Enterprise risk management in higher education has traditionally focused on individual institutions. Public university and community college systems face a different challenge by sharing risk across an interconnected network of campuses. This systemwide enterprise risk management analysis of 91 public higher education systems examines how enrollment, finances, governance, and state policy shape system resilience and vulnerability.
Here are the six key takeaways from the analysis to inform systems leaders' risk management strategy:
1. The Pressure Is High and the Runway Is Short for Systemwide Enterprise Risk Management
Of 91 systems…
- 39 (43%) have high-risk designations
- 27 are in a transition zone with most trending towards distress rather than recovery
- Only 25 systems are considered resilient
Additionally, the estimated runway for the at-risk systems is short. Systems that defer action can slide into distress within two to three years when compressed margins and depleted reserves begin compounding one another, and the window for internally funded recovery closes.
At that point, the only viable path is state intervention. But the price for doing so is high, exacted in the form of mandated restructuring and budget-allocation decisions that may or may not align with the system's goals.
The federal policy environment is adding even more pressure. Indirect cost rate exposure, volatility in federal research funding, disruption to international student visa policies, and the broader fiscal posture signaled by recent federal legislation have shifted the planning horizon for distressed systems from uncomfortable to acute.
The systems that will absorb this environment best are already structurally resilient. The systems with the least capacity to respond are the most at risk already.
2. High-Risk Systems Have the Authority to Act — But Not the Leadership or Capacity
Thirty one of the 39 high-risk systems (79%) operate under centralized governing structures that exercise a high degree of formal authority over system operations. So why haven't they acted?
In some cases, governing boards are unaware of risks or struggle to mobilize action among stakeholders. In other cases, the board has the resolve but is stymied by executive teams lacking the talent, data infrastructure, budget transparency, and management discipline necessary to execute an intervention.
The good news is that the fix is within the system's hands. It does not require statutory reform (which can take years and yield unpredictable outcomes) but rather a disciplined approach to enhance the effectiveness of governance, leadership, and execution.
The most concrete place to start is data. The most consistently underdeveloped capability among high-risk systems is unified, interoperable administrative information across campuses. A board without program-level financials and comparable definitions cannot exercise the authority it holds on paper. The same foundation supports another critical capability that high-risk systems most often lack: the ability to model scenarios and see trouble coming while options are still open.
3. State Funding Strategies Matter More Than Funding Levels
One of the most surprising findings is that per-student funding levels do not reliably predict system risk. Systems in states that spend more are not necessarily more resilient, and systems in states that spend less are not necessarily more vulnerable.
What matters more is the direction of state investment. Following the 2008 financial crisis, many states reduced funding for public higher education systems. Twenty-four states never restored those investments to inflation-adjusted levels.
Over time, that matters. Systems in states that never restored funding are nearly twice as likely to be classified as high risk and have significantly higher vulnerability scores than systems in states that did. The lesson is clear: long-term funding strategy has a greater impact on system resilience than funding levels alone.
4. Outcomes-Based Funding Is Stronger Than Funding Based on Headcount
Many states with high concentrations of at-risk systems still allocate funding based on enrollment. While simple, these models reward institutions with natural advantages such as brand recognition, geography, or population growth — penalizing schools that serve small or contracting communities, regardless of student outcomes.
They can also encourage competition among institutions at a time when many systems would benefit more from collaboration. Instead of sharing services, coordinating programs, or managing risk across the portfolio, campuses compete for a shrinking pool of students.
States that have adopted outcomes-based funding models have seen better results. Tennessee and Ohio have spent more than a decade aligning funding with measures such as completion, workforce outcomes, and student success; Kentucky, Indiana, Florida, and Louisiana have followed more recently. While no model is perfect, these approaches create stronger incentives for long-term system performance and resilience.
5. Each System Archetype Faces a Different Problem and Warrants a Different Response
The 91 systems analyzed can be sorted into six archetypes, each with its own characteristic risks, resiliencies, and necessary interventions. What most have in common is the opportunity to improve through deliberate action, and the risk of continuing to deteriorate without it.
Archetypes include:
- Systems that have some resource reserves but are limited by demographic, state-funding, and other constraints beyond their immediate control. They have a small window of opportunity to restructure and size themselves sustainably.
