What is Southwestern College's Reserve Fund? (The Economics of Accreditation, the Surplus, and the Bond Rating)

Like the Nick Alioto piece, this came from some of my comments in the comments section. I think the questions are big enough to warrant consideration. Call it hubris if you will, but I haven't heard anyone else asking them. I'm going to call it "watchdogging."

Accreditation in Jeopardy?

In February, WASC (the Western Association of Schools and Colleges – Accrediting Commission for Schools) will present its findings regarding Southwestern College. This will be one month after the school begins its new Chopra-created shorted schedule.

Among their initial findings were these (and I'm quoting here from SWC's Exit Interview Transcript of October 8, 2009 - written by Dr. Gari Browning/Superintendent of Ohone College, and WASC Team Chair):

"The Team recommends that the college set as a priority fostering an environment of trust and respect for all employees and students." (This was not part of another bullet point; it was one entire point on its own.)

How well can this administration’s agenda of fear reflect on WASC's decision? Chopra or his sidekick, Nick Alioto, has apparently finished their "investigation" and placed official Letters of Reprimand in the files of those professors the administration is trying to railroad! Students are saying they've been told they're not allowed to complain about the administrations' actions. The community is starting to realize how divisive these actions are. WASC quite rightly said that the college should move in the opposite direction - engendering trust among its faculty and students, the very people who are being turned out into the cold.

"The Team further recommends that the college establish and follow a written process for providing faculty, staff, administrators, and students, a substantial voice in decision making processes."

Do I need to mention again the fact that these unilateral budget cuts weren't even allowed to be discussed? The Board rubber-stamped Chopra's budget and refused to even allow Board member Nick Aguilar's motion to simply discuss other options in an emergency meeting. There is no one besides the upper administration that thinks they have a voice in the process. They don't. That has been made clear.

There are other recommendations, but these are two that directly impact how WASC perceives Southwestern College.

It would be ludicrous to think that WASC is unaware of the actions of FIRE and the ACLU, the frequent negative (to the administration) news coverage, and yes, the constant buzz about the blogosphere. Can anyone take seriously the idea that this can't affect SWC's accreditation process?

It can, and it would fall hard at the feet of an administration that has created an atmosphere of fear and disenfranchised the very people that WASC thinks must be included in the decision-making process.

The Bond Rating: Why is This More Important Than Classes?

At the last Board meeting, the vice-president, Yolanda Salcido, said that the college's 11.5 million-dollar 'reserve' needed to be left intact, "to help maintain their bond rating." (And, yeah, that's a quote.)

Leaving aside for a moment the concept that a school's administration and Board should tear apart their own schedule, disenfranchise their faculty, and kick an unknown number of students to the curb, just to make themselves more attractive for possible future investors, there is a question of economic fact.

Standard & Poor's has given Southwestern College a rating of AA- (Double A minus), which is pretty damn good, and keeps them in the top bracket of performance. But, after doing some research, I've found some facts of interest.The amount of money in the bank counts very little toward how a rating agency (like S&P) grades the bonds. You know what's more important? The quality of education, the diversity of adjunct faculty, the diversity of students, and a well-balanced selection of classes all weigh more to the rating agencies.

To recap: to keep from spending less than $2M out of $11.5M in the bank, the Board would rather lower its quality of education (point 1), by cutting hundreds of classes - both electives and core (point 4); in doing so, laying off (or "not bringing back" in SWC parlance) about half its adjunct faculty (point 2), and forcing an undefined number of student - but surely in the few thousands - to give up their education or go somewhere else (point 3).

All to 'keep that money in the bank to look good' - which is not nearly as important to the rating agencies!

To me, this appears to be the short-sighted nature of this administration and its Governing Board - to take the 'easy' way out, and do it on the backs of the students and faculty, all so they can make the school look better to those possible future investors.

You have to ask: why does this matter more than the student's education? Does this focus on the financial risks of the investors (not the school) mean that they have ignored the school's focus: to educate those students of the South Bay area?

I'll be the first to admit that I could have this wrong. If someone out there with a background in Economics could let me know how I got it wrong, please do. I'd be delighted to hear it.

Okay…one last thing I forgot to point out.

According to Moody's (another rating agency), approximately 95% of all the public institutions that they rated received a grade of "A" or better.

(Moody's, Standard & Poor's, Fitch IBCA, and Duff & Phelps' all use equivalent "A" ratings. SWC's "AA-" is equivalent to Moody's "Aa3" - both of which refer to High-Quality, strong Investment Grade bonds.)

This reflects well on the school - pre-budget cuts. By undermining its own values as an educational institution, they'll have done more harm to the credit rating than spending less than $2 million - most of which would have gone back into the economy in and around Chula Vista.

But with about 19 in 20 public institutions being "Investment Grade" bonds or better, Yolanda Salcido's comment takes on a darker hue: is she unaware of how the bond rating is determined, or does she not care - and simply whipped it out as a handy reason hard to challenge on the spot?

So...why? Why was this reason given? Why would they rather keep this money in the bank than spend the profits of a few good years on one year when the school needs it?

The Board's driving goal should be to maintain the highest quality of education. Instead, it looks like their one goal is to protect a fat, fat bank account.