Article | Fiscal resiliency

Navigating success drivers, challenges and rewards of a strategic integration

How Pennsylvania’s State System of Higher Education pioneered institutional mergers

Sept. 21, 2022

This blog summarizes the key takeaways from our fiscal resiliency podcast, episode 16.

Higher education is in a unique time as critical conversations continue across the industry about the growing need to transform institutional business models to better serve students, strategically differentiate institutions and achieve sustainability. In fact, some higher education leaders note that the situation is analogous to the recent overhaul by the healthcare sector as an example of an industry drastically rethinking its model.

In Baker Tilly’s latest Higher Ed Advisor fiscal resiliency podcast, Dan Greenstein, Chancellor of Pennsylvania’s State System of Higher Education (PASSHE or the State System), joined Christine Smith, fiscal resiliency specialist, to explore the complexity of this issue.

They discussed how strategic integrations, or mergers, are a part of the sustainability plan for some of Pennsylvania’s 14 state-owned institutions to navigate the challenges facing institutions and chart a data-driven course as they strive for fiscal resiliency, meet community needs and most importantly, expand opportunities and improve outcomes for students.

The State System’s transformation: shaping and embarking on an integration road map

In setting the stage for the discussion, Smith noted that Baker Tilly “is seeing many more of our higher education clients discussing the need for bold, transformative actions – things like mergers, integrations and acquisitions as a means to address unsustainable subsidies or to avoid closures.”

PASSHE required that type of forward-thinking mindset, and Greenstein understood well what that transformation looks like when he joined the institution in 2018 while the redesign process was already underway in response to issues with student enrollment and other challenges. The State System’s sustainability effort was designed to address:

• Student affordability
• Continued state-wide access to higher education 
• Fiscal instability for several of the State System institutions 

The decision towards a system-wide redesign proved to be particularly critical when the PASSHE leaders realized that the severity of the financial challenges they faced were “far worse than anybody had predicted.” They concluded that if every campus within the State System was forced to sustain itself on its own means, it would be likely that some of the institutions would prove to be unviable, either in terms of attracting enough students or by providing the depth and breadth of degrees that are needed in the local community. Greenstein detailed that at least five of the State System’s 14 schools were “suffering pretty severely” at that time, which, he added, was dragging the overall system health down with them. It was here, during the redesign, that the strategic integration concept emerged.