BOSTON – More states are likely to consider laws like the one Massachusetts just passed in hopes of protecting students from sudden college closures, according to the credit rating agency Moody's.
The new law, which Gov. Charlie Baker signed on Nov. 14, imposes new financial disclosure requirements on colleges and universities and requires training for trustees on fiduciary responsibilities and other aspects of governance.
Discussing the law in a recent radio interview, Baker said it means the state Board of Higher Education "will now have tons of data on the general financial position of colleges and universities in Massachusetts" and will be able to use that information toward the goal of preventing another instance like the 2018 closure of Mount Ida College that left students and staff blindsided.
Moody's Investors Service on Monday released a report on the new law, saying closures like those of Mount Ida and Newbury College mean Massachusetts is part of a national trend that is particularly prevalent in the Northeast, "which faces weak demographic trends marked by a decrease in high school graduates."
Moody's said the law "will be credit positive if it leads to more orderly and less abrupt closure and improves public confidence in oversight of small private colleges' financial risks."
"At the same time, the legislation adds an additional level of governance complexity for institutions in a state (and sector) that already has multiple layers of oversight and sometimes competing interests," the credit agency said.
Under the law, colleges and universities will be required to post financial reports online, and the Board of Higher Education is tasked with developing a screening program to determine if schools are at risk of closing.
The screenings can be conducted by either the state Department of Higher Education or a college accrediting agency, and financial information would be exempt from disclosure under the state's public records law.
Baker, in an interview last week on WGBH Radio, said the state will be able to collect "a lot of financial data from colleges and universities in Massachusetts about their financial situation, their financial performance, both historically and going forward, based on assumptions they make about student aid and class size and acceptance rates and all the rest."
He said it's important that the data will be kept private, reflecting a concern that colleges had that making their information a public record "will put every school that's kind of in almost any position other than the one Harvard and MIT is in, at some financial risk of having somebody write a really bad story or series of really bad stories about a school that's actually in OK financial shape but for which the data would say something different."
"The schools said we're happy to play this game, we're happy to be collaborators, but you've got to protect our information," Baker said.
During deliberations on the bill, lawmakers said 18 private colleges and universities in Massachusetts have closed or merged over the past five years and said additional consolidation is likely in the future.
Among the schools grappling with tight finances and shifting demographics has been Hampshire College in Amherst, which this year admitted a freshman class of 15 students after officials there announced in January they were seeking a long-term partner to help chart a sustainable path for the school.
Over the past several months, Hampshire welcomed a new president, Ed Wingenbach, launched efforts to reinvent its academic programs, and began implementing a plan to rebuild its full enrollment by the 2023-2024 school year. Documentarian Ken Burns, a Hampshire alumnus, is the co-chair of a new fundraising campaign set to launch on Dec. 3 with the goal of raising more than $60 million.
The New England Commission of Higher Education on Friday voted to continue Hampshire College's accreditation, after reviewing the school's progress and five-year plans. In a letter to students, faculty and staff, Wingenbach called the accreditation decision "a major indicator for success."
"We should celebrate this news, and share it proudly, while recognizing the hard work that lies ahead. NECHE continued our accreditation but also affirmed the 'Notation on Institutional Resources,' which states that Hampshire risks falling out of compliance with the standard should our financial situation worsen," he wrote. "It is essential that we follow our plan for financial stability presented to NECHE, including limiting our expenditures to levels similar to the current year, implementing the new student experience, rebuilding enrollment, and raising $60 million dollars in operational support by 2024. I believe we can achieve our goals, and am grateful that the Commission found our plans viable."