The famed liberal arts school faces a financial crisis after a tough year
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After a turbulent year in which its accreditation was suspended and school president Martin Hamilton reluctantly resigned, New College of California is in dire financial straits. Some even fear that the innovative liberal arts institution whose central campus at 777 Valencia Street once housed a mortuary before the school was founded there 40 years ago could be in its death throes.
New College has experienced a 41 percent decrease in enrollment this year, seeing its population drop to fewer than 500 students. And the institution is losing about $80,000 each month, according to minutes from a faculty meeting that took place in late November. The school needs more than $2 million to cover operating expenses into January, and school trustees have considered filing for bankruptcy protection.
A Chapter 11 reorganization would allow New College time to improve its finances without shuttering completely. But acting school president Luis Molina says bankruptcy would also mean the school wouldn't receive any federal financial aid for its students, a source of tuition revenue it desperately needs to survive. So he insists bankruptcy is off the table.
"I'm not going to deny that the school is in a financial crisis," Molina said. "But from my perspective, I don't see bankruptcy as the solution."
New College is nonetheless struggling to make payments to vendors, and payroll checks have bounced or been withheld by the school. Molina also acknowledged that in the summer Pacific Gas and Electric Co. threatened to turn off the school's power due to unpaid utility bills.
Dozens of financial aid applications for the just-ended fall semester still need to be processed, which means New College can't yet receive the federal loans and grants it pays out to students, many of whom rely on the funds to cover basic expenses while attending classes.
"We can't believe it's happening," said Cheryl Fabio, a second-year law student at New College. "No one knows anything. We're operating completely on a rumor mill, and the worst of the rumors keep on becoming [true]."
Fabio returned to school after working for several years as an Oakland city employee. Despite the uncertainty about New College's future, she was studying for finals and continuing to attend classes. But she hasn't received $10,000 worth of financial aid from New College this semester, and she's four months behind in rent at the home in Pittsburg where she lives with her daughter.
The US Department of Education sent a letter to the school in August informing administrators that applications for federal funds submitted by New College's Financial Aid Office would face heightened scrutiny due to the discovery by investigators earlier this year that the school may have illegally mishandled scholarships and other aid money.
New College must repair dozens of student files and submit a mountain of documentation for preapproval on each financial aid package before being reimbursed. Eighty such packets were submitted Dec. 12, Molina said, but as of now money from earlier applications is only trickling into the hands of students.
That's a considerable setback for the school, since it relies heavily on student tuition to continue operating, so it's considering a big fundraising drive and a halt in enrollment in some programs for the spring semester until its finances are stabilized.
The November minutes show proposals including an across-the-board 25 percent pay cut as an alternative to layoffs, but up to 20 full-time faculty members between January and spring of next year might need to be cut to keep the school from going under. Another option, Molina said, is for some faculty to work part-time and apply for limited unemployment benefits from the state to make up the difference.
Maria Bourn is a second-year law student who moved to San Francisco from Washington to attend New College. She's received her financial aid for the fall semester, but her last $1,200 check for her work-study job as a legal clerk bounced. Bourn says that while she's fortunate enough to receive help from a partner who works, one of her classmates was forced to return to Pennsylvania because he couldn't continue paying rent without federal assistance.
"It has just been one disaster after another," Bourn said. "Last year I didn't receive my financial aid for several months because of difficulty after difficulty with [New College's] financial aid department."
Recently departed president Hamilton had vowed to stay on for up to a year during a transition period, but Ralph Woolf, the executive director for the Western Association of Schools and Colleges, insisted during a July meeting with the school that it would be "unacceptable" for Hamilton to stay, according to minutes.
WASC's accreditation commission for senior colleges suspended New College in June after a rare special investigation revealed flawed financial controls, sloppy record keeping of student files, and ill-conceived academic curricula. A blistering report from the commission concluded, for instance, that the school couldn't explain the course requirements and specific content of its Pilot Hybrid Leadership in Urban Transformed Environments program, which New College hoped would benefit adult African Americans who otherwise have trouble accessing higher education.
"The commission has repeatedly found that, in addition to longstanding and ongoing financial challenges, New College did not have systems and structures in place in very basic areas of operation, including governance, faculty oversight of academic matters, assessment of student learning, and financial management and accounting," the report stated.
WASC will decide in February whether to remove New College from probation or strip the school of its accreditation. Woolf refused to comment when we called his office.
Molina said the school may also have to liquidate some of the buildings it owns in San Francisco to maintain solvency. In the meantime, he said, a committee charged with finding a new president for the school has identified three candidates for the job.
"The students, the faculty, the staff there's a huge commitment to keep the college open," Molina said. "It's part of the social fabric of San Francisco.... Nancy Pelosi is a strong supporter of the college. I know her office is concerned.... We're doing everything we can to make sure this college can survive."
Money woes and accreditation problems were a common occurrence during Hamilton's rocky tenure, which often divided the campus into factions of supporters and opponents of his administration.
New College bought one of San Francisco's oldest and most beloved movie theaters in January 2006 in an effort to save it from closure. But employees at the Roxie Film Center on 16th Street are now unsure about its future. Sunny Angulo has worked there for two and a half years. A payroll check from early November bounced, and she hasn't received checks for the two following pay periods.
"We have seen single-screen, small independent theaters all over the city all over the country, really close down," Angulo said. "They're sitting around rotting. Without another source of revenue tying in a nonprofit, educational component, I think that it would be very difficult for the Roxie to survive. Almost impossible."
Peter Gabel, a board trustee of New College, admitted during a small Dec. 14 all-campus meeting that he'd recently loaned the school money to help cover payroll expenses. Shortly afterward, however, the attendees voted 109 to eject the Guardian from the room after discovering that a reporter was present.
New College's federal tax forms show that in late 2005, Gabel loaned the school $95,000 to cover operating expenses, and other records show that he loaned the school more than $400,000 in August 2007. As of May 2006, the school owed creditors nearly $6 million, New College's most recent federal tax forms show.
Despite WASC's sweeping indictment of the school's operation, New College's leaders indignantly responded in a June letter that the school was "shocked and even traumatized by the sudden abruptness of the investigation," which it claimed "lacked due process."
The school also denied that its administrators were reluctant to cooperate with the investigation and implied that complainants who first contacted WASC conspired to damage the school.
New College did admit, however, that Hamilton was duped by an exchange student who promised the school a sizable donation in return for help in attending classes after entering the country from Nepal. The student claimed he was a wealthy bureaucrat there but turned out to be more or less a con artist without money even to cover tuition.
New College has long served as an academic training ground for social justice advocates and liberal activists. In 2002 it made national news when it launched a green business master's degree that balances traditional marketing and management courses with sustainability concepts in an attempt to marry profit with ecological sensitivity.
Despite the challenges, Molina remains optimistic about the school's future: "Once we get our record-keeping offices in order so that we don't have delays processing the financial aid, things will start running smoothly." *