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Struggles to Survive
By JUNE KRONHOLZ
and STEFAN FATSIS
Staff Reporters of THE WALL STREET JOURNAL
September 28, 2005
HOUSTON -- A week after escaping his flooded New Orleans campus in a dump truck, Tulane University President Scott Cowen stood in shorts and days-old stubble before his team of deans and administrators in a Houston hotel. Holding a red marker up to an easel board, he asked them to list problems facing the school.
There are plenty. Students are scattered around the country with some withholding tuition checks. The medical school's 325 doctors have no billing system to collect their fees. Some of the university's most prestigious research -- including the world's longest-running study of heart disease in children -- is in shambles.
Tulane's intercollegiate sports teams, which Dr. Cowen hopes will "carry the torch, be the face" of Tulane, are spread among four colleges in Texas and Louisiana. The school is still paying its 6,000 employees, but recruiters already are after Tulane's professors like "looters," complains Alan Miller, a vice president for health sciences.
As the largest private employer in a city with few other economic engines, Tulane's reopening would provide a vital development spark to battered New Orleans. "Symbolically, what happens to Tulane will help determine how people think of New Orleans," says Dr. Cowen, a 59-year-old management professor now in his eighth year as Tulane's president.
Along with millions in recovery costs and lost revenue, Tulane is saddled with the city's new image as a great party gone bad. As a result, Tulane is now fighting hard to make sure its talent and money doesn't drain away with the floodwaters.
In a series of hardball moves, Tulane has blocked its scholarship athletes from transferring to other schools. It has told students to pay tuition even though its campus is closed, and asked faculty to postpone sabbaticals.
In an online-chat with students a week after the hurricane, Dr. Cowen assured them Tulane would reopen in January "a stronger, wiser" institution. "Stay with us," he pleaded. "Be patient."
When Hurricane Katrina roared into the Gulf of Mexico on Aug. 27, Tulane was busy welcoming 1,700 freshmen to its magnolia-draped campus off St. Charles Avenue.
The new class capped a decade-long turnaround for Tulane. In 1995, its incoming class was below capacity and its finances were shaky. Since then, applications have tripled, stoked by an aggressive marketing campaign that cost Tulane $2,712 for every freshman it enrolled this year.
Revenue was up more than 60% since 1998. Although it slipped from 38th to 43rd in U.S. News & World Report's rankings of top colleges during the past 10 years, merit scholarships had helped push average SAT scores up 80 points to 1356 on the old 1600-point College Board scale.
"They were breaking down the doors to get their applications in," admissions dean Richard Whiteside says.
Then Katrina hit. As the storm approached, students who had arrived only hours earlier were evacuated in buses and cars to a gym at Jackson State University in Mississippi. When power failed there, they moved on to airports in Dallas and Atlanta. Dr. Cowen, a beefy former college linebacker, stayed on campus another five days before staffers commandeered a parked dump truck and drove him to a waiting helicopter.
After regrouping in a Houston hotel, Tulane's administration tried to salvage what it could. On Labor Day, computer-systems staffers returned with an armed escort to collect financial data and student records from the 14th floor of a darkened office tower across from the Superdome.
Thousands of laboratory mice, whose DNA had been altered for genetics experiments, were spirited out of downtown research labs. Researchers also rescued tanks of stem cells vital to Tulane's aspirations as a leader in biomedical research, topping them off with liquid nitrogen and taking them to the university's primate research center across Lake Pontchartrain.
Tulane's recovery now depends on getting revenue flowing quickly again. Its $810 million endowment is small compared with other schools of similar size. Tuition accounts for one-third of the school's annual revenue, which totaled about $700 million in the 2004-05 academic year, with hospital-related fees and research grants accounting for another third. Shortly after the hurricane, Moody's Investors Service predicted Tulane could run out of cash by April if students didn't return.
Tulane was thrown a crucial lifeline when dozens of universities agreed to welcome its 13,000 graduate and undergraduate students free of charge this semester. As part of the arrangement, which is aimed at propping up Tulane's finances, students are supposed to pay Tulane their regular fall fees even though they are studying elsewhere.
Faced with complaints, Tulane extended the payment deadline to May 1. "I don't like it. I don't think anyone does, but it's the price of going back to my school," says Cassie Ammerman, a Tulane junior from Houston. Others say it's not fair to charge Tulane's $20,350-a-semester fee while they are attending lower-priced schools. Ms. Ammerman says she is withholding her tuition check until she's assured she gets graduation credit for courses she's taking at the University of Texas in Austin.
Tulane has worked to secure other valuable assets. Most of its $140 million a year in federal research funds comes from the National Institutes of Health, which won't allow faculty to move their grants to other universities. To keep its intercollegiate teams intact, athletic department officials decided the school would not approve transfer requests from any scholarship student now attending classes elsewhere. So far, only one of 327 has asked, Tulane athletic director Rick Dickson says.
Altogether, 78 students have said they don't plan to return to Tulane, according to Earl Retif, Tulane's registrar.
Aside from tuition, other income is limited. Dr. Cowen estimates insurance will cover less than half of Tulane's lost revenue this semester. And midway through a 10-year, $700 million capital campaign, he worries that donors may divert contributions from the school to relief efforts in New Orleans.
