Managing Political Risk

Does your university have a strategy to manage political risk? In the past, you probably did not need one. Federal higher education policy has been relatively stable for the last 80 years. Decade after decade, since the unanimous passage of the GI Bill in 1944, both parties in Congress supported generous student aid, subsidies for university research, tax exemption and liberal immigration rules for foreign students.

There were blips along the way. During the McCarthy era, universities were roiled by charges of harboring communists, and in the 1960s, Governor Ronald Reagan of California made political hay attacking protest culture at Berkeley. But for the most part, federal policy has been consistent, bipartisan and supportive.

Today, that landscape has changed. Since taking office in January, the Trump administration has launched a revolution in federal higher education policy. The government has cut research funding, raised endowment taxes, changed civil rights enforcement policy, restricted foreign student immigration and capped or eliminated major student loan programs. The administration has also targeted a number of major universities with enforcement actions, funding freezes and lawsuits.

Further changes, particularly to accreditation, have been promised. To state the obvious, these massive changes in the regulatory environment have immense financial and operational implications for colleges and universities across the higher education sector. They also suggest that higher education leaders can no longer take politics for granted.

Political risk management is the process of identifying, analyzing and mitigating the potential negative impacts of legislative, regulatory and political changes on your ability to achieve your mission. There is no one-size-fits-all political risk management strategy. Every institution faces different risks and possesses different resources to manage those risks. But there are five basic things every president and board can do now to put themselves in an optimal position.

First, university presidents need to build very close relationships with their senators and members of Congress. Your federal elected officials are the best source of intelligence about changes that may be coming down the pike. More importantly, they are the only leaders in this environment with any chance of intervening successfully on your behalf at the federal level to protect important university interests.

Institution presidents need to be on a first-name basis with their federal elected officials and have regular conversations so the elected officials develop a positive view of their institutions and understand the impact of potential legislative and regulatory changes on university finances, enrollment and employment. The best time to reach out is now, not when you are in crisis. You cannot leave this task to your lobbyists. Your staff can build useful relations with congressional staff, but the only way to develop real political leverage is by building a strong principal-to-principal relationship.

Next, conduct a political risk assessment and develop a mitigation plan. Your planning team should ask: How do we currently benefit from the state and federal regulatory environment? What can we do to protect those benefits? What will we do if those benefits disappear? How can we move the regulatory environment in a direction favorable to us? What operations on campus may provoke government enforcement action or litigation? How can we limit that risk? Is our current lobbying effort sufficient?

Once the assessment and mitigation plan is completed, the president should share it with her board of trustees. In the past, political relations was largely an executive, not board, matter. That is true no longer. These days, if you get crosswise with your board on matters of politics, you can easily find yourself out of a job.

Third, if you have a significant endowment that will trigger tax liability, have your CFO conduct a tax analysis. Historically, colleges and universities have been tax exempt and so they have never needed to adopt the kinds of legal tax-minimization strategies used in the private sector. That may need to change. Can some operations be moved offshore? Can new gifts supporting sports or research be channeled to independent foundations, not the university endowment? All these ideas need to be explored.

What about your pipeline of international students? Do they contribute significantly to the university budget? Then you need an immigration strategy. In the coming years, colleges and universities that can actively help foreign students legally obtain student visas—and gain a reputation for doing so among foreign students—will prosper over their competitors. You may need to develop your own immigration support staff or, if you are a smaller school, join up with other schools to create a shared capability. You may also need to enlist political help. Most members of Congress have staff in their local offices who help local businesses and other constituents with immigration challenges. Your team needs to connect with that staff and develop a good working relationship with them, just as other major employers do.

Finally, you need to work with your board to develop a university policy on collective advocacy. Arguably, the best way to protect your university’s interests is to work with other schools on joint lobbying and advocacy efforts either directly or through membership associations. That said, joining with other schools to lobby for specific policies could, in this environment, put a target on your back. Presidents should not make this strategic decision alone. They need to work with their boards to develop a shared approach.

These strategies may sound odd to some folks in higher education, but they are necessary. Times change and higher education practices need to change with them. The era of consensus in higher education policy has ended. You need to be prepared for what comes next.