CBS curtails student intake this year

Skrevet af Bjørn HyldkrogJesper Snedker Adamsen, (versioning) - Foto: Morten Andersen - 17. juni 2014 - 12:270 kommentarer
CBS' financial situation looks problematic in the longer run. President Per Holten-Andersen will now brief the political spokesmen on university education about CBS' financial prospects.

CBS has reached its maximum limits for student admissions and will be retaining the same intake as in 2013. Any intake on new programs has to be counterbalanced by a reduction of intake on existing programs. However, the number of students will continue to increase over the next couple of years.

The maximum capacity has definitively been reached

This summer, CBS will implement what University Director Peter Jonasson describes as the first moderate curtailing of student intake; the first. The original plan of an annual 3.5 percent increase in the student body will be abandoned and instead CBS will stop at the intake level of 2013.

The new course of action has been deemed necessary as economic projections have indicated that CBS would face a structural problem of DKK 50-100 million annually if the increase in the student body was to continue.

By curtailing intake, and cutting back the number of teaching lessons and the use of external lecturers to the levels of 2011, CBS will be able to maintain balance in its economy for a few years to come.

However, this will not be the case in the longer run, as CBS will not be able to perform in accordance with the public sector’s annual 2 percent efficiency improvement requirement. As of now, CBS presupposes that new PhD scholarships must in part be financed externally by 50 percent as they are reopened.

It is in this light and with those numbers in his presentation material that CBS President Per Holten-Andersen has just commenced his annual briefing round to the political parties’ spokesmen on university-educational affairs.

Necessary decisions, not political signals

- Currently there are no indications that the universities will receive additional funds; quite the contrary, actually. However, it is not my intention to turn these meetings with the party spokesmen into a dirge, but I will deliver a clear orientation concerning the current economic state of CBS and the consequences of the current economic model”, says Per Holten-Andersen.

The President describes the decision of an initial freeze of the intake as a necessity caused not only by the fact that CBS’ deficit would increase for every additional student taken in from 2015, but for other reasons as well:

“We simply do not have sufficient room for more students or PhD scholars in our current facilities and we do not have the funds to further increase the capacity of our facilities; neither do we have the funds to increase the number of lecturers”, Per Holten-Andersen points out and puts it into perspective:

- The only alternative is to compromise the quality and that we will not! CBS delivers a product that society needs; 83 percent of our graduates obtain jobs in the private sector and the unemployment rate amongst our graduates is very low. It is the basis of our existence and that we will not squander. Furthermore, the board of directors and the management team are not prepared to force Copenhagen Business School into an uncertain financial situation, which they would unless the course is changed.

External funds alone would never suffice

Thereby not saying that the management team and board of directors are just sitting back not going through every possibility of improving the economic situation; including the possibility of external financing.

At the board of directors’ seminar on strategy and recent board meetings, the focus has been to uncover which opportunities CBS has in relation to finding new business areas; how to increase the external financing of research activities and facilities in particular; and generally how to bring down costs.

- A number of ideas and initiatives, which we plan to act on, have been discussed; however, the fact of the matter is that besides the grants, there are no potential sources of income that would be able to deliver a nine-figure amount annually, says President Per Holten-Andersen.

Fewer students or compromised quality

At the last meeting of the board of directors of CBS in 2013, a financial outlook covering 10 years from 2015 was drafted. Herein, four possible scenarios for CBS were described, based on the presumption that the financial situation would not be improved. The conclusion in two of these scenarios was a nine-figure deficit after 10 years:

If the standards at CBS were leveled to the standards of the faculties of social sciences at other Danish universities, and if CBS had continued to increase the student body by the scheduled 34 percent over 10 years, then the institution would face an annual deficit of DKK 350 million after 10 years, even with increased external financing, i.e. we will not continue down that path.

If the standards at CBS were leveled to the standards of the faculties of social sciences at other Danish universities and the number of full-time students was kept at 2012 levels (approximately 15,900) over the next 10 years, then the annual deficit would be DKK 177 million with increased external financing, i.e. we will not continue down that path either.

CBS could lower standards and keep the number of full-time students at 2012 levels (approximately 15,900). Over the next 10 years, with increased external financing, this would result in a balanced budget, but also significantly lower educational standards, i.e. also not an option for CBS.

Finally, CBS can retain the level of quality and reduce the number of full-time students by approximately 5,500 over the next 10 years. With increased external financing, this would also result in a balanced budget; however…

Dry figures and worrying prospects

CBS came out of 2013 with a planned deficit of DKK 20 million and equity of roughly DKK 270 million. At a glance, it would seem that that is sufficient for a rainy day; however, if you take into consideration that 2014 is estimated to generate a deficit of DKK 35 million, you start to worry.

- Obviously, it is not healthy for CBS to continually generate annual deficits of DKK 35 million. Even in a situation with static income and costs we have to either reduce our net expenses or increase our net income by roughly 3 percent compared to 2014 levels, says University Director Peter Jonasson Pedersen as he points out that neither income nor costs will be static.

- When looking ahead to 2016, the issue is not to simply find net increases in income or cost reductions in the amount of DKK 35 million; we actually have to find twice that amount and in that case we are facing a challenge which amounts to 5-6 percent of the budget, Peter Jonasson Pedersen stresses.

CBS has an annual turnover of DKK 1.2 billion and while the aforementioned spending cuts do not represent an insurmountable challenge, it is the way in which CBS faces the challenge that will be central to the question of which form CBS will take in the future.

Among other things, it is information like this President Per Holten-Andersen will pass on to the spokesmen on university-educational affairs during this year’s orientations.

Meanwhile, the public sector’s annual efficiency improvement requirement keeps chopping away, reducing CBS’ funding by 2 percent every year.