- Fragmented systems that are seriously challenged by the absence of a governance structure to effectively adapt. The remedy on paper is statutory reform, which no state examined has achieved; the practical path is voluntary coordination among campuses, which may be slower than those in greatest need can afford. That path moves faster and holds together longer when campuses coordinate shared data and administrative infrastructure, giving them collective visibility without any campus surrendering local control.
- Systems serving small or shrinking populations through access missions, where operational improvement helps only at the margin and the durable answers are structural, and include floor funding commitments, multi-state collaboration, or planned, deliberate downsizing.
- A small group of resilient, high-performing systems that benefit from continued enrollment demand, adequate reserves, and diversified revenue streams. Their biggest threat is complacency because, as we've seen in recent years, the entire sector is only an exogenous shock away from destabilization.
6. A Strong Flagship Can Hide Systemwide Risk
A high-performing flagship campus is often a system's greatest asset. It can drive enrollment, research funding, reputation, and financial stability across the broader portfolio.
However, strength at one institution can also mask weakness elsewhere. Twenty-nine systems in the analysis rely heavily on a standout campus to support other institutions with declining enrollment, weaker finances, or limited demand.
This masking dynamic is exclusively a university-sector phenomenon. Community college and technical systems have no flagship to do the masking. Their risk is visible, not hidden. Their characteristic weakness lies elsewhere: fragmented governance across locally controlled colleges, with no one positioned to act on what everyone can see. The flip side is also true. Where two-year systems hold real central authority, they tend to use it well — most of the strongest-executing systems in the analysis are community college or technical systems.
As long as the flagship remains strong, the model works. But if enrollment softens, research funding declines, or another disruption occurs, vulnerabilities across the rest of the system can quickly come into view.
The lesson for boards and system leaders is simple: Understanding systemwide risk requires transparent financial and operational data at both the campus and program level. Without that visibility, it is difficult to see where vulnerabilities exist until they become much harder to address.
Strategic Implications
The good news is that the risks facing public higher education systems are well understood, and so are many of the strategies needed to address them. The challenge, then, is taking action before options become limited. The cost of acting matters as much as the choice of strategy. Distressed systems, by definition, lack the discretionary resources for multi-year, campus-by-campus technology builds; each one a custom project with its own timeline and price. The strategies within their reach are those that reduce implementation and operating costs and deliver value quickly. In practice, that points toward a common platform that institutions share over bespoke individual campus solutions: one implementation pattern, not reinvented, at each institution.
One caution as leaders choose among those strategies: The distress pattern is an enrollment-driven cascade, and the two families of response are not interchangeable. Cost-side measures — including shared services, consolidation, and administrative standardization — stabilize a system and buy time. Only demand-side action reverses the trajectory: coordinated enrollment management, recapture of transfer students and stop-outs, completion at scale, and credential portfolios aligned to workforce need. Austerity is a bridge, not a strategy. Usefully, both sides of the ledger rest on the same data foundation described above.
For most systems, there is still time to act. But the window is closing. Enrollment pressures, financial strain, and demographic decline continue to erode flexibility and make recovery more difficult.
System leaders, boards, and policymakers have an opportunity to shape their future. The systems that act early will have the greatest range of options. Those that wait may find that decisions once within their control are eventually made for them.
The capabilities this analysis points to are remarkably consistent across archetypes: a common data foundation with comparable definitions across campuses; the modeling capacity to spot challenges before they become crises and opportunities before they pass; and the operational infrastructure to execute on both sides of the ledger (shared services on the cost side, coordinated enrollment, credit mobility, and program sharing on the revenue side). Those requirements are what shape Ellucian's work on system-level platforms, including Ellucian Student — delivered as a common platform rather than a series of custom builds, so each institution gains value immediately and on its own terms while system leaders gain portfolio visibility and early warning from the first stage.
Methodology
This analysis draws on my assessment of 91 public university and community college systems enrolling approximately 15 million students and the majority of public higher education enrollment in the United States. The findings combine institutional financial and enrollment data, system governance structures, state funding and policy environments, and evidence from successful recovery and restructuring efforts across the sector.
I evaluated each system using a framework that considers current financial and operational conditions, enrollment and operating-margin trends, governance capacity, and broader structural factors such as market position and state policy context. These indicators were used to assess system vulnerability, identify patterns of risk and resilience, and group systems into common archetypes facing similar challenges.
The analysis is based on several years of research and draws on publicly available institutional, financial, and policy data. The findings presented here are excerpted from a broader report currently in development.
