Tuesday, November 1, 2011

Cooper Union contemplates charging tuition for the first time; faces $16.5 million budget deficit



Wow, the Coop is considering charging undergraduate students tuition for the first time since its founding in 1859, according to The New York Times today.

Per the article:

[University president Jamshed] Bharucha said that in recent decades, the school had resorted to unsustainable practices to support its operations — like selling assets and dipping into the principal of its endowment, which stood at $577 million in mid-2010 — rather than just spending the endowment’s earnings. In recent years, it also spent heavily on a new academic building and renovations of its historic building, both on Cooper Square.

The school also generates significant income from real estate it owns, including the land under the Chrysler Building, but the value of those properties has also been dropping.

The Wall Street Journal reports that the school's $16.5 million budget deficit this year has been growing for decades.

Nothing definite about the tuition, Bharucha said. There will be task forces and blue ribbon committees and stuff exploring all this. Also: lower-income and many middle-income students would continue to attend free ... and none of the current 900 undergraduates would be charged, per the Times.

Meanwhile, not looking so good now for a rent reduction for the St. Mark's Bookshop, though that matter wasn't mentioned in the articles.

21 comments:

John M said...

This reminds me of that scene in Citizen Kane where Thayer tells the young Kane that the paper lost a million dollars in the previous year. Kane replies, 'Yes, we lost a million dollars last year, and we'll probably lose a million dollars this year, and a million the year after that. And if we keep losing a million dollars a year, I'll eventually be bankrupt...in a hundred years.'

If you assume that the school will never make another dime on its principal or real estate holdings--which is a flat-out impossibility--and has to burn through its principal at a rate of $16.5 million per year, it will be completely broke in 35 years. If it doesn't build any more incredibly bizarre and ugly buildings, that might stretch to 40 or 50 years.

So yes, let the well-to-do students pay something, but this is absurd, and to even think that an extra couple of hundred thousand per year from a new tenant (to replace the bookshop) is going to make any difference whatsoever is simply preposterous. Because these guys are good for a century, easy, and more like for another 152.

Kind of makes the whole St. Mark's Books thing seem kind of petty and insane, doesn't it? I use 'seem' to retain some aura of politeness.

Anonymous said...

I always felt that new building was stupid and desperate looking. Ooh look at me, I'm asymmetrical and therefore artsy!

Anonymous said...

John, you are delusional. Everyone claimed CU weren't broke and were just being mean to the bookshop. That was not true. Why should they get a pass over other holdings? What makes that specific spot so special? Move down the block. Move anywhere else.

Guess what? Anywhere the shop goes, it is going to fail because book shops aren't a good business model.

nygrump said...

Gee, why is this story so familiar, the elite spend more than they have, and the youth have to pay for it. The Board of Directors there should be replaced.

Lisa said...

Now there's a good argument-- this 150 year old institution may be hemorrhaging money, but it'll be a whopping 35 years before they're totally kaput!

Had Peter Cooper the benefit of John M's sage advice (back in 1859), Cooper Union obviously wouldn't be experiencing any of these unpleasant financial difficulties in 2011.

Anonymous said...

John M,
The deficit is 16.5 million. The operating budget is multiples of that.

Goggla said...

Wow.

Anonymous said...

What are the salaries for the high-end of the administrative staff? How much is Mr. Bharucha being paid? And why did they build an extremely expensive/fancy new building if they were having budget problems?

Perhaps because the heads of non-profits frequently don't care about the mission of the institution they run, but rather, only about their own personal ambition and how they can spin what they did for their current institution on their CV for their next leap up the corporate ladder. That's why we see people like John Sexton spending NYU's money on building new facilities and campuses overseas, rather than on things that benefit, you know, the students. People like Sexton et. al. focus on expanding market share etc. because they import morally bankrupt corporate practices that don't even benefit shareholders in the private sector, but make CEOs look good in the short-term for the purposes of their compensation and career advancement (i.e. increased quarterly earnings at the expense of long-term solvency).

In any event, given the heat Cooper Union was getting for the St. Marks Bookshop affair, I suspect that this is a cynical PR move on behalf of Mr. Bharucha, and I won't believe the protestations of budget woes unless Cooper Union releases a complete copy of all of their books.

Anonymous said...

It sounds like there has been some financial mismanagement going on for some time.
But as the first comment points out, I believe this is ultimately a public relations smoke screen.
Cooper is not broke, not even close.
The numbers just don't add up.

nygrump said...

I wouldn't put it past someone on the Board who intends on destroying the school to get a hold of the real estate. Its worth billions of dollars. People get killed for much much less.

Jeremiah Moss said...

i have to agree with Anon 2:02. the timing of this announcement, after all the bad press over St. Mark's Books, is interesting at least. and what happened between 2009, when Cooper was cheered as thriving financially, and now? the economic downturn had already happened.

Anonymous said...

if budgets were tight, why did Cooper Union demolish the completely fine 7th Street Building and replace it with a monstrosity? The new planewreck of a building is apparently aimed to appear trendy, but instead looks like a dated relic of the "postmodernism" and "deconstruction", two aesthetically and culturally bankrupt ideas, which now contribute the financial crisis of a university.

