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UMUC looking to restructure business model

When classes at the University of Maryland University College resume in the fall, it will be business as usual for students. But behind the scenes, major change is brewing.

There’s been turmoil at the university, which offers mainly online courses, for months, if not years. Enrollment has been down and is expected to continue falling, along with revenue. At the same time, competition in the online education market has never been fiercer.

UMUC President Javier Miyares says he isn’t about to let those challenges bury the university.

Miyares has been working with state officials and a group of external experts to map out a blueprint for the school’s future that’s likely to involve substantial restructuring and a new business model.

The goal is to make UMUC a more flexible, business-like institution that can compete on a national — indeed, a global — level. As a state agency, the institution caters to Maryland residents and military personnel, but Miyares said UMUC needs to target a much larger pool of potential students to stay afloat.

Under its current operating model, the school is constrained by a litany of government regulations and procedures, so it can’t effectively penetrate those other markets, he said.

“State agencies are not designed to compete,” Miyares said. “That’s just not their purpose. We need to be an entity that competes.”

Miyares is not advocating for privatizing UMUC. He and other officials are adamant that UMUC should keep its ties to the University System of Maryland, which includes 12 institutions, and that it remain a not-for-profit school.

He also said UMUC’s mission of educating working adults through online classes should not change.

But beyond those three parameters, he said, UMUC has many options. One likely scenario involves UMUC being exempted from certain state regulations.

Even though other public universities operate under state rules, some policies — such as those involving procurement — are more onerous for UMUC.

“Most of these rules and regulations were written under the assumption that these entities conduct their business inside the state of Maryland,” said USM Chancellor William E. Kirwan. “When they were established, nobody was thinking about online education operating as a global enterprise. So UMUC will be exploring whether they could receive certain exemptions from some of these procedures, given that so much of their activity is outside the state.”

About half of UMUC’s enrollees are military personnel. But due to military downsizing and other factors, that market is shrinking, Miyares said.

Recent enrollment declines are particularly problematic because UMUC relies heavily on tuition dollars for revenue. Only about 10 percent of UMUC’s $350 million budget comes from state coffers (other universities receive closer to 30 percent).

Miyares said enrollment must grow by 5 to 7 percent per year in order for UMUC to survive. And the only way to do that, he said, “is to develop a true national footprint.”

To attract more students nationwide, UMUC might need to acquire and occupy facilities in other states. Removing certain regulations would make it easier for the school to do that, Kirwan said.

“UMUC operates in a different kind of environment than other USM institutions,” Kirwan said. “They’re in a highly competitive, global market. So I think it’s entirely appropriate that they consider some changes in their operating model that would enable them to level the playing field with their competitors.”

“As we’re currently structured, it’s highly unlikely that we’ll be agile enough to keep growing,” Miyares added.

He also said he wants the flexibility to buy smaller online-education companies.

“Over the next five to 15 years, I think there will be consolidation in the industry and only a few large providers will prevail,” he said. “If Maryland wants to continue providing quality online education at low cost, UMUC better be one of those players left standing.”

The school sought input from a group of experts on a handful of options and is now asking for suggestions from faculty, alumni, students and other stakeholders. Based on that feedback, Miyares will make a recommendation to the USM Board of Regents — most likely no later than October, he said.

Any final action will have to be approved by the regents and the chancellor. Changes that deal with certain state requirements might also require legislative action.