Governor signs college financial transparency bill

Correction: A previous version of this article incorrectly stated the academic year for which Hampshire College did not accept a full class. The college’s trustees voted not to accept a full class for fall 2019.

BOSTON — Gov. Charlie Baker has signed into law a bill that requires greater financial transparency from colleges that face possible closure.

The bill, which passed unanimously in the state House and Senate, was prompted in large part by the sudden closure of Mount Ida College in 2018. The Newton college was shuttered without warning and was purchased by the University of Massachusetts Amherst, leaving students without a school and scrambling.

Experts predict that demographic trends will force more financially struggling colleges to close or merge in the coming years, as 18 have already done in the last five years.

In a statement, Baker said the new law would “protect students and families from sudden college closures, while also guaranteeing those institutions confidentiality as the Department of Higher Education works with them to understand their financial status.”

Among the provisions in the law are requirements that institutions of higher education post financial reports online, and that they notify the state Board of Higher Education of any financial liabilities or risks that might result in their closure or prevent the school from fulfilling its obligation to students.

Colleges determined to be at risk of closure will also be required to develop contingency plans for closure, and will also have to provide “appropriate notification to relevant stakeholders,” including enrolled students, prospective students who have applied to the school, recent graduates, faculty, staff and host communities.

That broad list of stakeholders originally only included students and their families when Baker first filed the legislation. But state Rep. Mindy Domb, D-Amherst, said she and state Sen. Jo Comerford, D-Northampton — both of whom sit on the Legislature’s Joint Committee on Higher Education — pushed to expand it to include host communities, faculty and staff.

“We know, especially in the Valley and the Five College community, that host communities are directly impacted by what colleges do,” Domb said. “Our communities need to know, our residents need to know. It’s a consumer issue, but it’s also an economic issue.”

Locally, Hampshire College faced financial crisis earlier this year, when its leaders announced in January — to the surprise of most of the campus community — that they were seeking a merger to save the iconoclastic liberal arts school. Two weeks later, the college’s trustees voted not to accept a full class for fall 2019, which soon led to sweeping layoffs and faculty reductions.

As Hampshire College shrunk in half, the impacts were felt not only by faculty and staff who lost their jobs. The cuts had economic ripple effects in the community, hurting local businesses and municipal revenue.

Constituents also pressed for expanding the list of stakeholders when the two lawmakers brought the state’s commissioner of higher education to Amherst for a listening session this summer.

“I think this is a great first step, and I think including host communities by law gives host communities more a foothold into this process,” Domb said.

Comerford said the bill is a “big deal,” and that it helps ensure the state understands that communities have a stake in a college’s well-being.

“I think regarding oversight, this is a good step forward,” Comerford said. “Mindy and I have been tenacious … because our constituents demanded that of us.”

In addition to the provisions requiring notification of stakeholders if a college is in danger of going under, the bill provides for annual financial screenings of colleges and universities.

Either the Department of Higher Education or an accrediting agency like the private New England Commission of Higher Education (NECHE) will conduct those financial screenings to determine if schools are at risk of imminent closure. The state’s private college lobby, the Association of Independent Colleges and Universities in Massachusetts, had pushed for independent accrediting agencies like NECHE to be able to conduct those screenings.

The bill states that the Board of Higher Education will establish an annual financial assessment process, though it does not specify what the state’s process of identifying at-risk colleges will look like. The bill also creates an exemption to the state’s public records law to ensure that financial information submitted by a college is exempt from disclosure.

Schools that do not comply with the law can be fined as much as $1,000 a day and may face the revocation of their degree-granting authority.

The law also includes mandatory training for the trustees of private and public colleges and universities on their legal and fiduciary responsibilities.

“The fiduciary weight is heavy for a trustee, and I’m glad they’ll get the requisite training to carry it,” Comerford said.