University Licensees Have Some Tough Questions to Answer
Recent threats to higher education revenue could have a measurable impact on public media.
I don’t think it would be too hyperbolic to say that, right now, public media is engaged in a fight for its life. Every week - and nearly every day - since President Trump’s second inauguration has brought ever-worsening news for the hundreds of stations and producers who rely on funding from the Corporation for Public Broadcasting. The latest blow being the House of Representative’s vote last week to send the White House’s rescissions package to the Senate.
The deluge has made it hard to take a step back and recognize that just about every other industry in the U.S. that relies on the federal government is engaged in a similar fight…sometimes even more so than public media. Whether intentional or not, it’s created a sort of bunker mentality among those affected: It’s terrible what’s happening to their industry, but I only have enough hours in a day to worry about mine. And rightfully so.
But there are consequences to having too narrow a focus.
Public media exists in an intricate regulatory and financial web. What happens to, say, public media stations’ non-commercial status with the FCC if federal funding ends? Does the non-commercial educational station designation just go away? And what about the Communications Act of 1934? Will any mention of the Corporation for Public Broadcasting simply be removed if Congress doesn’t fund CPB?
In the business world, having a detrimentally narrow view of the environment around you is called “strategic myopia.” There are many agencies and industries whose effects on public media are not yet being fully considered due to this myopia, but none more consequential, in my opinion, than higher education.
The State of Federal Funding for Higher Education
According to data gathered by Semipublic through the Integrated Postsecondary Education Data System, the U.S. government gave over $70 billion in grants and contracts to over 2,800 universities and colleges in 2023. Overall, these institutions relied on federal grants and contracts for an average of almost 6% of their total revenue, though several, as you can see in the chart above, had a reliance of 30% or more.
According to NPR, the Trump Administration had cut about $11 billion in federal grant and contract spending to universities by mid-May of this year. Add to this remarkable drop in funding an uncertain environment for foreign students, who pay full tuition for the privilege of studying in the U.S., fueled by a pause in student visa interviews and targeted policies blocking foreign students from enrolling at universities like Harvard. It’s no surprise, then, that some institutions are already considering layoffs and budget cuts to offset losses from multiple streams of revenue.
I’m going to start making my main point about public media university licensees soon, but I wanted to talk for a moment about something interesting I found in the raw university data from IPEDS. I filtered the chart above to exclude any institution with a total revenue under $100 million in 2023 to help bring up bigger, more recognizable names like MIT and Princeton. Look at the top 15 most reliant institutions when that filter is removed:
Nearly every one of those is a Tribal college or university, and all of them rely on federal funding for over 70% of their total revenue. I’ve written extensively about the specific threat that losing federal funding poses to public media stations that serve Native audiences - it’s startling, frankly, to see this threat replicated in federal university grant data. In fact, the reliance percentages of these institutions are strikingly similar to those of Native Public Media stations.
This should be a wake up call for anyone unsure about the real-life consequences of these federal funding cuts. There are clear losers in both public media and higher education should these cuts continue, and they happen to be Indigenous populations.
The Trouble with Non-Operating Revenue
Three weeks ago, I completed gathering every publicly available station Audited Financial Statement (AFS) from FY23 - over 450. When analyzing the AFS data for my newsletter on station cash-on-hand, I noticed something interesting: Several, but not all, public media stations divided revenue into “Non-Operating Revenue,” as opposed to just “Operating Revenue.” Moreover, most of these stations were run by a university.
In general accounting, non-operating revenue is any income - or loss - that is not regular or has strings attached, like investment income or land grants. In public media accounting, non-operating revenue can be anything from CPB funding to asset disposal fees. Mostly, though, non-operating revenue for stations is a monetary allocation by the operating entity to cover losses.
This is important because it means that, when a station that’s run by another organization doesn’t make enough income to cover their expenses, the parent organization will step in to cover the losses with their own money.
In contrast, operating revenue for public media stations is, as you would expect, income from regular donations and underwriting. Most stations report CPB funds in operating revenue - only a handful report those funds in non-operating revenue.
The differences in accounting techniques can be rather frustrating: One station will list everything from CPB funds to restricted donations to FCC repacking fees as non-operating revenue, while others will only list a monetary allocation from their operating entity as non-operating revenue. In some instances, a station will draw almost no operating income and rely on non-operating income for nearly all of their total revenue.
In my analysis of station AFS data, I found that stations run by universities tend to report operating and non-operating revenue similarly, so in order to account for the inconsistencies I talked about above, we’ll mostly be looking at data from those licensees.
The Data
On average, the 173 stations that separated operating and non-operating revenue in their FY23 AFSes gathered by Semipublic relied on non-operating revenue for about 36% of their total revenue. Much of that number comes from university licensees (129): Stations that were not run by a college or university had a reliance on non-operating revenue that was, on average, 21% - 20 points less than their university licensee counterparts.
There doesn’t seem to be a correlation between a station’s size or format and the amount of non-operating revenue it relies on for its total revenue. That is, until stations pass $40 million in total revenue, similar to federal funding reliance.
When averaged out by state (the Semipublic special), there is an interesting mix of states that had a high reliance on both federal funding and non-operating revenue (Montana) as well as stations that had a high reliance on federal funding but not non-operating revenue (Alaska) and vice-versa (Kentucky).
Another aside: A few months ago, I reported for Current on a study NPR commissioned in 2011 that projected what would happen to their member stations if public media lost its federal funding. One of the top-line findings was that public radio stations in the South were most at risk. With each newsletter I write, it becomes more apparent that Southern public media stations have taken remarkable steps in the last 14 years to shake their reliance on (what are now) less stable forms of income, like federal funding and non-operating revenue from parent organizations.
Connecting the Dots
So what does this all mean? Unlike federal funding, we can’t say that that having a high reliance on non-operating revenue is good or bad for a station: Different stations report different types of income or losses as non-operating revenue, and some draw nearly all of their total revenue from non-operating revenue. The other good news is that, for university licensees, cash appropriations from their parent organizations aren’t a hose that will necessarily be turned on or off like a hose.
That bad news, however, is that all of the financial headwinds higher education is facing right now presents a real risk for stations that do rely on non-operating revenue from their parent organization. Some universities are looking at the prospect of losing 30% or more of their annual federal grant and contract revenue forever at the same time that enrollment by full-tuition foreign students may be dropping and tariffs push the cost of goods up: When faced with either helping prop up a station that has the ability to raise its own donations or sending money to a department that lost all of its federal grant income, administrators may be inclined to ask their licensee to step up.
Of course, stepping up isn’t that simple, and donors don’t just grow on donor trees. Tucked inside my proposal to raise the price of PBS Passport from a few weeks ago (it’s a great newsletter, I promise) were several sobering facts about the state of fundraising in public media. Essentially, the number of new donors has been falling since the pandemic started. Not only that, but public media consumption has also been falling in the same timeframe. Other than reducing dependence on non-operating revenue infusions, there are few other options.
All of this potentially adds up to a vicious spiral of income losses for university licensees: The rescinded federal funding creates a bigger deficit in the station’s budget, donor/audience loss trends add to the deficit, and funding challenges for universities means less ability to cover that growing deficit. Let’s hope that some - or all - of the headwinds higher education and public media could be facing don’t come to pass.
As always, here’s a shareable dashboard containing this newsletter’s graphs and data. If you enjoyed this article, please leave a like. It’s very much appreciated.