Lower-than-anticipated enrollment will cost Henderson State University about $2.3 million and prompt an examination of longer-term budget cuts, interim President Jim Borsig told university trustees Thursday.
Borsig remains optimistic that his approach is conservative. He and Arkansas State University System President Chuck Welch expect more state revenue than planned for and a second federal stimulus check in the millions of dollars.
Universities nationwide have experienced losses from fewer people living and dining on campus because of the coronavirus pandemic's impact on educational delivery and students' health and financial decisions. Living and dining on campus are two of the highest revenue-generating operations of residential universities.
Nearly 5,000 fewer students are enrolled in Arkansas two-year and four-year colleges this fall, compared with last fall, and most student bodies at institutions of higher learning shrank.
Cash-strapped Henderson State University's enrollment dropped 11.8% from last fall, from 3,570 students to 3,147. The university budgeted for 5% fewer students.
Henderson State ended the last fiscal year with a $184,000 balance in its educational and general budget, according to financial documents provided to trustees. The university doesn't have long-term reserves.
It would have faced a deficit of more than $4 million last year, said Rita Fleming, vice president of finance and administration, if not for about $2 million in federal stimulus cash and another $2 million in money left over from the state's $6 million advance that must be repaid by June 2028.
At the recommendation of the administration, trustees additionally cut more than $3 million from the budget last year and voted to join the Arkansas State University System to help spread risk and increase resources and oversight.
Based on what he's heard from people who lobby on behalf of the ASU System, Borsig expects that Congress will include stimulus money for colleges in its next pandemic recovery package. That would be a multimillion-dollar influx of cash to the university.
The university still will begin its budget adjustment and planning process without the guarantee of the stimulus.
"We can't wait until we know how much money we might get in federal stimulus, or whether there will be a second federal stimulus before we get started," Borsig told trustees.
He plans to direct a new university budget committee to plan for the rest of the academic year assuming less than what he hopes for, factoring in a stimulus check of $5 million, much of which would be used for building up university reserves.
"So our only backstop isn't a line of credit," Borsig said. The university should continue to trim from its budget rather than backfill expenses to keep operating as planned, he said.
The university hasn't drawn on its $3 million line of credit approved by trustees in December.
"Even if we got a $5 million, $6 million, $10 million stimulus, that doesn't mean we've solved this problem," board Chairman Johnny Hudson said, summarizing Borsig's message to agreement from others on the virtual conference call.
The university is on target to join the ASU System in January, Borsig said. Higher Learning Commission officials visited with campus leaders virtually in June, and another official went to the campus in August for a verification visit, speaking with many of the same people.
Most of Henderson State's expected revenue loss will end up coming from diminished room and board revenue, about $2 million from its auxiliary budget. The auxiliary budget funds operations that aren't related to education delivery. The university lost about $2 million in tuition and fees, as well, from its education and general budget but made up for most of the loss through cuts to travel, an unexpected increase in state revenue and an increase in collection of debts and rebates.
Next week, Borsig will begin searching for faculty and staff members for a new university budget planning committee. It will be chaired by Jim Hunt, whose first day as interim provost and vice president of academic affairs is Monday, and Brad Patterson, vice president of student affairs and success.
Borsig announced the committee and the university's adjusted budget picture in an email to faculty and staff members Thursday afternoon.
"Financial sustainability, immediate and long term, is our first priority," he wrote. "While this will include decisions that reduce spending it must also include identifying opportunities to grow our enrollment and further diversify the sources of our tuition revenue."
Henderson State furloughed employees in July to save money before the school year. That was after a few days of furlough in June before the university learned it would recoup its loss in state revenue because state sales-tax revenue exceeded pandemic-adjusted projections for the fiscal year. The university continues to be behind on its bills but has been accommodated by its vendors, Fleming said. The university will have enough money to make it through December, without adjustments, she said.
The university's financial rebound has been diminished by the pandemic and the impact on enrollment, but also by interruptions in collecting students' outstanding debts to the university, for things like courses that go unpaid.
When the pandemic hit, the university stopped pursuing collections on new accounts, Fleming said. It continued to receive payments from people on a payment plan and, aided in part by a new approach to collections, made progress on obtaining some of the nearly $4 million in debt accrued during the 2018-19 academic year. Trustees also approved a new policy limiting students' ability to register for more classes based on the amount of their debt to the university.
The current total student accounts receivable, provided to the Arkansas Democrat-Gazette on Thursday, is $15.6 million, but spokeswoman Tina Hall said many of the summer and fall students are still filling out financial aid applications. In the past year, the university incurred $4.3 million in additional outstanding student debt.
University officials figure $5.9 million is unlikely to be collected, and they have written off $26,729.
University officials also are trying to restore two laboratories where two former instructors cooked methamphetamine. The university already has spent about $148,000 cleaning up the rooms, Fleming said, and engineers unofficially estimated the work remaining would cost about $850,000.
University officials are appealing an insurance determination that the restoration didn't qualify because the damage was caused by pollution. University attorneys argue the damage was caused by "malicious mischief," Fleming said.