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A Small College's Demise

11/14/2013

Inside Higher Ed.  November 14, 2013. Despite historic backing from the nation's largest labor unions and niche offerings, the National Labor College plans to close - unable to get beyond ongoing financial difficulties, its president said Wednesday.

The college, in suburban Maryland, has a decades-long history at the heart of the American labor movement. Its collapse comes after what now seems like a poorly chosen campus renovation effort and the waning of support of its main backer, the A.F.L.-C.I.O.

The closure also represents the failure of an ambitious and controversial technology project that was supposed to create one of the country’s largest online colleges.

Instead, the Labor College’s board – chaired by the national labor federation’s President Richard Trumka – directed the college’s administrators on Tuesday to figure out how to shut down the college. The timeframe for the shutdown is unclear.

“It’s a huge loss, there’s no question about it,” said Trumka’s deputy chief of staff, Thea Lee. “If it were at all possible we would maintain it.”

In the wake of the board’s decision, the current president and the college’s founding president have pointed to now seemingly imprudent campus management decisions that involve John Sweeney, a former head of the A.F.L.-C.I.O.

About 40 percent of the college’s operating budget comes from the federation. Its students are mostly union members and their families looking to complete an online bachelor’s degree in union-related fields, although the Labor College offers certificates and associate degrees. It had about 750 degree-seeking students last year taught by six full-time faculty members and just over 40 adjuncts, according to college and government records.

The federation bought its 47-acre campus in 1971 to house the George Meany Center for Labor Studies. The center trained generations of U.S. labor leaders and thousands of unionists from across the world. It initially partnered with Antioch College to offer degrees before the center became a full-fledged college in 1997.

But that beautiful campus, a former seminary in the Washington suburbs, eventually became a burden, a current and a former college president said Wednesday.

The Labor College has been trying to sell the campus since spring 2012. Current Labor College President Paula Peinovich said decisions by past college and union leaders have left the college “plagued” with about $30 million in debt. That debt, she said, is the primary reason the board had to close the college.

The shutdown was nearly prevented this summer, though, when the college was on the verge of signing a deal between a government-backed affordable housing group and a local church that wanted to buy the campus. Because the college is online now, the campus is unneeded. The purchase would have turned the college solvent, Peinovich said. “We were walking into our June board meeting presenting a completely balanced budget to our board,” she said.

But it counted on the sale. And the night before the meeting, the land deal fell apart.

Peinovich said the land will sell, eventually, but not in time to save the college.

Asked why the A.F.L.-C.I.O. couldn’t provide a bridge loan until the property sells, the federation's Lee said there have been a lot of union-backed bridge loans over the years. “It’s more money than we have available and it’s really a shame because, I think, there were a lot of bad turns along the way,” Lee said.

Peinovich said other colleges, particularly religious colleges, could learn a lesson from the Labor College’s fate.

“I think many, many small colleges that are supported by major social and religious organizations are learning this lesson: visions, wonderful visions that bring together the best for the institution and its supporting organization can be changed by time – time and tide,” she said.

There’s another lesson Peinovich has: don’t build fancy buildings without a business model that works. “Don’t build a lot of buildings,” she said. “Hear me, hear me, Catholic college presidents.”

This, Peinovich said, is what happened at the Labor College when it was led by a previous college president, Susan Schurman, and when Sweeney was head of the A.F.L.-C.I.O.

In 2003 – long before Peinovich arrived in 2010 – college and union leaders and embarked on a multimillion-dollar campuswide renovation and expansion effort. “The debt that was left for future leadership is what we’re dealing with right now,” Peinovich said.

Schurman, who is now a dean at Rutgers University’s School of Management and Labor Relations, doesn’t dispute that debt is a problem. But she pointed to Sweeney, who led the labor federation from 1995 to 2009. As president of the federation, he was chair of the Labor College board.

Schurman, the first Labor College president, came to Maryland in January 1997 to serve as executive director of the George Meany Center and by October was head the of the newly founded college.

The financial problems she found were longstanding, she said, and the consequences obvious: mold, for instance.

