Advancing Liberty

Whether you loved or hated Liberty University founder Jerry Falwell Sr.—and there are plenty in both camps—you have to be impressed by the size of the university he created in the mountain town of Lynchburg, Va.: More than 12,500 residential students on its 6,000-acre campus (largest Christian college in the world). Nearly 100,000 online students (by far the largest online Christian college in the world, and one of the largest of any kind).

Liberty has more than $400 million in construction currently underway: the $50 million Jerry Falwell Library, a $40 million Center for Medical and Health Sciences, tens of millions more in new residence halls. A drive through the campus this summer was an exercise in dodging orange cones and construction cranes. The plan is to finish by next year virtually all of the projects underway now—and Liberty President Jerry Falwell Jr., says “the university’s cash reserve will not drop below $1 billion in spite of all the construction.”

So while the skies look blue over Lynchburg, Liberty—and all colleges—will face storms in the years ahead. For one: There will simply be fewer college-aged people 10 years from now than today. Also, the portfolio of federally guaranteed student loans passed $1 trillion in 2012. Some analysts think the crash of the student loan market is the next great economic crisis. And last year, Liberty’s approximately $800 million budget included more than $400 million in federal funds.

The bottom line: honoring Jerry Falwell Jr.’s pledge to keep growing and to remain debt-free will not be easy.

Liberty wasn’t always flush. It has teetered on the brink of disaster for most of its life. Mark DeMoss, who graduated from Liberty in 1984 and soon became Jerry Falwell Sr.’s chief of staff, remembers the worst years were 1989 through 1991: “Lots of times I would hear Jerry on the phone talking with donors on Wednesday, asking them to wire money to us so we could make a payroll on Friday. That didn’t happen just once or twice. That happened a lot.”

Author Alex McFarland remembers attending Liberty chapels as a graduate student about that time: “Dr. Falwell was, if nothing else, completely transparent. He would say, ‘We need a million dollars by Friday’ or ‘we need $10 million by the end of the year.’” He would ask the students to pray. McFarland said some students would roll their eyes at Falwell’s continuous appeals for money, but they made him feel he was a part of the solution: “We loved Liberty, and it was threatened. Lots of us—even those of us without money—felt like we could make a difference by praying.”

That sense of mission was almost not enough. In 1991, Liberty had planned to issue bonds to give it some financial relief. At the last minute, the bond offering fell through. Liberty in 1992 was $82 million in debt and laying people off wholesale. These crises forced Falwell Sr. to focus. He shut down his political organization, the Moral Majority, and focused his attention on being the pastor of Thomas Road Baptist Church and being president of Liberty University. It was Liberty, though, that took all the heavy lifting.

The school survived financially for three reasons: big donors, distance learning, and—ironically—help from big government:

Big donors included billionaire A.L. “Art” Williams, whose name is now on the Liberty football stadium. Another, Art DeMoss, Mark’s father, had founded National Liberty, a life insurance company that made DeMoss one of the richest men in America. Art DeMoss died at age 53 in 1979, just as Mark prepared to enter Liberty University. Mark recalls that time: “The Falwells took me in. Jerry became a second father to me.” When DeMoss graduated in 1984, he worked as Falwell’s chief of staff, working through the worst part of the financial crisis without pay. DeMoss is now a Liberty board member and major contributor.

Distance learning revenue grew in 1985 when Provost Ron Godwin started videotaping Liberty classes and selling VHS tapes through Falwell Sr.’s radio and television broadcasts. The series was hugely profitable: Once a course was on tape, the only costs were duplication and mailing.

Politically conservative Liberty University became a massive recipient of one of modern liberalism’s flagship big government programs: Pell Grants and federal student loans. Last year, of Liberty University’s nearly $800 million budget, about $400 million of it came from federal government sources. About $40 million came from Pell Grants, and most of the rest from federally backed student loans.

