Henderson State University has requested a $6 million advance in state funds as financial problems mount, and Gov. Asa Hutchinson said Thursday that the state wants to help the school but also favors "fundamental corrections" in the university's financial controls.
Hutchinson spoke briefly with the Arkansas Democrat-Gazette a day after he met with Henderson President Glen Jones, Henderson board Chairman Johnny Hudson and others to discuss the Arkadelphia university's financial problems.
"I was briefed fully on the circumstances that Henderson State University faces," Hutchinson said. "I assured them that I have a great deal of confidence in Henderson State as an institution, and the state wants to be able to help them through this financial bump."
The Republican governor said he wants the school to look at additional steps it might take "to make sure they get back on track financially."
"I'm confident they can," he said. "We want to make sure they have the support and also some guidance. ... We want to see some fundamental corrections made in their financial controls."
Hutchinson said he believes "in Henderson State University, its future and the way it serves its students. ... We'll stand with them through this bump."
Others at the meeting Wednesday with the governor were Larry Walther, director of the state Department of Finance and Administration, and Maria Markham, director of the state Department of Higher Education.
In a letter dated Tuesday to Walther and Markham, Jones requested that the $6 million advance be distributed from the state's Budget Stabilization Trust Fund to the university during the 2020 fiscal year, which begins Monday.
Both Jones' letter and the governor said that if the advance is approved and takes place, it must be repaid by June 30, 2020.
The state will decide on Henderson's request next week, said Scott Hardin, a Finance and Administration Department spokesman.
"Director Walther will work closely with the Department of Higher Education next week on this determination," Hardin said in an email.
University spokesman Tina Hall said Tuesday that school officials were expecting to end the fiscal year Sunday with a budget deficit.
"Finance expects that there will be a deficit for this fiscal year," she said, referring to the school's finance department. "The amount is not currently known due to the invoices that are being processed this week to close out the end of the fiscal year." She said officials still would not know today .
In his letter, Jones wrote, "The reason for the request is to levelize the cash flows of the university."
Hardin said earlier this week that no higher-education institution in the state has obtained an advance from that stabilization fund in the past five years.
In 2008, the University of Central Arkansas obtained a $3.5 million advance on state funds in addition to a $6 million line of credit. In 2009, UCA obtained a separate advance for $3.7 million, Hardin said.
In an email to faculty and staff members Monday, Jones announced "an immediate hiring freeze, a hold on planned restoration of supplies and services funding, and the elimination of all non-essential travel."
Jones said the "primary cause" of Henderson's financial challenges was about $4.5 million in unpaid student accounts incurred this fiscal year.
In fiscal 2013-14, student debt to Henderson totaled $3,754,570. It has now reached $10,003,967, according to information Henderson provided. The $4.5 million debt incurred this year was included in the $10 million figure.
Henderson had 3,000 undergraduate students and 557 graduate students during the fall 2018 semester.
Jones noted that his letter included, as required by law, the total cash balances of all of the university's accounts as of Tuesday -- $3,028,180.04. That list showed $854,432.74 in three bank accounts and $2,173,747.30 in nine other funds, six of which were described as "restricted."
The largest of those nine funds was $971,017.16, restricted for "bond issue-debt service." Next were $672,591.94 for Stephens Investments; $205,809.81 for HSU employee retirement funds; and $137,457.96 in restricted grant funds. All other funds held less than $100,000 each.
Hudson, the board of trustees chairman, did not return a phone message seeking comment Thursday.
Trustee Eddie Arnold said Thursday that he favored the school's seeking the advance "because we have creditors that have to be paid."
Asked if the university could begin fall classes without the advance, he said, "I just don't know."
He said he had not "been privy" to the school's financial records "other than I know we had creditors that need to be paid."
"I haven't gone up there [to see financial documents] because I knew it was kind of a crisis situation, and I thought it best that the chairman do [that]," Arnold said. "At the appropriate time, they will let the rest of us board members know what's going on."
Arnold said the board had "assumed a million-dollar line of credit would take care of" the problem. He was referring to a board vote in May to seek such a line of credit from a bank. The university decided not to pursue that credit or an additional line of bank credit up to $2 million, though, after learning last week that it had to get state approval for any loan from a private institution.
Other financial challenges cited by Jones included "difficulties accessing funds that are due to the university using the current financial aid system." He said the university also encountered "significant maintenance projects" this year, including improvements to two residence halls.
Metro on 06/28/2019