New Orleans officials are now projecting the city will have all its water, electricity and sewer systems working by late fall. But there's no playbook for what comes next. "I don't have anyone to call who's been through something like this," says Dave Dickerson, who signed on in April as Tulane's men's basketball coach.
Douglas Hertz, a Tulane trustee who lives in Atlanta, says if 90% of Tulane's students return, the school's finances will "look a lot better." In the interim, he says, "everything's on the table" including the school's size, what programs it keeps, and whether it can afford to retain all its faculty and staff. Trustees could begin making those decisions next month, when they are scheduled to meet in New York.
Leading Tulane's recovery effort is Dr. Cowen, who hurtles between appointments while tenderly urging staffers in his thick New Jersey accent to "take care of yourselves." His deans say Dr. Cowen sets a demanding schedule of dawn meetings and late-night requests.
In a 3:58 a.m. email sent to Mr. Whiteside, Dr. Cowen demanded fast turnaround on a post-hurricane tuition policy, but wanted it written eloquently too, in "Jeffersonian language."
When New Orleans announced it wouldn't open its elementary schools this year, Dr. Cowen decided that Tulane would open its own for faculty and staff children. "It's a vision thing," he told the law-school professor he abruptly appointed to come up with a plan: "Take 72 hours."
So far, Dr. Cowen has had modest success and some good luck. Tulane's campus was flooded, but suffered no major structural damage. Two branch campuses may open in late fall. One afternoon two weeks ago, technicians announced they'd gotten the payroll system operating. "We're going from life support to stabilization," Dr. Cowen says.
Today, Dr. Cowen is expected to announce that Tulane will hold its regular spring semester starting Jan. 17, followed by an additional seven-week semester in May and June. The extra term would help students who didn't end up studying this fall, or who fell behind on credits.
While Tulane worries about professors decamping for other schools, the crisis could cement the bonds of others. "I feel more committed to New Orleans now," says Rachel Devlin, an associate professor of history, who has been volunteering at a Red Cross call center in New York. "You want to defend your institution, you want to help."
Meanwhile, there are setbacks for the recovery. For days, staffers had hoped to recover bins of mail left behind in the evacuation. "We know that's where our tuition checks are," says Mr. Retif, Tulane's registrar. Then a recovery team reported that the bins were under water. Because financial systems aren't yet running, there's no way to send out new bills.
Cash is so tight that department heads aren't able to spend any Tulane money. Mr. Dickson, the athletic director, was expecting the Green Wave's teams to operate on a $22 million budget this year. After relocating his department to Dallas, Mr. Dickson opened a bank account with a $308,000 check from the National Collegiate Athletic Association.
Some of Tulane's losses are permanent. When generators ran out of fuel, 27 massive freezers lost power. The resulting heat destroyed 33 years worth of blood samples collected as part of a research project into adolescent heart disease called the Bogalusa Heart Study. "They're cooked," says Paul Whelton, senior vice president for health sciences.
Floodwaters also soaked archival collections in the library's basement, including Admiral Perry's reports from his 1853 expedition to Japan. Librarian Lance Query now worries about mold attacking books on upper floors.
So far, the federal government hasn't provided much aid. During a telephone meeting with the Federal Emergency Management Agency earlier this month, an agency representative referred Dr. Cowen to the agency's Web site for answers about business-interruption insurance. "We care about you," the FEMA representative said as the call ended.
A FEMA spokesman says he believes the FEMA representative was a contractor. Dr. Cowen says Tulane still hasn't received any money from the agency.
Tulane's administrative challenges don't end at the campus gates. Even if the school reopens for classes, students and staff still need food, housing and medical care. Tulane has dormitories for just 3,300 of its students, and prices for housing undamaged by flooding are already skyrocketing. Dr. Cowen says Tulane will ask FEMA for mobile homes. He also plans to call an upscale grocer to offer space for a store on campus. "Around here we say we can't count on anyone but ourselves," he says.
Tulane's leaders also fret about rebuilding a mostly white enclave of schools and services in a predominantly black city. Founded in 1834, Tulane has "always stood aloof from direct intervention in New Orleans's problems," says Clarence Mohr, a professor at the University of South Alabama and co-author of a history of Tulane.
The hurricane could change that. Dr. Cowen says Tulane's new grade school will be open to neighborhood children. And Tulane has offered use of its campuses to New Orleans's historically black Xavier and Dillard universities, which were heavily damaged by Katrina. Tomorrow, Dr. Cowen plans to tour Tulane's campus for the first time since the hurricane, and says he invited Dillard's president to join him.
The largest uncertainty for Tulane is whether students will return. About 18,000 teenagers applied to Tulane for this fall's freshman class. That allowed Tulane to admit fewer applicants and boost the average SAT score of its incoming class -- two measures of a college's academic exclusivity.
But images of New Orleans's lawlessness and disorder after the hurricane may scare off students, as could concerns that the city's recovery will take years.
Mr. Dickerson, the basketball coach, says when he recently contacted a dozen high-school seniors being considered for scholarships, every one of them was reluctant to attend Tulane. Tulane's main draws are its academics and its fun-loving hometown, says Mr. Dickerson, and "it doesn't take a brain surgeon to know we don't have either one of those things to showcase now."