- East Villager

Anonymous said...

Off-topic, but relevant as metaphor:

This disingenuousness also reminds me of the MTA, which has been crying poverty for years now, cutting service, raising prices, abolishing attendants, and allowing maintenance to go to hell....all while investing in the pointless 2nd Avenue Subway, which will cost approximately...wait for it... over $17 billion.

Meanwhile the 2nd avenue line will not even stop in the East Village, skipping from 14th Street straight to Houston.

A surface transit line (streetcar or light rail with timed lights) would have been far less expensive, flexible, and useful.

So apparently both Cooper Union and the MTA went for the "impressive", "landmark", and obscenely expensive projects, forgetting about practical concerns such as usability and finances.

- East Villager

Kurt said...

"This disingenuousness also reminds me of the MTA, which has been crying poverty for years now, cutting service, raising prices, abolishing attendants, and allowing maintenance to go to hell...."

The subway has been better than any time I've taken it in 25 years. Was it better in the early 80's and before?

Anonymous said...

Cooper is broke. It's true; the underlying model of its funding is fundamentally unsustainable, but regardless it is a unique instution which provides unique opportunities. Cooper predates the East Village. The Cooper Square developed with and around the school it derives its name from. It can not subsidize failing buisnesses. It's easy to blame the institution for its faults as mistakes have been made. It's mission has and always will be to provide an educational model free from financial pressures among its student population and in order to accomplish that mission it can not subsidize failing businesses.

The school doesn't have 30+ years with the current deficit, it has 2 or 3. It's liquid endowment lags, and as each year passes, its ability to generate new revenue declines.

Cooper is worth saving.

Cooper Insider said...

Cooper will run out of money in 2-3 years, not 35. This is direct from the mouth of President Bharucha, as of last night.
While many might take issue with what Cooper has done of late in attempt to secure its future, I guarantee that nobody would want to see what would replace Cooper if the institution fails.

Anonymous said...

That is f*cking APPALLING that they have been spending MILLIONS OF DOLLARS on putting up new buildings without first having a BIG surplus of cash on hand.

The whole CHARTER of Cooper Union is to provide a free college education - the people running the school should all be fired and investigated to see if they have been making money off construction of the new buildings via back channels. In other words, it certainly would seem they have been using the school as a front for laundering money.

Of course, they probably will not be fired or investigated because they almost certainly run in the same circles as Prince Michael (Bloomberg).

It's really sad...with a private charitable foundation like this - who is there to demand justice and repair the damage that these people have done?

Lisa said...

The prevailing sentiment last week was that Cooper Union was richer than god (but greedy!); this week, news that CU is floundering is met with cynical disbelief or wild accusations of malfeasance. Seems safe to assume that none of you know the first thing about Cooper Union's finances (not to mention economics in general: "Cooper Union is supposed to be a NON PROFIT-- therefore they shouldn't turn a profit on their rental properties!!").

Ignorance is forgivable. What's a lot less forgivable is smug righteousness in the complete absence of facts.

Never mind grieving for EV landmarks, I grieve for the EV sensibility. Most of you EV Grievers sound like a bunch of disapproving small-town matrons.

glamma said...

i think this is complete and total bullsh*t intended to do damage control after they royally screwed the st marks bookstore (and the whole east village). everyone's entitled to their opinion and this is mine. i call BULLSH*T on cooper union.
if they do start charging students it will be because they WANT to, not because they HAVE to, because they are greedy monsters, as we can see clealry exhibited by their reprehensible behavior with st marks bookstore.

glamma said...

this doesn't make anything ok. they should be DOUBLY ashamed of themselves.
just like bloomberg cut thousands of programs that serve nyc elderly and children while spending billions to erect new sports complexes that we DID NOT EVEN NEED and NONE OF THIS TOURIST WEATLTH TRICKLES DOWN so give me a f*ckin break.
is anyone else really sick of having their intelligence insulted by this cr@p?

TCM said...

As a somewhat recent Cooper Union graduate and someone who has lived in NYC all their life, I think this was pretty much known for a while.

Back a little over 5 years ago there was much discussion of Cooper's finances and how to fix them. Around the same time, there was the discussion of tearing down the old building and putting up a new one. If anyone remembers the building that was there previously, it was more lobby than anything else. That way, they could reduce the footprint that would be used to teach students. At the time, I personally thought it was a bad idea.

New building or not, however, it's been known for a while that they have less money coming in than is being spent. Which is an absolute shame, as I very much value the education I received there, and try to donate as much as possible each year to help repay the opportunity they provided me.

I agree with the new president's statement that their previous financial system was not sustainable, and I am happy that he is bringing it to the forefront. I think mentioning charging tuition is a way to bring more attention to the subject. I do not think it is related to the issue of the bookstore (that is my opinion however, and much like the opposing view, it would be rather difficult to prove either).

On the subject of the bookstore, I would love if it could stay, but I also believe in paying for what you sign. If they signed a lease that was not within their budget, that is an issue they need to deal with. Similarly to the fact that if Cooper can't pay it's way I would hope they look at changing their financial practices in lieu of looking for a bailout the way the bookstore is.