The Arkansas Legislative Council has recommended sending $825,000 in rainy-day funds Henderson State University's way, nearly two weeks after the state's special committee for rainy-day funds rejected it by one vote.
After losing about $871,000 in expected state general revenue this spring because of the coronavirus, the Arkadelphia university went from expecting a small positive margin -- about $23,000 -- for the year, to expecting red ink in the hundreds of thousands of dollars.
"If not for covid-19, we would have finished this year in the positive," Arkansas State University System President Chuck Welch told the Arkansas Legislative Council on Wednesday afternoon.
Henderson plans to merge into the ASU System, which has helped guide Henderson's finances back from $4.9 million in the hole last year with almost no reserves to barely breaking even this year.
To avoid going broke this fiscal year, which ends June 30, 205 of Henderson's 12-month employees have been furloughed for part of each week until the end of the fiscal year. Employees will be furloughed for at least some time in July, regardless of whether the special committee approves the $825,000 in rainy-day funds, but the rainy-day funds would eliminate furloughs through June.
The six-person special committee, made up of House and Senate leaders to approve expenditures from the state's rainy-day fund designated for coronavirus relief, must approve the recommendation in order for the money to be disbursed.
Act 1 of this year's special legislative session allows the special committee to vote via email, giving "written or electronic approval," according to state budget director Jake Bleed. The recommendation hadn't been considered by the committee before the close of business Wednesday and will not be considered until after Wednesday, said Scott Hardin, spokesman for the Arkansas Department of Finance and Administration.
But one of the lawmakers on the committee, who rejected the funding request earlier this month, voted in favor of it in a roll call vote Wednesday as a member of the Arkansas Legislative Council.
Senate President Pro Tempore Jim Hendren, R-Sulphur Springs, approved the motion to send the money to Henderson during Wednesday's meeting. Senate Republican leader Bart Hester, R-Cave Springs, also a member of both committees, continued to oppose it.
The recommendation, made by Sen. Bruce Maloch, D-Magnolia, would send the money to Henderson with the stipulation that if state revenue forecasts improve and the university ends up with more general revenue appropriations than anticipated, the university must return what it can of the $825,000.
Before making his motion, Maloch recalled a fire more than 100 years ago that burned much of the Henderson campus, but the school managed to rebuild.
"Henderson has had another fire," he said. "The current leadership has put the fire out. We need to help them rebuild."
The Arkansas Legislative Council voted to recommend use of the rainy-day funds earlier Wednesday after more than an hour of deliberation. Several lawmakers questioned whether Henderson should receive the money after years of poor financial decision-making while businesses across Arkansas also struggle to pay their workers. Others contended that Henderson is on a better path now and has an incalculable impact on southwest Arkansas, lower-income students and first-generation students.
Henderson and its foundation continued to pay former President Glen Jones Jr. more than $200,000 in salary this year as part of a sabbatical written into his original employment contract, to the chagrin of several legislators who blame Jones for playing a critical role in the university's financial troubles.
"Can you ease my concern with what I feel like was a reward for somebody that has" run the university off track, Sen. Terry Rice, R-Waldron, asked Welch.
Jones' employment contract, negotiated by trustees, had no provisions related to termination for cause, Welch said. The separation agreement, as a legal precaution, continued to pay Jones for a yearlong sabbatical to avoid a court battle.
Lawmakers also discussed the possibility of changing Arkansas code to give more oversight to outside entities, such as the Arkansas Division of Higher Education, to avoid a similar situation from happening again. That could include increasing required financial reporting to the division or at the board of trustees level. The Henderson board received fewer financial statements than is standard within the ASU System, Welch said.
Only Henderson has formally asked lawmakers for some of the state's coronavirus rainy-day funding, but Southern Arkansas University in Magnolia has approached the Department of Finance and Administration about filing a request next month. Details on SAU's request were unavailable Wednesday.
Lawmakers asked Welch if Henderson would ask for additional funding to help cover its fiscal 2021 budget. The university has already received a $6 million advance on state funding that lawmakers approved turning into a loan to be repaid by 2028 to shore up the university's finances. Welch said he wasn't comfortable with turning the $825,000 into a loan for fear that the university's bond rating would be further downgraded because of increased debt.
Welch said the budget drafted so far for the university projects a 5% enrollment reduction and 10% less in state funding. The university is also evaluating its academic programs to see if any "may not be viable moving forward, may not be producing," he said. Leaders are also "tightening" course scheduling and reducing expenditures on supplies and services.
"So, barring any additional cuts related to covid-19 or anything, we don't anticipate any need for additional funds next year," Welch said.
The money requested Wednesday is simply to help the university, which couldn't certify its solvency to lawmakers this spring, balance its budget before the end of the fiscal year, Welch said.
A Section on 05/28/2020