Following the announcement of a $24 million budget deficit last year, Northern Kentucky University has approved its operating budget for the upcoming school year, reducing its deficit from more than $24 million to $9.6 million.
This includes a 3% tuition increase and eliminates 100 faculty and 25 staff positions as the university continues to pull itself from a major deficit last year.
Wednesday, the board approved the budget after passing a resolution to further draw down its now $9.6 million budget deficit by at least $5 million by fiscal year 2025.
After the university announced its budget deficit late last year, it departed with former President Ashish Vaidya — something the university claims isn’t due to the deficit, though the Faculty Senate has said the two are related.
The university still faces a $9.6 million deficit that it continues to dig itself out of, and the new budget will help them do that, though the faculty senate recently criticized the board for its role in the deficit.
Faculty Senate President John Farrar said this budget is a step in the right direction for the university to recover from its financial woes.
“It’s required us to work together as staff, faculty, and administration, but we’ve reduced a structural, recurring budget deficit from around $24 million to $9.6 million in one year,” Farrar said. “In the fiscal year that begins in July, we’ll have to continue this hard work to balance our expenses with income. We’ll have to make more cuts, but we must make more progress with revenue, too. This year isn’t going to be any easier.”
The proposed budget includes an expected operation amount of $280,590,172, with projected revenue expected at $264,483,089 — NKU plans to use $16,107,083 from its reserves to cover the difference.
Of the more than $16 million expected to come from the university’s roughly $81 million reserve pool, $9.6 million will be recurring, and $6.5 will be non-recurring — meaning the former amount will continue to occur unless NKU plugs that leak. At the same time, the latter will be only a one-time cost.
“This is not a sustainable situation,” said Chief Financial Officer Jeremy Alltop. “That $9.6 million has to be addressed sooner than later.”
NKU’s revenue is primarily based on the money it makes from student tuition and fees, according to Alltop. With the 3% tuition increase, NKU expects to pull $164.9 million from tuition revenue — or roughly 61% of its budget.
“We are an extremely tuition-dependent university,” Alltop said.
To that end, the board spent most of their meeting before the budget discussions trying to unspool the math behind the university’s dwindling enrollment numbers, a discussion topic that led to some tense exchanges between the board and university staff.
Provost and Executive Vice President for Academic Affairs Matt Cecil and Assistant Vice President of Enrollment and Student Success Ryan Padgett gave a presentation that broke down recent enrollment numbers and projections for the future.
Cecil made the case that NKU’s declining enrollment reflected national trends. Padgett said that enrollment numbers would likely continue to decline in the coming years, although he noted that retention and persistence rates among undergraduates were increasing, which could translate to more tuition revenue.
Regent Nathan Smith took issue with some of the university’s programs, specifically NKU’s high school program, which he claimed operated at cost.
“We can no longer afford to do this,” Smith said.
A debate about the amount of money brought in from student enrollment ensued, with commissioners and staff members challenging each other on the numbers and projections.
Regent Ken Perry said only “a market change or a structural change from here inside the university” would address the problem.
“It’s not going to change unless we change the way we do business here at the university,” Perry said. “The total number of students are going down nationwide. Our competition is going up, up, up all around us, so our numbers are going to keep going down until we change the way we do business here. We’re going to have to reinvent ourselves.”
More debate about money, student headcounts, university discount programs, and credit hours continued for several minutes.
Finally, Regent Brad Zapp spoke up.
“I think this conversation is completely insane,” Zapp said. “And that’s not enough. I don’t know what the hell we’re talking about. And we shouldn’t be doing back-of-the-napkin math. I mean, this is a $260 million institution.”
The next largest revenue source is $64.9 million from the state of Kentucky. The university received an additional $1.3 million under the state’s new performance model established in 2016 by the Council on Postsecondary Education.
The additional budget numbers come from auxiliary services, such as housing and dining fees and sales and services, among other revenue sources.
The university must increase tuition to cover the $164.9 million in its budget. Without the 3% tuition increase, its revenue from enrollment would be $160.4 million.
The increase in tuition means a full-time undergraduate student would see their tuition increase by $304 per semester to a total of $10,512.
The Kentucky Council on Postsecondary Education must still approve NKU’s tuition recommendations but recently approved similar increases for Eastern Kentucky University, 3%, Murray State University, 2.9%, and Western Kentucky University, 3%.
The council on postsecondary education sets tuition ceilings at 5% for four-year undergraduate institutions over the course of two years — universities can’t make more than a 3% increase in one year, which means NKU could make a 2% increase next year.
Furthermore, NKU cut 100 faculty positions and 25 staff positions as part of its budget process. The Faculty Senate recently criticized the university via a resolution after the board voted to pass athletic raises as the university cuts faculty and staff.
“Recently, the Board offered raises to certain athletic coaches just one week after 23 tenure-line faculty members were paid to resign and 17 additional faculty members were laid off,” the faculty senate said in the resolution. “This decision and its timing suggest the success of the basketball program is more important to the Board than the success of the academic programs that have been devastated by cuts.”
Chair of the Board of Regents Rich Boehne said that the athletics department has made significant commitments on the contribution and revenue sides. The athletics department budget is rolled in with the university’s overall budget, but he said that “Athletics has made a big commitment, and we believe they’ll follow through, and we expect them to follow through.”
NKU faculty member and regent Michael Baranowski said during the meeting that with the faculty cuts, the university expects them to do more with less.
“There comes a breaking point, and it ends up falling on students, and that’s not okay,” Baranowski said.
But, the cuts to faculty and staff are already causing morale issues at the university, according to Farrar.
“Faculty and staff cuts are already affecting morale and confidence,” Farrar said. “We understand that this is necessary, but these budget cuts and employee reductions are awful-tasting medicine. It’s really difficult to see valued people leaving. So far, however, most of the cuts have come from academics — faculty and staff; this won’t work unless all divisions of the university participate.”
Boehne acknowledged the cuts to faculty would cause morale issues amongst the staff.
“I would expect it would if you take out that many positions at the same time,” Boehne said, though he said that the university added faculty positions leading up to 2019 and the COVID-19 pandemic.
Moving forward, the board of regents hopes to reduce the deficit by no less than $5 million. The board passed a resolution calling university administration to improve the budget deficit by fiscal year 2025.
“I certainly propose that we now begin the next step, which would be to look at improving the budget as it sits today by no less than $5 million,” Boehne said.
Further, the resolution requires the university administration to present a plan to improve the budget deficit by the board’s September 2023 meeting.
Before voting on the resolution, board of regents Vice Chair Nathan Smith said the amount should be more than $5 million.
“I don’t think $5 million is enough,” Smith said, though he acknowledged that this is the current state of higher education nationwide.
Before taking a vote on the resolution, Alltop said that the university had used a considerable amount of reserves — the reserves sit at roughly $81 million, which equates to 105-110 days of unrestricted cash, though this is a simplistic number as cash fluctuates — but can’t sustain at this level.
“It is not advisable from the CFO that we can continue operating losses at this level as proposed in the budget,” Alltop said.