President: Primary budget ‘solid’, housing, other auxiliary budgets ‘thin’
JOHNSON CITY, Tenn. (WJHL) – East Tennessee State University’s primary budgets have come through COVID’s challenges in reasonably good shape, President Brian Noland told News Channel 11.
It’s a different story with “auxiliary” budgets — particularly housing — that have to pull their own weight and can’t be supplemented by the public university’s other revenue sources like tuition and state appropriations.
“On the main side of the equation — teaching, research and service — our budgets are solid, they’re balanced, we’re in good shape,” Noland said.
He said the university prepared last summer for an expected decline of up to 500 students. The actual number came in close to that, but slightly lower, and Noland said ETSU put several measures in place to prepare for lower revenues on the general education side of things, which comprises a large majority of its overall budget.
“We moved through with the campus budget reductions, we put in place the voluntary retirement program, but we avoided the furloughs, we avoided the program closures, we avoided the reduction in force (layoffs),” Noland said.
ETSU implemented 5 percent across the board budget reductions in the administrative sector and 4 percent elsewhere. More than 100 people opted for early retirement, and ETSU isn’t backfilling most of those positions, at least for now.
“A lot of it was just slow and steady financial management, so as I’m looking at 2021, the academic year to come, I’m hopeful that enrollment will rebound,” Noland said.
People over budgets — housing takes hit as ETSU opts for single occupancy
The picture is a good bit grimmer in auxiliary budgets. Both housing and food service are down about 33 percent from the last “normal” academic year.
While Sodexo is contracted out for food services, housing employees are ETSU staff — and the building debt doesn’t take a break for COVID. Housing revenues were $14.5 million in 2018-19 — they’re projected to be $9.6 million this fiscal year.
“We cannot take money out of instruction and move it to pay housing back, so we’re just going to have to work our way through that,” Noland said.
During the summer, ETSU leadership decided to allow only single occupancy in the dorms, while it charged those students who did live on campus lower, double occupancy rates.
Noland defended that decision despite the financial implications.
“The result of all of that is as a campus I think we’ve provided one of the most safe learning environments of any public university in the state,” he said.
“On our worst day we had 50 students in quarantine, and compare that to other institutions in the state that had thousands in quarantine — but the consequence of that safety decision decision comes home to roost in budgets.”
So far, the university has taken money from housing reserves and used some federal CARES Act money to reimburse itself for refunds it provided students last spring when the dorms shut down mid-semester.
“A lot of institutions kept that money,” Noland said. “We didn’t, we gave that back to our students because we knew the financial challenges that they were facing.
“Some would say, ‘you shot yourself in the foot financially.’ I would say, ‘no, we led with our values.'”
The housing debt ETSU does have is manageable, Noland said, but ETSU doesn’t have much cushion in its housing budget — at all.
“We’re not at a point yet where we’ve got challenges in terms of our ability to make our debt service payments, but I can tell you … we don’t have a lot of money to cover something if a boiler went out,” Noland said.
“We’re running pretty thin right now on the housing side of the equation.”
What comes next?
ETSU’s refusal to furlough employees extended to housing staff, despite the revenue hit. Athletics, too, has suffered revenue reductions, though not to the extent of housing or food service.
ETSU’s chief financial officer, B.J. King, said in December the federal government authorized a fresh set of funding for higher education.
That tranche includes $5.5 million for distribution to students based on calculations from the financial aid office.
But it also includes about $12 million coming for “institutional purposes.” King is still trying to learn whether, unlike the first CARES Act distribution, this one will allow for replacement of lost revenue.
“We had substantial revenue losses in the fall from not increasing our fees, we were flat on all fees across campus, and then also from the additional decline in enrollment that we didn’t anticipate last March,” King said.
Noland said the first disbursement of CARES money “has been the subject of a lot of audit scrutiny,” and that ETSU doesn’t want to do anything that would get them crossways with the feds.
“We anticipate some flexibility, but to date we’ve not been provided with the full details so we have not expended any of those funds,” he said.
“I’m hopeful we’ll have some clarification from Washington soon.”
Noland said the situation is generally more difficult for small private institutions than for larger public universities.
“There are a number of institutions across the country that are operating with very thin margins, limited cash on hand. You know, if you’re a small institution, enrollment of under 1,200, typically you would want 900 of those students living in university and residence halls and on ground experience.
“And you’ve had to pivot to complete remote. No students in the residence halls. You’re blowing through your reserves. I think you will see waves of smaller institutions closing or consolidating and you’re already seeing that.”
Even at ETSU, whose enrollment decline of less than 4 percent was dwarfed by some state schools that saw 20 percent reductions, is watching enrollment numbers and demographic trends closely.
“Typically we would like to have 2,000 freshmen at ETSU,” Noland said. “This year we had right at 1,650.
“You know, the gap year that many of us were afraid of, students would just take this year off because of COVID — they did. Now we’ve got to get them back. I’m hopeful next fall will look different than next fall, but our freshman numbers are not where we wanted them to be.”