Hammerstein University president Blake Sherman was worried about the survival of his university. The state of Illinois had been having financial troubles for years. For the past two years it was at an impasse in passing a budget. One consequence was that students were not getting the state tuition funds they had received in past years. This issue had multiple results.
Less students were enrolling because of the lack of state funds.
Those students who did enroll were tentative about remaining in school and this generated a high dropout rate.
To support the students, Hammerstein University increased its own tuition assistance program.
All three results were affecting Hammerstein University’s financial well-being.
The key to survival was simple. Enrollment has to be maintained at a level to support the current level of degree programs, staff, and faculty. In addition, there still are the basic expenses of running Hammerstein University such as building repairs, grounds upkeep, and travel costs for sporting events. If the enrollment could not be maintained at the required level, Blake knew he would have to make some significant cuts. Degree programs that were not paying for themselves may need to be cut. This obviously would affect faculty. Cosmetic repairs for building or the grounds may need to be deferred to later. The potential financial crisis may make it necessary to temporarily shut down some sports. Blake feared that while these types of actions would ease the financial crisis in the short term, the same actions could further reduce enrollment and result in a slow downward spiral.
Blake had his admissions staff provide the enrollment for the past six semesters. The following table provides the data.
Blake has the vice president of finance, Leroy Hardy, to calculate how many students represented a breakeven point under the current financial situation. He then asked Leroy to calculate what the enrollment breakeven point would be if the state began to provide tuition assistance again to their students. Leroy said for the enrollment breakeven point for no-state tuition was 3,265. The enrollment breakeven point for state tuition being paid was 3,000.
Blake had not yet been told the forecast for fall 2017. However, as he looked over the past enrollments, he was not optimistic. Both spring 2017 and fall 2016 enrollments were below the breakeven point for no-state tuition. Although he would have to wait for the figures from admissions staffs, he believed he needs to begin looking at options if the state didn’t pass a budget that included tuition assistance.
1. Calculate the potential enrollment for fall 2017 using a three-semester weighted moving average, with weights 0.1, 0.3, and 0.6, with 0.06 for the most recent semester. Start your forecast for the spring 2016 semester and continue to fall 2017.
2. Calculate the potential enrollment for fall 2017 using exponential smoothing with a forecast for fall 2014 of 3,094 and a smoothing constant of 0.2. Which forecast do you think is the best? Why?
3. Which forecast or forecasts match or exceed the enrollment breakeven point if the state continues to not pay tuition assistance? Which match or exceed the enrollment breakeven point if the state pays tuition assistance? What is the next task Blake should have his staff do, based on these forecasts?