colleges having financial difficulties it might be best to close them and put the resources into only a few. The LDS have done this successfully with only a few colleges and have far more members.

SDA’s seem to have a sentimental attachment to every school whether it be on the elementary level to the college level. This loathing to close doesn’t always jibe with financial facts or uneven to insufficient enrollment figures. I think that it has to be faced that all colleges and academies are not going to be saved.

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Choosing that Location may have looked great at the time when people were led to believe that they would soon need some refuge in the mountains (or remote) to hide against some kind of persecution. When paranoia hits, crazy ideas popup quickly.

The question now (in 2020) is, who wants to go to a school that is remotely located like that? If I were a student not affected by the persecution paranoia, I would never go there, I would rather go to LSU, located “in civilization.” :innocent: :innocent:

I know, @phil has a point, but I don’t think it will be able to be actualized. When it rains… it pours. It’s been raining at PUC for a while… :roll_eyes:

Do you know what is Walla Walla’s status in this regard? :thinking:

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No, I don’t…maybe someone else is more familiar with the situation there. Most likely having similar issues just like PUC. There are other small colleges like Southwestern and CUC that are struggling as well.

I think it needs to be faced that all can’t/won’t be saved. Better to plan the exit strategy than have it forced…but that isn’t the Adventst way. God does work in mysterious ways- but also in common sense.

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I believe that there is an urgent need to adjust to the new socio-economic reality of the Country/World. It’s a major “re-tooling” regarding educational institutions. It’s looking for the reality as it may be in 2030 or 2050, and get prepared for that.

The problem with Adventism is that the Denomination only keeps getting ready/prepared for a repeat of 1844. That’s the only thing they have in mind. How is it working for them so far? What part of today’s reality they don’t understand??? :thinking:

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"How is it working for them so far? What part of today’s reality they don’t understand??? :thinking:"

Isn’t that the Million Dollar Question(s)…

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It must be because they are way too “booxed.” … They can’t think “out of the boox” … :wink:

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Following the “script” is another way of saying it. :slight_smile:

Anecdotally SWAU, or so I have been told by an administrator is the only SDA university that is in the black financially. They have no debt. They have been growing student census wise as well. I would characterize the growth as steady. Maybe someone has better information.

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Interesting and good for them! I know that they have been promoting a “stay in our dorms as a high school student and take college classes” in NM. Which, I would say is rather innovative in its approach to attracting and keeping young students at the college. I don’t know if they have been doing any other creative marketing, etc.

Of course, they may have some “Angel” investors as well…I just don’t know that much about what has been done. Maybe some other commenters would know more. Thanks for the info.

Many ideas have been tried in the past two decades in the effort turn PUC around - some with devastating effects that placed the college in an even more precarious situation. It’s such a beautifully situated campus with a fine history. I hope someone comes up with some workable solutions for the economic challenges ahead. I’m at a loss.

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But the schools that have rich endowments, like Andrews University, are financially better off than SWAU, which does not. An occasional annual deficit is not crippling if you have strong endowments to cushion the blow.

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PUC is mirroring the AUC history. Its pretty simple if you are not growing your dying.

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Andrews is having its own issues, unrelated to finances at least at this point. When you say “rich endowments” you use imprecise words. SWAU does have an endowment! I have no way of knowing what the amount is, but is it possible that it is workable for their student enrollment size? A finance team that runs a university in the black year in year out gets the benefit of the doubt IMO.

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Why have they not used the land in your opinion?

I am sure that some of the other colleges have their “Angel” investors, so to speak, that keeps them afloat.