Despite these advantages, at the time of Jerry Falwell Sr.’s death in 2007, the school was still almost $30 million in debt. Falwell Sr.’s last grand gesture to the university he founded was naming Liberty the beneficiary of a $34 million life insurance policy. Falwell’s death accomplished what he had never been able to do in life. Liberty University was now, for the first time ever, completely debt-free.

It also had a succession strategy. Jerry Falwell Jr. had been a friend and classmate of Mark DeMoss in the last graduating class before Liberty Baptist College changed its name to Liberty University. Falwell Jr. then went to the elite University of Virginia law school and became general counsel for Liberty. DeMoss saw both Falwells almost daily during these years and recalls the father/son differences in style were stark. The father came into the building and made everyone aware of his presence. The son would come in the back door, go into his office, and shut the door. “He might work all day in his office, and then quietly leave,” DeMoss said. “You’d never know he was there.”

But behind that door Falwell Jr. poured himself into contracts and financial statements, mastering the mechanics of the school. When Jerry Falwell Sr. died on May 15, 2007, son Jonathan became pastor of Thomas Road Baptist Church, and Jerry Jr. became president of Liberty. The introverted Falwell became a major presence at student events and, according to Mark DeMoss, “grew into the job, exceeding everyone’s expectations.”

He has also shrunk into the job: Falwell Sr.’s rotundity contributed to his health problems and sudden death, so when Falwell Jr. looked in the mirror a couple of years ago and saw he looked more like his father every day, he lost 60 pounds over the next 18 months. He now weighs 175, about the same as when he graduated from Liberty. It was an act of methodical disciple typical of the son, but hard to imagine of the father.

Jerry Falwell Jr., will need that discipline in the years ahead, as he, Liberty, and colleges generally face pressures.

First, what lives by federal funds can also die that way. Falwell Jr. defends the use of federal dollars: “Our default rates are well below the national average,” he told me. That’s true. The national default rate in 2010 was 5.2 percent. That year, Liberty’s default rate was 4.1 percent. Falwell Jr. also claims, “We have so far had no interference in our curriculum from the federal government.” But how long that will last no one knows. Colleges are under increasing pressure to treat homosexuality like race: no discrimination allowed. Falwell Jr. said if that happened, Liberty would simply stop participating in the program: “We’re now in a financial position that would allow us to simply exit the program. … If it became necessary, that’s what we would do.”

Obamacare poses another challenge. Lawyers for Liberty argued the provision of the healthcare law imposes costly burdens on employers and infringes on religious liberty, both in violation of the U.S. Constitution. The 4th U.S. Circuit Court of Appeals dismissed Liberty’s case in 2011, but the U.S. Supreme Court reversed that decision, keeping Liberty’s legal fight alive. A new 4th Circuit Court of Appeals ruling on Aug. 7 means the case will once again go to the Supreme Court.

Some have also noted that neither Jonathan nor Jerry Jr. is as outspoken on political or “culture war” issues as their father. New York magazine’s “The Daily Intelligencer” went so far as to call the silence of the sons a shift in policy. “Liberty’s [stand] on gay marriage—from vocal activism to quiet tut-tutting—are likely a product of the school’s increased focus on growth over ideological unity.” Falwell Jr. insists the school will never compromise on its core Christian distinctives. Every faculty member has to reaffirm the school’s doctrinal statement every year, said Provost Ron Godwin, which affirms, among more than two dozen doctrines, that “the universe was created in six historical days.”

Still, Liberty has a lot going for it. As the internet became more widespread, Liberty quickly converted its old VHS tapes to digital, online video, making Liberty one of the early leaders in online learning. This “first-mover advantage” into the online market continues to generate outsized profits for the college. The size of the school means that thousands of graduates join Liberty’s alumni pool every year—all of them potential donors. Other colleges have more than Liberty’s $1 billion in assets, but no other Christian colleges do. Falwell Jr. said within five minutes of our first meeting, “Schools like Harvard have more assets. But it took Harvard 350 years to get there. We did it in less than 40.”