Making College Mergers Easier in New York

New York is poised to make it easier for its private nonprofit colleges to merge with institutions in other states.

Some higher ed experts describe the proposal as a no-brainer at a time when demographic changes are taking their toll on small, nonwealthy colleges nationally. But others say the changes could bring new competition into an already cutthroat market.

“It provides more opportunity to explore different types of partnerships, not only for institutions that are financially challenged, but also those that may just be looking for new ways to expand,” said Dina Vespia, co-chair of the higher education practice group at the law firm Cullen and Dykman. “But different institutions may have different viewpoints.”

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New York has historically been known as one of the more complex regulatory environments for colleges and universities looking to establish a presence beyond their home state, Vespia said. Although out-of-state merging was never impossible, it was very complicated.

In order to complete a merger, the newly consolidated body was required to have a New York-based governing board. This meant that if a financially strained college in upstate New York wanted to be absorbed by a larger university in Massachusetts, say, it would either need to re-register its current Board of Trustees in New York or establish a duplicative and potentially conflicting governing body specifically for the New York campus. Both options were unfavorable and often deterred outside interest.

This new amendment aims to change that, capitalizing on what is otherwise a desirable market for higher education satellite campuses.

“The proposed regulations are intended to address the growing number of colleges across New York State that are experiencing enrollment, financial and operational challenges, and are increasingly exploring partnership opportunities with other institutions to offer the most ideal program and degree portfolio,” JP O’Hare, a spokesperson for the State Education Department, wrote in an email.

The text of the proposal itself—which was first released in January, along with a Q&A on both in-state and out-of-state mergers—describes the amendment as “a more streamlined approach” designed to “eliminate unnecessary hurdles.” At the same time, it says certain guardrails such as accreditation and Title IV requirements, charter applications and curricula registrations would all be maintained to ensure all partners are “highly qualified.”

Inside Higher Ed requested access to any public comments submitted to the department since the amendment’s publication in the state register, but was told no formal comments had been received as of Friday. O’Hare did say, however, that informal comments from the field “have been positive.”

“There is some trepidation about how it actually could play out,” Vespia added. “But generally, I think it signals a willingness for the state to explore unique opportunities.”

The regulations will be presented to the state Board of Regents for approval in April.

Adapt to Survive

Colleges across the country have experienced an overall decline in enrollment over the past decade, and when you add in the impact of the pandemic, declining trust in the value of a college degree, and a looming demographic cliff, many—especially the small liberal arts colleges—find themselves in an uphill battle.

New York has seen 12 colleges and universities close in the last eight years, and five in the last 12 months, with the most recent being the College of Saint Rose in Albany. Two more, the King’s College and ASA College, have not officially closed but have no current educational activity.

Kevin Cavanagh was executive vice president at the College of New Rochelle, just north of New York City, when it announced its closure in March 2019. He said college administrators spent months exploring the possibility of merging with an out-of-state or international institution, but the idea was “not well supported” by state regulatory agencies. They then turned to in-state institutions, but challenges persisted.

“We spoke to over 30 schools in New York but we had serious conversations with just a handful,” he said. “There were costs in time and energy of executives that not everybody was interested in pursuing.”

In the end, the college shuttered. A similar scenario played out at Medaille University in Buffalo last spring.

“Had we had the opportunity to speak with schools in New England or other parts of the country, that probably would have opened more doors,” Cavanagh said.

Assemblywoman Patricia Fahy, a Democrat whose district includes the soon-to-close Saint Rose, said that even if the amendment were to have passed a few months prior, it likely would not have been enough to change the tide for her local institution. (The college owes $48.1 million in bonds, which made it an unattractive entity for both in-state and out-of-state partners.) She nonetheless views the amendment as “an absolute positive” and hopes it gains approval so other colleges don’t find themselves in the same scenario.

“Across the country, we’ve seen financial tightening and enrollment struggles … and colleges have absolutely had to be more creative,” said Fahy, who is also chair of the Assembly's Committee on Higher Education. “We saw this as a way of trying to give that early guidance to help make sure that if there is an issue, colleges have some ways forward.”

An ‘Unalloyed Good’

Dennis Cariello, co-chairman of the education practice at Hogan Marren Babbo & Rose, noted that as more colleges close, there will be fewer merger options for the ones that remain. As a result, he said, more closures will become more likely. It’s a vicious cycle and the amendment makes “tons of sense” as a means to break it.

Guilbert Hentschke, a consultant for Higher Ed Consolidation Solutions, an advising group staffed by former academic and financial leaders who have worked in the field on mergers past, said he “can’t see a downside” to the amendment.

“There’s a saying in the trade, ‘Two turkeys don’t make an eagle,’” he said. “What it’s meant to connote is the idea that if you’ve got two weak institutions they don’t get you much … You want to have at least one institution that’s got sufficient strength, that can actually help the combined institutions to grow rather than not survive together.”

Some experts said they’d heard concerns that the introduction of outside institutions could increase already steep competition for students.

“If the schools that are doing OK in New York suddenly have the new challenge of large universities that are financially strong siphoning away enrollment into these satellite campuses … what does that do to the both the private and the public institutions in New York that are having their own enrollment challenges?” asked Cavanagh, who is also a consultant at Higher Ed Consolidation Solutions. “While at the same time, it could benefit the collaborative environment and the merger environments. So it’s a double-edged sword.”

But Hentschke believes that if an institution feels threatened, it’s probably a sign that they have their own inherent problems.

Cariello said he views competition as an “unalloyed good.”

“I do think as a general matter, more competition is good for students and ultimately … good for the institutions,” he said. “Because if they’re forced to take a hard look at what they’re doing, and how they’ve structured themselves and what programs they’re offering, and whether those programs are meeting the market demand—that's generally a good thing.”