“As soon as I really got familiar with the financial picture, I was dismayed,” she said in a telephone interview. “The biggest source of revenue had been the international institutes where the U.S. government would essentially pay for trade unionists to come from emerging democracies, because the U.S. government then and now believed trade unions are vital civil society organizations in the building of political democracy.”

The second-largest backer at the time was the A.F.L.-C.I.O., she said. (It is now the largest.)

Schurman said decades of deferred maintenance had left the place “kind of a dump.”

She was so worried, she thought about returning to Rutgers, where she was still on leave as a professor. Instead, Schurman stayed but recommended selling the campus then and moving the college into rental facilities.

Sweeney said the last thing he would do was close the George Meany Center for Labor Studies, Schurman recalled.

So officials decided to renovate buildings across campus and build a 72,000-square-foot convention center.

Schurman said going into the project, the goal was to fully pay for the construction costs – about $50 million, she said – out of fund-raising and come away with new buildings and no debt. But costs climbed unexpectedly with steel prices. Then the fund-raising effort did pretty well, she said, but didn’t succeed in paying off the debt. So officials mortgaged the campus.

But Schurman wonders why the A.F.L.-C.I.O. did not do more and throw its largesse into saving the college.

“Colleges do capital campaigns and the boards of directors of colleges lead capital campaigns,” Schurman said. “I don’t know what the figure is, but I know the American labor movement is capable of raising millions of dollars for political campaigns and other purposes, so it’s mysterious to me its not been possible to wipe that debt out. It’s a mystery to me – if that’s true. It’s about priorities.”

Federation spokeswoman Lee said the federation would not engage in “backs and forths” over what led to the closure. “Obviously, we can all look back and try to figure out who did what wrong, but I don’t think that’s all that productive,” she said. “Whatever the past decisions were, in the end of the day, we’re all devastated about that.”

Schurman pointed the blame squarely at the federation: “It’s about priorities. And the decision was clearly made that this was not a priority. And so be it.”

The buildings were designed to allow Labor College to have more students on campus.

But after the buildings were finished, the college ended up shifting its focus to become fully online. That plan came after Schurman and apparently during the tenure of Labor College’s second president, William E. Scheuerman.

Contact information for Scheuerman could not be found Wednesday.

Part of that effort proved controversial, because the union-backed college teamed up with for-profit Princeton Review. Some faculty members at other colleges and union officials were shocked to see organized labor’s college turn to a for-profit company to expand itself.

Scheuerman announced the deal and left shortly after, but it was not finalized until Peinovich succeeded him.

The whole partnership eventually fell apart. According to college and union officials, that was because of financial difficulty at the Princeton Review, which later filed for bankruptcy.

The failure of the online program to save Labor College was disappointing, but Peinovich, who came out of retirement from the for-profit online Walden University, did not cite it as a major factor in the closure.

Peinovich said the partnership actually helped the college market itself for the first time and money from the deal allowed it to build degree programs it continues to offer.

The college faced other challenges, some of them unique. For years, it was unable to offer two-year degrees. Peinovich said rules in Maryland made it hard for non-community colleges to offer two-year degrees. Eventually, to get around that, Labor College opened up a branch campus outside of Maryland – in the A.F.L.-C.I.O. offices in downtown Washington – to be able to offer associate degrees.

The college also focused on helping students, mostly over the age of 25, complete degrees rather than start them, so the majority of classes have been upper-division courses, which cost more to offer. At other colleges, profits from lower-division curses help fund upper-division courses.

Schurman said when she was there the federation’s subsidy to the college also remained flat even as costs increased. Some of those costs were for personnel. The Labor College’s faculty and adjuncts are both unionized and well-paid compared to other institutions.

Peinovich did take heart in one aspect of the closure. The Labor College is closing on its own terms and isn’t taking drastic measures to stay open like abandoning its goals of helping union members, leaders and their families.

“Our institution wants to have that mission as a legacy rather than taking other types of actions, like turning it over to a venture capitalist to turn it into something it’s not,” she said. “…We’re not going to be selling out to someone else who wants to turn it into something else.”

Attempts to reach more than a dozen of the college's faculty members were unsuccessful.